Hercules City Council
March 12, 2024

2 Auditors’ Responsibilities for the Au dit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, a nd to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordi ngly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Schedules of Proportionate Share of the Plan’s Net Pension Liability, the Schedules of Contributions to the Pension Plan, the Schedule of Proportionate Share of the Plan’s Net Other Postemploym ent Benefits Liability (Asset) - PEHMCA, the Schedules of Contributions to the OPEB Plan – PEHMCA, the Schedule of Proportionate Share of the Plan’s Net OPEB Liability (Asset) – SOMAR, and the Schedule of Contributions to the O PEB Plan - SOMAR as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency w ith management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
302
To the Honorable Mayor and Members of the City Council
of the City of Hercules
Hercules, California

3 Management has omitted the Management’s Discussion and Analysis that accoun ting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated February 22, 2024 on our consideration of the City's internal control over the Fund’ s financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effec tiveness of the City’s internal control over Fund’s financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over the Fund’s financial reporting and compliance.

Santa Ana, California
February 22, 2024
303
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304
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Independent Auditors’ Report
To the Honorable Mayor and Members of the City Council
of the City of Hercules
Hercules, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (“Government Auditing Standards”) , the financial statements of the Hercules Wastewater Fund (the “Fund”), an enterprise fund of the City of Hercules, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the basic financial statements, which collectively comprise the Fund’s basic financial statements, and have issued our report thereon dated February 22, 2024.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the C ity’s internal control over financial reporting (“internal control”) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
305
To the Honorable Mayor and Members of the City Council
of the City of Hercules
Hercules, California

6 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether th e Fund’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards .

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Santa Ana, California
February 22, 2024
306

BASIC FINANCIAL STATEMENTS
7 307
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8 308
ASSETS
Current assets:

Cash and investments 18,830,203$
Cash and investments with fiscal agent 8,327,888
Total current assets 27,158,091
Noncurrent assets:

Net OPEB asset (PEHMCA) 12,132
Capital assets:

Nondepreciable 3,456,514
Depreciable, net 36,922,843
Total noncurrent assets 40,391,489
Total assets 67,549,580

DEFERRED OUTFLOWS OF RESOURCES
Pension-related deferred outflows of resources 445,145
OPEB-related deferred outflows of resources (PEHMCA) 33,622 OPEB-related deferred outflows of resources (SOMAR) 35,838 Total deferred outflows of resources 514,605

LIABILITIES
Current liabilities:

Accounts payable 2,026,678
Salaries and benefits payable 8,776
Accrued interest payable 16,055
Long-term debt - due within one year 1,557,797
Total current liabilities 3,609,306
Noncurrent liabilities:

Long-term debt - due in more than one year 27,599,075
Net pension liability 1,092,885
Net OPEB liability (SOMAR) 100,875
Total noncurrent liabilities 28,792,835
Total liabilities 32,402,141

DEFERRED INFLOWS OF RESOURCES
Pension-related deferred outflows of resources 136,612
OPEB-related deferred outflows of resources (PEHMCA) 92,420 OPEB-related deferred outflows of resources (SOMAR) 31,658 Total deferred inflows of resources 260,690

NET POSITION
Net investment in capital assets
Restricted for debt services 19,602,539
Unrestricted 15,798,815
Total net position 35,401,354$
Hercules Wastewater Fund
Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 9 309
OPERATING REVENUES:

Charges for services 5,922,758$
Total operating revenues 5,922,758
OPERATING EXPENSES:

Salaries and benefits 821,479
Services and supplies 2,652,510
Depreciation 990,241
Total operating expenses 4,464,230
Operating income 1,458,528
NONOPERATING REVENUES (EXPENSES):

Interest income 294,199
Interest (expense) (621,774)
Total nonoperating revenues (expenses), net (327,575)
CHANGE IN NET POSITION 1,130,953
NET POSITION:

Beginning of year 34,270,401
End of year 35,401,354$
Hercules Wastewater Fund
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 10 310
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers 5,922,758$
Cash paid to suppliers for goods and services (971,308) Cash paid to employees for services (750,940)
Net cash provided by operating activities 4,200,510

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Payments related to the acquisition of capital assets (2,283,619) Principal repayments related to capital purposes (2,604,812) Interest repayments related to capital purposes (968,747) Net cash (used in) capital and related
financing activities (5,857,178)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest earnings 294,199
Net cash provided by investing activities 294,199
NET CHANGES IN CASH AND CASH EQUIVALENTS (1,362,469)
CASH AND CASH EQUIVALENTS:

Beginning of year 28,520,560
End of year 27,158,091$

RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO STATEMENT OF NET POSITION:

Cash and investments 18,830,203$
Cash and investments with fiscal agent 8,327,888
Total cash and cash equivalents 27,158,091$

RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income 1,458,528$
Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 990,241
(Increase) decrease in assets and deferred outflows
Pensions-related deferred outflows (283,060)
OPEB-related deferred outflows (30,141)
Increase (decrease) in liabilities and deferred inflows Accounts payable 1,681,202
Salaries and benefits payable (23,785)
Net pension liability 728,877
Net OPEB liability 17,658
Pensions-related deferred inflows (355,956)
OPEB-related deferred inflows 16,529
Compensated absences 417
Total adjustments 2,741,982
Net cash provided by operating activities 4,200,510$
Hercules Wastewater Fund
Statement of Cash Flows
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 11 311
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12 312
Hercules Wastewater Fund
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023

13 Note 1 – Summary of Significant Accounting Policies
The financial statements of the Hercules Wastewater Fund (“Fund”), an enterprise fund of the City of Hercules, California (the “City”), have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as applied to governmental agen cies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for estab lishing governmental accounting and financial reporting principles. The following is a summary of the C ity’s significant policies relating to the Fund:

A. Reporting Entities

The Hercules Wastewater Fund is an enterprise fund of the City’s financial statements. This Fund accounts for wastewater treatment to the cities of Hercules and Pinole and for the maintenance of the City’s sewer lines and related facilities. It is a self-supporting activity which provides services on a user charge basis to residences and businesses.

These financial statements present only the Wastewater Fund and do not purport to and do not present fairly the financial position of the City as of June 30, 2023, the changes in its financial position, or where applicable, its cash flows for the year then ended in accordance with U.S. GAAP.

B. Measurement Focus and Basis of Accounting

Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows.

Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets, deferred outflows of resources, liabilities (whether current or noncurrent), and deferred inflows of resources are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Position presents increases (revenues) and decreases (expenses) in total Net Position.

Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

Operating revenues are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.

C. Cash and Investments

All cash and investments of the Fund are held in the City’s investment pool. These cash pools have the general characteristics of a demand deposit account, therefore, all cash and investments in the Fund are considered cash and cash equivalents for statement of cash flows purposes.

Investments are stated at fair value (quoted market price or best available estimate thereof).

D. Cash and Investments with Fiscal Agents

Cash and investments are held by fiscal agents for the redemption of bonded debt and maintaining required reserves.

313
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

14 Note 1 – Summary of Significant Accounting Policies (Continued)

E. Revenues

Wastewater revenues (wastewater disposal services) are recorded as billed to customers on a cyclical basis. All wastewater customers are billed annually by the Contra Costa County Treasurer-Tax Collector Office.

F. Capital Assets

Capital assets are recorded at historical cost or estimated historical if purchased or constructed. Donated capital assets are valued at their estimated acquisition value on the date donated. City policy has set the capitalization threshold for reporting capital assets with an initial, individual cost of more than $2,500 for general capital assets and $5,000 for infrastructure capital assets, and an estimated useful life of one year or more.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method.

The estimated useful lives used for depreciation purposes are as follows:

Wastewater structure 30 Years
Machinery and equipment 5-20 Years
Infrastructure 15-50 Years

G. Accounts Payable

Accounts payable consists of general administration costs incurred and construction services performed during the fiscal year, but paid after the fiscal year.

H. Long-Term Debt

Long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method.

Bonds payable are reported net of the applicable bond premium or discount.

I. Compensated Absences

City employees have vested interest in varying levels of vacation, sick leave and compensatory time based on their length of employment. It is the policy of the City to pay all accumulated vacation pay and all or a portion of sick pay when an employee retires or terminates. Compensated absences are expensed in the period they are earned, and the unpaid liability is recorded as a long-term liability. 314
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

15 Note 1 – Summary of Significant Accounting Policies (Continued)

J. Pensions

For purposes of measuring the aggregate net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net posit ion have been determined on the same basis as they are reported by the plans (Note 6). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

CalPERS
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 - June 30, 2022

Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

Pension benefits are expensed to the various funds in the period they are earned, and the unpaid liability is recorded as a long-term liability.

K. Other Postemployment Benefits (“OPEB”)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the plans and additions to/deductions from OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by the plan (Note 7). For this purpose, the OPEB plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value.

The following timeframes are used for OPEB reporting for PEMHCA and SOMAR:

OPEB - PEMHCA and SOMAR
Valuation Date June 30, 2023
Measurement Date June 30, 2023
Measurement Period July 1, 2022 - June 30, 2023
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the source of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over 5 years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period.
315
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

16 Note 1 – Summary of Significant Accounting Policies (Continued)

L. Deferred Outflows and Inflows of Resources

The Statement of Net Position reports separate sections for Deferred Outflows of Resources, and Deferred Inflows of Resources, when applicable.

Deferred Outflows of Resources represent a consumption of net assets that applies to future periods.

Deferred Inflows of Resources represent an acquisition of net assets that applies to future periods.

M. Net Position

Net position is classified as follows:

Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation and related deferred charges on refunding capital debt, reduced by the related debt that are attributable to the acquisition, construction, or improvement of those items, net of unspent debt proceeds.

Restricted – This component of net positi on consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the City’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

N. Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Note 2 – Cash and Investments

Cash and investments at June 30, 2023 consisted of the following:

Cash and investments pooled with City 18,830,203$
Cash and investments with fiscal agents 8,327,888
Total 27,158,091$

316
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

17 Note 2 – Cash and Investments (Continued)

A. Cash and Investments Pooled with City
The Fund pools its cash and investments with the City in order to achieve a higher return on investment. Certain funds which are held and invested by independent outside custodians through contractual agreements, are not pooled. Interest earned on investments is allocated using the LAIF factor and average quarterly balances. Required disclosure information regarding investments and other deposit, and related risk disclosures can be found in the City’s financial statements. The City’s financial statements may be obtained by contacting the City’s Finance Department’s office at 111 Civic Drive, Hercules, California.

At June 30, 2023, the Fund has deposited $18,830,203 in th e City’s investment pool. Investments held in the City’s investment pool are available on demand and are stated at cost plus accrued interest, which approximates fair value.

B. Investments Authorized by the California Government Code and the City's Investment Policy

The table below identifies the investment types that are authorized by the City's investment policy and the California Government Code. The table also identifies certain provisions of the California Government Code (or the City's investment policy, if more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy.

Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer Local Agency Investment Fund (State Pool) N/A $50 Million $50 Million U.S. Treasury Obligations 5 Years None None
U.S. Government Agency Issues 5 Years None None
Insured Deposits with Banks and Savings and Loans N/A None None Bankers Acceptance (Must be Dollar Denominated) 180 Days 40% 30% Commercial Paper 270 Days 15% 10%
Negotiable Time Certificates of Deposits 5 Years 30% $100,000 Nonnegotiable Time Certificates of Deposits 5 Years 30% $100,000 Federally Issued Time Deposits 5 Years None $100,000
Repurchase Agreements 30 Days None 10%
Reverse Repurchase Agreements 92 Days 20% None
Medium-Term Notes 5 Years 30% 15%
Money Market Mutual Funds N/A 20% 10%
Insured or Passbook Savings Accounts N/A None $100,000

*The table is based on state law requirements or investment policy requirements, whichever is more restrictive. 317
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

18 Note 2 – Cash and Investments (Continued)
C. Investments Authorized by Debt Agreements

Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the investment policy of the City. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk.

Maximum M aximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer Local Agency Investment Fund (State Pool) N/A $50 M illion $50 M illion U.S. Treasury Obligations 30 Years 20% None
U.S. Government Agency Issues 30 Years 20% None
Insured Deposits with Banks and Savings and Loans N/A None None Bankers Acceptance (Must be Dollar Denominated) 6 M onths 40% 30% Commercial Paper 6 Months 15% 10%
Negotiable Time Certificates of Deposits 5 Years 30% $100,000 Nonnegotiable Time Certificates of Deposits 5 Years 30% $100,000 Federally Issued Time Deposits 1 Years 20% None
Repurchase Agreements 30 Days None None
Reverse Repurchase Agreements 92 Days 20% None
Medium-Term Notes 5 Years 30% 15%
Mutual Funds N/A 20% None
Money Market Funds N/A None None
Insured or Passbook Savings Accounts N/A None $100,000
Guaranteed Investment Contract N/A None None

D. Fair Value Measurement

At June 30, 2023, the Fund’s investment consisted of $ 18,830,203 pooled with the City and the City invested in the State of California Local Agency Investment fund and $8,327,888 invested in money market mutual funds, which is valued at amortized cost and “uncategorized” under the fair value hierarchy.

E. Risk Disclosures

Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment is, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Fund manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

318
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

19 Note 2 – Cash and Investments (Continued)
E. Risk Disclosures (Continued)

Disclosures Relating to Interest Rate Risk (Continued)
Information about the sensitivity of the fair values of th e Fund’s investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the Fund's investments by maturity:

Maturity
12 Months
Investment Type Total or Less
Cash and investments pooled with City 18,830,203$ 18,830,203$ Investments with fiscal agents:

Money Market Mutual Funds 8,327,888 8,327,888 Total 27,158,091$ 27,158,091$

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations Interest rate risk is the market value fluctuation due to overall changes in the interest rates. It is mitigated by limiting the average maturity of the City’s portfolio, not to exceed three years.

As a means of maintaining liquidity an d minimizing interest rate risk, the City’s investment policy limits are as follows:

Percentage
Maturity of Portfolio
Up to One Year 10% Minimum
One Year to Five Years 60% Maximum
More Than Five Years 30% Maximum

Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or the City's investment policy, or debt agreements, and the actual rating as of fiscal year end for each investment type.

Minimum
Legal Not
Investment Type Total Rating AAA Rated
Cash and investments pooled with City 18,830,203$ N/A -$ 18,830,203$ Investments with fiscal agents:

Money Market Mutual Funds 8,327,888 N/A 8,327,888 - Total 27,158,091$ 8,327,888$ 18,830,203$ S&P Rating as of Fiscal Year Ended

319
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

20 Note 2 – Cash and Investments (Continued)
E. Risk Disclosures (Continued)

Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. The Fund has 100% of its cash and investments pooled with the City.

Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that in the event of the failure of the counterparty (e.g., broker dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the provision for deposits as disclosed in Note 2A.

Note 3 – Capital Assets

Summary of changes in capital assets for the year ended June 30, 2023, was as follows:

Balance Reclassification/ Balance
July 1, 2022 Additions Transfers June 30, 2023
Nondepreciable assets:

Land 191,700$ -$ -$ 191,700$ Constrution in progress 981,195 2,283,619 - 3,264,814 Total nondepreciable assets 1,172,895 2,283,619 - 3,456,514 Depreciable assets:

Structures and improvements 38,325,271 - - 38,325,271 Machinery and equipment 250,345 - - 250,345 Infrastructure 14,945,319 - - 14,945,319 Subtotal 53,520,935 - - 53,520,935 Less: accumulated depreciation:

Structures and improvements (11,007,031) (137,358) - (11,144,389) Machinery and equipment (215,394) (4,560) - (219,954) Infrastructure (4,385,426) (848,323) - (5,233,749) Subtotal (15,607,851) (990,241) - (16,598,092) Total depreciable assets, net 37,913,084 (990,241) - 36,922,843 Total capital assets, net 39,085,979$ 1,293,378$ -$ 40,379,357$

Depreciation expense in the amount of $990,241 was charged to the Fund for the year ended June 30, 2023.

320
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

21 Note 4 – Long-Term Debt
Summary of changes in long-term debt for the year ended June 30, 2023, was as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Yea r State Water Resources
Construction Loan 23,259,518$ -$ (2,249,812)$ 21,009,706$ 1,153,672$ 19,856,034$ Wastewater Revenue Bonds, Series 2021A 8,450,000 - (355,000) 8,095,000 365,000 7,730,000 Compensated Absences 51,749 30,440 (30,023) 52,166 39,125 13,041 Total 31,761,267$ 30,440$ (2,634,835)$ 29,156,872$ 1,557,797$ 27,599,075$ A. State Water Resources Construction Loan

In June 2016, the City entered into an installment sale agreement with the California State Water Resources Control Board in the amount of $26,500,000. The funds are for construction costs for the Pinole-Hercules Wastewater Pollution Control Plant Improvement Project. The interest rate on the loan is 1.7%. The first principal and interest payment are due August 31, 2019, and is contingent on the total drawdowns at project completion. The loan matures on August 31, 2038. The City has drawn down $25,457,695 of the loan principal including construction loan interest as of June 30, 2023. The outstanding balance as of June 30, 2023 was $21,009,706.

The annual debt service requirements to maturity for the State Water Resources Construction Loan as of June 30, 2023 are as follows:

Year Ending
June 30, Principal Interest Total
2024 1,153,672$ 357,165$ 1,510,837$ 2025 1,173,285 337,553 1,510,838 2026 1,193,230 317,606 1,510,836 2027 1,213,515 297,322 1,510,837 2028 1,234,145 276,692 1,510,837 2029-2033 6,492,658 1,061,529 7,554,187 2034-2038 7,063,618 490,567 7,554,185 2039 1,485,583 25,255 1,510,838 Total 21,009,706$ 3,163,689$ 24,173,395$ 321
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

22 Note 4 – Long-Term Debt (Continued)
B. Wastewater Revenue Bonds, Series 2021A

In July, 2021, the City issued the Direct Purchase Lease in the amount of $8,450,000 and the proceeds were used to early pay off the 2010 PFA Wastewater Revenue Bonds.

The bonds bear interest at 2.38%. Interest on the bonds is payable semi-annually on February 1 and August 1 in each year, commencing February 1, 2022. Principal payments are due in annual installments ranging from $355,000 to $545,000, commencing August 1, 2022 through August 1, 2040.

In the event of default, the City shall declare the entire principal amount of the unpaid Series 2021 installment payments and accrued inteest thereon to be due and payable immediately in wirting.

The annual debt service requirements to maturity for as of June 30, 2023 are as follows:

Year Ending
June 30, Principal Interest Total
2024 365,000$ 188,318$ 553,318$ 2025 375,000 179,512 554,512 2026 385,000 170,468 555,468 2027 395,000 161,186 556,186 2028 400,000 151,725 551,725 2029-2033 2,150,000 609,280 2,759,280 2034-2038 2,425,000 337,544 2,762,544 2039-2041 1,600,000 57,715 1,657,715 Total 8,095,000$ 1,855,746$ 9,950,746$

C. Compensated Absences

There is no fixed payment schedule for earned but unpaid compensated absences.

Note 5 – Risk Management

The Fund is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disaster. The Fund participates in the City’s insurance programs to insure against these losses.

General Liability Insurance
Coverage is maintained with the Municipal Pooling Authority (MPA) with coverage limits of $1,000,000 with self- insured retention of $10,000 and $1,000,001 to $29,000,000 covered by California Affiliated Risk Management Authority (CARMA).

322
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

23 Note 5 – Risk Management (Continued)
Workers’ Compensation
The City has coverage limits for the following without a deductible:

MPA $0 to $500,000
PRISM $500,000 to $50,000,000
Liberty Insurance Corporation Statutory excess of $50,000,000

Miscellaneous Coverages
The MPA provides additional coverage for the following risks incurred by the City:

Coverage
Type Deductibles Limits
Auto - Physical Damage:

Police Vehicles 3,000$ 250,000$
All Other Vehicles 2,000 250,000
All Risk Fire & Property 25,000 1,000,000,000 Cyber Liability 50,000 3,000,000
Pollution Liability 250,000 25,000,000
Crime Coverage 2,500 5,000,000
Boiler and Machinery 5,000 100% of primary $75,000,000; 100% of $25,000,000 excess of $75,000,000

The MPA is governed by a board consisting of representatives from member municipalities. The board controls the operations of the MPA, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on the board.

The City’s deposits with the MPA are in accordance with formulas established by the MPA. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating. Audited financial statements can be obtained from the Municipal Pooling Authority, 1911 San Miguel Drive, #200, Walnut Creek, California 94596.

Note 6 – Public Employee Retirement System

A. General Information About the Pension Plans

Plan Descriptions

All qualified permanent and probationary employees are eligible to pa rticipate in the City’s Miscellaneous Employee Pension Plans, cost-sharing multiple employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS). Benefit provisions under the Plans are established by state statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
323
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

24 Note 6 – Public Employee Retirement System (Continued)

A. General Information About the Pension Plans (Continued)

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for nonduty disability benefits after 10 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plans’ provisions and benefits in effect at June 30, 2023, are summarized below:

Miscellaneous
Miscellaneous Tier 2
Benefit formula 2.0% @ 55 2.0% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50-63 52 - 67
Monthly benefits, as a % of
eligible compensation 1.426 - 2.148% 1.0 - 2.5%
Required employee contribution rate 7.0% 6.75%
Required employer contribution rate 10.320% 7.470%

Employees Covered

At June 30, 2022, the measurement date, the following employees were covered by the Plan’s provisions:

Miscellaneous
Miscellaneous PEPRA
Active employees 31 13
Transferred employees 48 13
Separated employees 95 17
Retired employees and beneficiaries 88 1 Total 262 44

Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions.

324
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

25 Note 6 – Public Employee Retirement System (Continued)

A. General Information About the Pension Plans (Continued)

Contributions (Continued)

The City contributed $105,146 towards the Fund’s share of the Miscellaneous Pension Plan during the year ended June 30, 2023.

B. Net Pension Liability

Actuarial Methods and Assumptions Used to Determine Total Pension Liability

The June 30, 2021 valuation was rolled forward to determine the June 30, 2022 total pension liability, based on the following actuarial methods and assumptions:

Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortality Rate Table 1
Post Retirement Benefit Increase

6.90%

2.30%
Varies by Entry Age and Service
Derived using CalPERS’ Membership Data for all Funds.

The lesser of contract COLA or 2.50% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.50% thereafter.
1 The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post- retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

Change of Assumption

Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. in determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension and fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Long-Term Expected Rate of Return

The long-term expected rate of return on pension plan investments was determined using a building -block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. The expected real rates of return by asset class are as follows:
325
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

26 Note 6 – Public Employee Retirement System (Continued)

B. Net Pension Liability (Continued)

Long-term Expected Rate of Return (Continued)

Asset Class
1 Assumed Asset
Allocation Real Return
1,2
Global Equity - Cap-weighted 30.00% 4.54%
Global Equity - Non-Cap-weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging M arket Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
1 An expected inflation of 2.30% was used for this period. 2 Figures are based on the 2021 Asset Liability M anagement study.

Discount Rate

The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

C. Proportionate Share of Net Pension Liability

The following table shows the plan’s proportionate share of the risk pool collective net pension liability over the measurement period:

Plan Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
Miscellaneous
Balance at: 6/30/21 (Valuation date) 2,537,625$ 2,173,617$ 364,008$ Balance at: 6/30/22 (Measurement date) 4,067,367 2,974,482 1,092,885 Net changes during 2021-2022 1,529,742$ 800,865$ 728,877$

326
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

27 Note 6 – Public Employee Retirement System (Continued)

C. Proportionate Share of Net Pension Liability (Continued)

The Fund’s proportionate share of the City’s net pension liability for the retirement plans is measured as the proportionate share of the net pension liability. The net pension liability of the retirement plans is measured as of June 30, 2022, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The Fund’s proportion of the net pension liability was based on a projection of the Fund’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The Fund’s proportionate share of the net pens ion liability as of the June 30, 2021 measurement date (June 30, 2022 reporting date) and 2022 measurement date (June 30, 2023 reporting date) was as follows:

Fund's Proportion
to City's S hare
Measurement date Pool
Proportion - June 30, 2021 0.00673%
Proportion - June 30, 2022 0.00946%
Change - Increase/(Decrease) 0.00273%

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the Fund’s proportionate share of th e net position liability for the Plan, calculated using the discount rate, as well as what the Fund’s proportionate sh are of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Discount Rate - 1% Current Discount Discount Rate + 1 % (5.90%) Rate (6.90%) (7.90%)
Miscellaneous 1,647,340$ 1,092,885$ 636,706$ Plan's Net Pension Liability

Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s fiduciary ne t position is available in the separately issued CalPERS financial reports.

327
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

28 Note 6 – Public Employee Retirement System (Continued)

D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pension

For the year ended June 30, 2023, the Fund recognized pension expense of $195,007. At June 30, 2023, the Fund reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after the measurement date 105,146$ -$ Changes of assumptions 111,989 -
Net difference between projected and actual
earnings on pension plan investments 200,188 - Difference between expected and actual
experience 21,947 (14,699)
Employer contributions in excess/(under)
proportionate share of contributions - (79,134) Adjustments due to difference in proportions 5,875 (42,779) Total 445,145$ (136,612)$
Miscellaneous Plan

$105,146 was reported as deferred outflows of resources rela ted to pensions resulting from Fund’s contributions subsequent to the measurement date and will be recognized as a reduction of the net pension liability in the measure period ended June 30, 2023. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Measurement Period
Ended June 30 Miscellaneous Plan
2023 29,133$
2024 27,568
2025 24,245
2026 122,441
2027 -
Thereafter -
Total 203,387$

E. Payable to the CalPERS Pension Plans

At June 30, 2023, the Fund had no outstanding amounts owed to the CalPERS pension plans for contributions for the year ended June 30, 2023.

328
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

29 Note 7 – Other Postemployment Benefits (“OPEB”)
A. Retiree Healthcare Plan (PEHMCA)

Plan Description and Administration

The City Retiree Healthcare Plan (Plan) is a single-employer benefit healthcare plan administered by the City. The Plan provides healthcare benefits to eligible retirees and their dependents. The Plan does not issue a financial report.

The City has prefunded a portion of its OPEB benefits in a Public Agency Retirement Services (PARS) trust. The PARS Trust is a tax qualified irrevocable trusts, organized under Internal Revenue Code (IRC) Section 115, established to pre -fund OPEB as described in GASB Statement 75. PARS issues annual audited financial statements for each participating agency of the Trust. PARS is considered an agency agent multiple -employer plan, required to provide financial statements and required supplementary information (Schedule of Changes in Fiduciary Net Position by Plan) that are prepared in conformance with GASB statement 75.

These reports may be obtained by writing the plan at the following address: PARS 4350 Von Karman Ave., Suite 100, Newport Beach, CA 92660 -2043.

Employees become eligible to retire and receive City-paid healthcare benefits upon attainment of age 50 and 5 years of service. The City contribution towards retiree health benefits is determined under the "Equal Contribution Method" under PEHMCA under which the City's nominal contribution to PEMHCA is the same for active employees and retirees ($149/month for 2022 and 2023).

Proportionate share of the City’s poste mployment benefits liabilities and related deferred outflows and inflows have been allocated to the Fund.

Contributions

The contributions are based on pay-go for premiums and contributions to the PARS OPEB trust. The pay-go amount is the actual amount of retiree premiums. Total contributions (pay-go and trust contributions) for the year ended June 30, 2023 were $5,879.

Actuarial Assumptions

The net OPEB liability of the Plan was determined using an actuarial valuation as of June 30, 2023 using the following actuarial assumptions:

Actuarial Assumptions:

Cost Method Entry age actuarial cost method
Discount Rate 5.15%
Inflation 2.50%
Aggregate payroll increases 2.75%
Expected long-term investment rate of return 5.15%
Mortality, Termination, and Disability 2021 CalPERS M ortality Healthcare Trend Rate 4%
329
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

30 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued) A. Retiree Healthcare Plan (PEHMCA) (Continued)

Actuarial Assumptions (Continued)

The mortality assumptions are based on the 2021 CalPERS Mortality for Miscellaneous and Schools Employees table created by CalPERS for the miscellaneous participant type and the 2021 CalPERS Mortality for Safety Employees for the safety participant type . CalPERS periodically studies mortality for participating agencies and establishes mortality tables that are modified versions of commonly used tables. This table incorporates mortality projection as deemed appropriate based on CalPERS analysis.

Changes of Assumptions

There were not discount rate changes. However, the demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Discount Rate

The discount rate used to measure the total Plan’s OPEB liability was 5.15%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the City plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long- term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

The expected long-term rate of return on OPEB plan investments of 5.15%, gross of expenses, was determined by Highmark Capital Management using a building-block method in which best-estimate ranges of expected future real rates of return, net of inflation, are developed for each major asset class. These ranges are combined to produce the term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class
New Strategic
Allocation
Long-Term
Expected
Real Rate of
Return
All Domestic Equities 30.00% 7.25%
All Fixed Income 65.00% 4.25%
Short-Term Gov't Fixed 5.00% 3.00%
100.00%
Proportionate Share of Net OPEB Liability and OPEB Expense

The following table shows the plan’s proportionate share of the risk pool collective net pension liability (asset) over the measurement period:

Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability (Asset)
Balance at: 6/30/22 (Valuation date) (136,327)$ (137,090)$ (763)$ Balance at: 6/30/23 (Measurement date) (130,814) (142,946) (12,132) Net changes during 2022-2023 (5,513)$ 5,856$ 11,369$

330
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

31 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued)

A. Retiree Healthcare Plan (PEHMCA) (Continued)

Proportionate Share of Net OPEB Liability and OPEB Expense (Continued)

The Fund’s proportionate share of the City’s net OPEB liability (asset) for the OPEB plan is measured as the proportionate share of the net OPEB liability (asset). The net OPEB liability (asset) of the OPEB plans is measured as of June 30, 2022, and the total OPEB liability (asset) used to calculate the net OPEB liability (asset) was determined by an actuarial valuation as of June 30, 2022 and rolled forward to June 30, 2023 using standard update procedures.

The Fund’s proportion of the net OPEB liability (asset) was based on a projection of the Fund’s long-term share of contributions to the OPEB plans relative to the projected contributions of all participating employers, actuarially determined. The Fund’s proportionate share of the net O PEB liability as of the June 30, 2023 measurement date and June 30, 2022 measurement date was as follows:

Fund's Proportion
to City's Share
Pool
Proportion - June 30, 2022 5.35664%
Proportion - June 30, 2023 5.35714%
Change - Increase/(Decrease) 0.00050%

Sensitivity of the Net OPEB Liability (Asset) to Changes in the Discount Rate

The following presents the net OPEB liability (asset) of the Plan, as well as what the City’s net OPEB liability (asset) would be if it were calculated using a discount rate 1% lower or 1% higher than the current discount rate:

Discount Rate - 1% Current Discount Discount Rate + 1
%
(4.15%) Rate (5.15%) (6.15%)
5,478$ (12,132)$ (26,770)$ Net OPEB Liability (Asset)

Sensitivity of the Net OPEB Liability (Asset) to Changes in the Healthcare Trend Rate

The following presents the net OPEB liability (asset) of the Plan, as well as what the Plan’s net OPEB liability (asset) would be if it were calculated using healthcare cost trend rates that 1% lower or 1% higher than the current healthcare cost trend rate:

Healthcare Cost Healthcare Cost Healthcare Cost
Trend Rates Trend Rates Trend Rates
3% 4% 5%
(30,493)$ (12,132)$ 11,014$
Net OPEB Liability (Asset)

331
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

32 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued) A. Retiree Healthcare Plan (PEHMCA) (Continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Relate to OPEB

For the year ended June 30, 2023, the Fund recognized OPEB expense of $271 for the Plan. OPEB expense represents the change in the net OPEB liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, and actuarial assumptions or method. At June 30, 2023, the Fund reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Difference between expected and actual experience 614$ (82,306)$ Changes of assumptions 21,944 (10,114)
Net difference between projected and actual earning on
OPEB plan investments 11,064 -
Total 33,622$ (92,420)$

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Measurement
Period Deferred Outflows/
Ending June 30 (Inflows) of Resources
2024 (3,191)$
2025 (6,560)
2026 (4,521)
2027 (9,661)
2028 (9,739)
Thereafter (25,126)
Total (58,798)$

B. Retiree Cash Benefit Plan (SOMAR Plan)

Plan Description

The City provide an optional monetary allowance with an annual three (3%) adjustment each year to Public Safety and Executive employees who retire as regulated by the Public Employee’s Retirement System. To be eligible for the optional monies, an employee must retire as follows:

1. Service Retirement: Employees who have served the City for at least ten (10) consecutive years immediately prior to retirement and are at least fifty (50) years old when they separate service from the City.

2. Disability Retirement: Employees who retire with a disability retirement are not required to be a certain age, but must have at least twenty (20) years of service with the City. 332
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

33 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued)

B. Retiree Cash Benefit Plan (SOMAR Plan) (Continued)

Plan Description (Continued)

Employees must have the minimum amount of sick leave on the books, as outlined in the chart below. If an employee has below the amount of sick leave required for their years of service, then they will only be eligible for the percentage paid equivalent to the amount of sick leave they do have on the books.

Years of
S ervice
S ick Leave
Balance
% of Optional
Money
Available
10 480 50
11 528 55
12 576 60
13 624 65
14 672 70
15 720 75
16 768 80
17 846 85
18 864 90
19 912 95
20-24 960 100
25 No M inimum
amount required 100

Employees must retire within one hundred twenty (120) days. In addition, employees who separate service but do not retire as a PERS annuitant, shall not be eligible under for SOMAR benefits.

The City will pay a portion of the optional money to a retiree until the retiree reaches age sixty-five (65), upon which they are required to enroll in Medicare. At that time, the optional money will drop to an amount equivalent to the Kaiser Supplemental to Medicare rate through PERS.

The SOMAR benefit is expected to last into perpetuity. Payments are made on a bi-annual basis.

Benefits Provided

The SOMAR plan’s provisions and be nefits in effect at June 30, 2023, are summarized below:

Executives Police
Duration of benefits Lifetime Lifetime
Required service 50% at 10 years
grading to 100% at
20 years
50% at 10 years
grading to 100% at
20 years
Minimum age Retirement Retirement
Amount $292 per month pre-
65; based on Kaiser
premium post-65
$388 per month pre-
65; based on Kaiser
premium post-65

333
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

34 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued)

B. Retiree Cash Benefit Plan (SOMAR Plan) (Continued)

Contributions

For the year ended June 30, 2023, the Fund contributions recognized as part of OPEB expense for the SOMAR plan were $2,303.

Actuarial Assumptions
The net pension liability of the SOMAR Plan was determined using an actuarial valuation as of July 1, 2022 using the following actuarial assumptions:

Cost method Entry age normal
Discount Rate 3.65%
Inflation 2.50%
Aggregate payroll increases 2.75%
Mortality, retirement, and turnover 2021 CalPERS tables

Changes of Assumptions

The interest assumption changed from 3.54% to 3.65%. Assumed rates of retirement, termination, and mortality have been updated to align with those currently being used by the statewide pension systems

Discount Rate

The discount rate used to measure the total OPEB liability for the SOMAR plan was 3.65% based on the Bond Buyer 20 Bond Index.

Proportionate Share of Net OPEB Liability and OPEB Expense

The Fund proportionate share of the net OPEB liability as of June 30, 2023, measurement date, is as follows:

Plan's Proportion
to Total Plan at
June 30, 2023
Proportionate
Share of Net
OPEB Liability

5.357% 100,875$

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following presents the net pension liability of the SOMAR Plan, as well as what the SOMAR Plan’s net pension liability (asset) would be if it were calculated using a discount rate 1% lower or 1% higher than the current discount rate:

Discount Rate - 1% Current Discount Discount Rate + 1
%
(2.65%) Rate (3.65%) (4.65%)
119,978$ 100,875$ 85,904$
SOMAR Plan's Total OPEB Liability

334
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

35 Note 7 – Other Postemployment Benefits (“OPEB”) (Continued)

B. Retiree Cash Benefit Plan (SOMAR Plan) (Continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Relate to Pension

For the year ended June 30, 2023, the City recognized pension expense of $4,317 for the SOMAR plan. OPEB expense represents the change in the net pension liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, and actuarial assumptions or method. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources for the SOMAR plan:

Deferred Outflows Deferred Inflows
of Resources of Resources
Difference between expected and actual experience 20,084 (15,648)$ Changes of assumptions 15,754 (16,010)
Total 35,838$ (31,658)$
S OMAR Plan

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in pension expense as follows:

Measurement SOMAR Plan
Period Deferred Outflows/
Ending June 30 (Inflows) of Resources
2024 458$
2025 458
2026 458
2027 458
2028 458
Thereafter 1,890
Total 4,180$

Payable to the OPEB Plan

At June 30, 2023, the Fund had no outstanding amounts owed to the SOMAR OPEB plan for contributions for the year ended June 30, 2023.

Note 8 – Contingencies

A. Lawsuits

The Fund is not involved in any matters of litigation that have arisen in the normal course of conducting business.

Additionally, management believes that the City’s insu rance programs are sufficient to cover any potential losses should an unfavorable outcome materialize.

335
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336

REQUIRED SUPPLEMENTARY INFORMATION
37 337
Measurement Date: June 30, 20221 June 30, 20211 June 30, 20201 June 30, 20191 June 30, 20181 Proportion of the Net Pension Liabilit y 0.0095% 0.0067% 0.0072% 0.0068% 0.0066% Proportionate Share of the Net Pension Liability 1,092,885$ 364,008$ 779,817$ 694,727$ 637,000$ Covered Payroll 437,549$ 229,694$ 335,827$ 331,260$ 321,063$ Proportionate Share of the Net Pension Liability
as a Percentage of Covered Payroll 249.77% 158.48% 232.21% 209.72% 198.40% Fiduciary Net Position as a Percentage of the
Plan's Total Pension Liability 73.13% 85.66% 73.63% 75.07% 77.69% 1 Historical information is presented only for measurement periods for which GASB No. 68 is applicable.

Miscellaneous Plans
California Public Employees' Retirement System (CalPERS) Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of the Proportionate Share of the Plan's Net Pension Liability For the Year Ended June 30, 2023
Last Ten Fiscal Years 1
38 338
Measurement Date: June 30, 20171 June 30, 20161 June 30, 20151 June 30, 20141 Proportion of the Net Pension Liabilit y 0.0067% 0.0065% 0.0056% 0.0057% Proportionate Share of the Net Pension Liability 659,623$ 562,902$ 481,238$ 462,583$ Covered Payroll 301,916$ 251,715$ 251,715$ 319,046$ Proportionate Share of the Net Pension Liability
as a Percentage of Covered Payroll 218.48% 223.63% 191.18% 144.99% Fiduciary Net Position as a Percentage of the
Plan's Total Pension Liability 75.39% 75.87% 78.32% 78.10% 1 Historical information is presented only for measurement periods for which GASB No. 68 is applicable.

Miscellaneous Plans
Last Ten Fiscal Years 1
California Public Employees' Retirement System (CalPERS) Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of the Proportionate Share of the Plan's Net Pension Liability (Continued) For the Year Ended June 30, 2023
39 339
Fiscal Year: 2022-231
2021-22 2020-21 2019-20 2018-19
Actuarially Determined Contribution2
105,146$ 88,805$ 102,423$ 95,532$ 91,514$ Contribution in Relation to the Actuarially
Determined Contribution2
(105,146) (88,805) (102,423) (95,532) (91,514) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ Covered Payroll3
449,800$ 437,549$ 0 229,694$ 335,827$ 331,260$ Contributions as a Percentage of Covered Payroll 23.38% 20.30% 44.59% 28.45% 27.63% Notes to the Schedule:

California Public Employees' Retirement System (CalPERS) 1 Historical information is presented only for measurement periods for which GASB No. 68 is applicable. 2 Employers are assumed to make contributions equal to the actuarially determined contributions (which is the actuarially determined contribution). However, some employers may choose to make additional contributions towards their side-fund or their unfunded liability. Employer contributions for such plan exceed the actuarial determined contributions. CalPERS has determined that employer obligations referred to as side-funds are not considered separately financed specific liabilities. 3 Includes one year’s payroll growth using 2.80% payroll growth assumption for fiscal year ended June 30, 2022; 2.75% payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00% payroll growth assumption for fiscal years ended June 30, 2014-17.

Last Ten Fiscal Years 1
Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the Pension Plan
For the Year Ended June 30, 2023
Miscellaneous Plans
Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. 40 340
Fiscal Year: 2017-18 2016-17 2015-16 2014-15
Actuarially Determined Contribution2
63,159$ 52,105$ 52,884$ 34,760$ Contribution in Relation to the Actuarially
Determined Contribution2
(63,159) (52,105) (52,884) (34,760) Contribution Deficiency (Excess) -$ -$ -$ -$ Covered Payroll3
301,916$ 251,715$ 251,715$ 319,046$ Contributions as a Percentage of Covered Payroll 20.92% 20.70% 21.01% 10.89% Last Ten Fiscal Years 1
California Public Employees' Retirement System (CalPERS) Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the Pension Plan (Continued) For the Year Ended June 30, 2023
Miscellaneous Plans
41 341
Measurement Date: June 30, 20231 June 30, 20221 June 30, 20211 June 30, 20201 June 30, 20191 Proportion of the Net OPEB Liability
(Asset) 5.36% 5.36% 5.88% 6.80% 5.16%
Proportionate Share of the Net OPEB
Liability (Asset) (12,132)$ (763)$ (28,052)$ (11,718)$ 66,474$ Covered Payroll 229,694$ 335,827$ 335,827$ 331,260$ 321,063$ Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll -5.28% -0.23% -8.35% -3.54% 20.70%
Fiduciary Net Position as a Percentage of
the Plan's Total Pension Liability 109.27% 100.56% 119.65% 106.92% 65.60% 1 Historical information is presented only for measurement periods for which GASB No. 75 is applicable.

Last Ten Fiscal Years 1
Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of the Proportionate Share of the Plan's Net OPEB Liability (Asset) - PEHMCA For the Year Ended June 30, 2023
42 342
Measurement Date: June 30, 20181
Proportion of the Net OPEB Liability
(Asset) 5.19%
Proportionate Share of the Net OPEB
Liability (Asset) 75,521$
Covered Payroll 301,916$
Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll 25.01%
Fiduciary Net Position as a Percentage of
the Plan's Total Pension Liability 59.11%
1 Historical information is presented only for measurement periods for which GASB No. 75 is applicable.

Last Ten Fiscal Years 1
Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of the Proportionate Share of the Plan's Net OPEB Liability (Asset) - PEHMCA (Continued) For the Year Ended June 30, 2023
43 343
Fiscal Year: 2022-232 2021-222 2020-212 2019-202
2018-19
Actuarially Determined Contribution 5,879$ 7,721$ 1,179$ 11,571$ 18,642$ Contribution in Relation to the
Actuarially Determined Contribution (5,879) (7,721) (1,179) (11,571) (18,642) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ Covered Payroll 449,800$ 437,549$ 229,694$ 0 335,827$ 331,260$ Contributions as a Percentage of Covered
Payroll 1.31% 1.76% 0.51% 3.45% 5.63%
1 Historical information is presented only for measurement periods for which GASB No. 75 is applicable. 2 Effective for the year ended June 30, 2020, PEHMCA Plan is valued separately.

Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the OPEB Plan - PEHMCA
For the Year Ended June 30, 2023
Last Ten Fiscal Years 1
44 344
Fiscal Year: 2018-19
Actuarially Determined Contribution 10,641$
Contribution in Relation to the
Actuarially Determined Contribution (10,641)
Contribution Deficiency (Excess) -$
Covered Payroll 321,063$
Contributions as a Percentage of Covered
Payroll 3.31%
Last Ten Fiscal Years 1
1 Historical information is presented only for measurement periods for which GASB No. 75 is applicable. 2 Effective for the year ended June 30, 2020, PEHMCA Plan is valued separately.

Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the OPEB Plan - PEHMCA (Continued) For the Year Ended June 30, 2023
45 345
Measurement Date: June 30, 20231 2 June 30, 20221 June 30, 20211 2 June 30, 20201 2 Proportion of the Net OPEB Liability
(Asset) 5.36% 5.36% 5.36% 5.36%
Proportionate Share of the Net OPEB
Liability (Asset) 100,875$ 71,848$ 86,665$ 99,901$ Covered Payroll 437,549$ 364,008$ 345,902$ 335,827$ Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll 23.05% 19.74% 25.05% 29.75%
Fiduciary Net Position as a Percentage of
the Plan's Total Pension Liability 0.00% 0.00% 0.00% 0.00% 1 Historical information is presented only for periods for which GASB 73 is applicable. 2 SOMAR Plan is now valued separately from PEHMCA Plan effective June 30, 2020.

Last Ten Fiscal Years 1
Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of the Proportionate Share of the Plan's Net OPEB Liability (Asset) - SOMAR For the Year Ended June 30, 2023
46 346
Fiscal Year: 2022-232 2021-222 2020-212 2019-202
Actuarially Determined Contribution 2,303$ 2,342$ 2,332$ 2,182$ Contribution in Relation to the Actuarially Determined
Contribution (2,303) (2,342) (2,332) (2,182) Contribution Deficiency (Excess) -$ -$ -$ -$ Covered Payroll 437,549$ 364,008$ 345,902$ 33,587$ Contributions as a Percentage of Covered Payroll 0.53% 0.64% 0.67% 6.50% 1 Historical information is presented only for measurement periods for which GASB No. 73 is applicable. 2 Effective for the year ended June 30, 2020, SOMAR Plan is valued separately.

Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the OPEB Plan - SOMAR
For the Year Ended June 30, 2023
Last Ten Fiscal Years 1
47 347
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48 348

City of Hercules
Hercules, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures
on Measure B Transactions and Use Tax Revenues
For the Year Ended June 30, 2023
349
350

INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING AGREED-UPON PROCEDURES To the Honorable Mayor and Members of City Council
of the City of Hercules
Hercules, California

We have performed the procedures enumerated below on the City of Hercules (t he “City”) in evaluating whether the Measure B – Transactions and Use Tax Revenues is in accordan ce with the provisions of this measure for the year ended June 30, 2023. The City’s mana gement is responsible for receipt of Measure B - Transactions and Use Tax Revenues and deposit of such proceeds into the City's General Fund. The City is responsible for compliance with the Measure B – Transactions and Use Tax.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of evaluating whether the Measure B – Transactions and Use Tax revenues is in accordance with the provisions of this measure. The City’s management has agreed to and acknow ledged that the procedures performed are appropriate for its purposes. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the ends of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

1. We confirmed Measure B payments with the Californi a State Board of Equalization (“BOE”) and calculated variances to the receipts summarized per the general ledger of the City for the year ended June 30, 2023.

Findings: We traced from the BOE on-line confirmation to th e City’s general ledger with a variance noted and details as below:

Date Posted to G/L Receipts per G/L Payments per BOE Variance 7/12/2022* $ 178,272 $ 178,272 $ - 8/11/2022* 126,798 126,798 - 9/08/2022* 216,071 216,071 - 9/29/2022 175,753 175,753 - 10/27/22 106,914 106,914 - 12/08/22 206,507 206,507 - 1/5/2023 180,920 180,920 - 2/2/2023 103,225 103,225 - 2/2/2023** 189,154 - 189,154 3/2/2023 224,657 224,657 - 3/28/2023 155,735 155,735 - 4/27/2023 92,527 92,527 - 6/5/2023 201,302 201,302 - 6/30/2023*** 496,006 496,006 - 2,653,841$ 2,464,687$ 189,154$ * The City accrued $521,141 for the fiscal year ended June 30, 2022. Thesepayments apply to part of that accrual.
** The City received October 2021 replacement check $189,153.74 and recognized the revenue in FY23.
*** California Department of Tax and Fee Administration (CDTFA) confirmed $166,014, $119,069, and $210,923 were paid towards accruals subsequent to the year end. 351
To the Honorable Mayor and Members of City Council
of the City of Hercules

2. We traced the proceeds of the tax levied and confirmed at procedure 1 to the City's General Fund for use by the City, in accordance with Ordinance 470 Sec 8-9.12 Use of Tax Proceeds and Ordinance 481 Sec 8-9.12 Use of Tax Proceeds (amends ordinance 470).

Findings: Proceeds of taxes levied and confirmed under M easure B were paid/deposited into the City’s General Fund for use by the City with no exceptions.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the revenue received by the City from Measure B – Transactions and Use Tax. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and the management of the City and is not intended to be and should not be used by anyone other than these specified parties.

Santa Ana, California
February 22, 2024

352

City of Hercules
Hercules, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures
on Measure N Utility Users Tax Rate Revenues
For the Year Ended June 30, 2023
353

354
INDEPENDENT ACCOUNTANTS’ REPORT

ON APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of City Council
of the City of Hercules
Hercules, California
We have performed the procedures enumerated below on assi sting the City of Hercules, California (the “City”) in evaluating whether the Measure N (formerly known as Measure C) Utility Users Tax Rate Revenues (UUT) is in accordance with the provisions of this measure for the year ended June 30, 2023. The City's management is responsible for the receipt of Measure N - Utility Users Tax Rate Revenues and deposit of such proceeds into the City's General Fund. The City is responsible for compliance with Measure N Utility Users Tax Rate Revenues.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of evaluating whether the Measure N Utility Users Tax Rate Revenues is in accordance with the provisions of this measure. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

1. We agreed t he actual UUT to the receipts recorded in the City's general ledger and recalculated the mathematical accuracy of the following schedules provided by the City:
a) FY 2022/23 - Expected UUT VS Actual UUT
b) FY 2022/23 - Increase in Revenues Generated by Measure N Findings:
a) Actual UUT agreed to receipts r ecorded in the City’s general ledger with no exceptions. Schedule recalculated for mathematical accuracy with no exceptions.

Type of Utility
Estimated Utility
Billings
(FY 22/23
Utility Billings
as a Base) Ex pected UUT¹
Actual
UUT Variance % Variance
Electricity 17,150,000$ 1,372,000$ 1,546,371$ 174,371$ 12.71% Telephone 6,037,500 483,000 460,077 (22,923) -4.75% Gas 5,625,000 450,000 749,243 299,243 66.50%
Water 9,700,000 776,000 713,884 (62,116) -8.00%
Cable 6,350,000 508,000 526,699 18,699 3.68%
Totals 44,862,500$ 3,589,000$ 3,996,274$ 407,274$ 11.35% FY 2022/23 - Ex pected UUT vs Actual UUT
* Based on UUT of 8% of estimated utility billings
355
To the Honorable Mayor and Members of the City Council
of the City of Hercules

b) Schedule recalculated for mathematical accuracy with no exceptions.

Type of Utility
Actual UUT
with Measure
A¹
Estimated UUT
without
Measure A²
Increase in
Revenue due to
Measure A
Increase/
Decrease in Revenue
per Staff Report ³ Variance % Variance
Electricity 1,546,371 1,159,779 386,592 404,272 17,680 4.37% Telephone 460,077 345,058 115,019 95,949 (19,070) -19.88% Gas 749,243 561,932 187,311 214,478 27,167 12.67% Water 713,884 535,413 178,471 203,070 24,599 12.11% Cable 526,699 - 526,699 492,750 (33,949) -6.89% Totals 3,996,274 2,602,182 1,394,092 1,410,519 16,427 1.16% ¹ Based on the actual UUT collected for FY 2022/2023 at a rate of 8% for the entire year. ² Based on a rate of 8% UUT on electricity, telephone, gas and water, and no UUT on cable. ³ Based on the Adopted Budget for FY 21/22 & FY 22/23.

FY 2022/23 -Increase in Revenue Generated by Measure N (formely known as Measure C)

2. We traced the proceeds of the Measure N tax, as listed in procedure 1.a) schedule to the City's General Fund for use by the City, in accordance with Ordinance 475 Sec 8-8.402 Use of Tax Proceeds and Ordinance 481 Sec 8-8.402 Use of Tax Proceeds (amends ordinance 475).

Findings: Proceeds of taxes as listed in schedule presented at 1.a) were paid/deposited into the City's General Fund for use by the City, with no exceptions.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Measure N Utility Users Tax Rate Revenues of the City for the year ended June 30, 2023. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and the management of the City of Hercules and is not intended to be and should not be used by anyone other than these specified parties.

Santa Ana, California
February 22, 2024
356

City of Hercules
Hercules, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures to
Appropriations Limit Schedule
For the Year Ending June 30, 2024
357
INDEPENDENT ACCOUNTANTS’ REPORT ON

APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of City Council
of the City of Hercules
Hercules, California

We have performed the procedures enumerated below on the accompanying Appropriations Limit Schedule of the City of Hercules, California (the “City”) for the year ending June 30, 2024. The City’s management is responsible for the Appropriations Limit Schedule.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution, which was agreed by the City and the League of California Cities (as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution ).

This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures performed and associated findings are as follows:

1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the year ended June 30, 2024, and determined that the limit and annual calculation factors were adopted by resolution of the City Council. We also determined that the population and inflation options were selected by a recorded vote of the City Council.

Finding: No exceptions were noted as a result of our procedures.

2. For the accompanying Appropriations Limit Schedule, we added the prior year’s limit to the total adjustments, and agreed the resulting amount to the current year’s limit.

Finding: No exceptions were noted as a result of our procedures. However, we noted that the City is not maximizing its calculation by using the City population factor for the year ended June 30, 2024 that will benefit the City th e most. There is no impact as the City’s appropriations for 2023-24 are below the limit.

3. We verified the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.

Finding: No exceptions were noted as a result of our procedures.

4. We verified the appropriations limit presented in the accompanying Appropriations Limit Schedule to the appropriations limit adopted by the City Council.

Finding: No exceptions were noted as a result of our procedures. 358
To the Honorable Mayor and Members of City Council
of the City of Hercules
Hercules, California

2 We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respective on the accompanying Appropriation Limit Schedule.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties.

Santa Ana, California
February 22, 2024
359
City of Hercules
Appropriations Limit Schedule
For the Year Ending June 30, 2024

3 Amount Source
A. Appropriations Limit FY 2022-2023 506,343,344$ Prior year appropriation limit adopted by the City
B. Calculation Factors:
1) Population increase % 1.0136 California Department of Finance 2) Inflation increase % 1.0444 California Department of Finance 3) Total adjustment % 1.0586 (B1 x B2) C. Annual Adjustment Increase 29,673,664 {(B3-1) x A} D. Other Adjustments:
1) Loss responsibility (-) - N/A 2) Transfer to private (-) - N/A 3) Transfer to fees (-) - N/A 4) Assumed responsibility (+) - N/A E. Total Adjustments 29,673,664 (C+D)
F. Appropriations Limit FY 2023-2024 536,017,008$ (A+E)

See Accompanying Notes to Appropriations Limit Schedule. 360
City of Hercules
Notes to Appropriations Limit Schedule
For the Year Ending June 30, 2024

4 Note 1 – Purpose of Limited Procedures Review
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes. Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to the agreed-upon procedures in connection with the annual audit.

Note 2 – Method of Calculation

Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1, 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-87, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.

Note 3 – Population Factors

A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population or the annual percentage cha nge in population of the county where the jurisdiction is located. The factor adopted by the City of Hercules, Calif ornia (the “City”) for the year ending June 30, 2024, represents the annual percentage change in population for the City.

Note 4 – Inflation factors

A California governmental agency may use as its inflation factor either the annual percentage change in the 4 th quarter per capita personal income (which percentage is supplied by the California Department of Finance) or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City for the year ending June 30, 2024, represents the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction.

Note 5 – Other Adjustments

A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. The City had no such adjustments for the year ending June 30, 2024. 361

CITY OF HERCULES
Presentation to the City Council
For the Fiscal Year Ended June 30, 2023
March 12, 2024
362
2 CONTENTS
• Scope of Work
• Required Communications (AU-C 260)
• Overview of the Financial Statements and Financial Indicators • Key Pensions and Other Postemployment Benefits Information • Financial Audit Results
3/12/2024
363
3 SCOPE OF WORK
3/12/2024
364
4 SCOPE OF WORK
• Audit of the Annual Comprehensive Financial Report
• Audit of the Hercules Wastewater Fund
• Report on internal control over financial reporting and on compliance in accordance with Government Auditing Standards
•
Agreed Upon Procedures:
• GANN Limit
• Measure B – Transactions and Use Tax Revenues
• Measure N (formerly as Measure C) – Utility Users Tax Rate Revenues 3/12/2024
365
5 OUR RESPONSIBITY IN ACCORDANCE WITH

PROFESSIONAL STANDARDS
• Form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America • Our responsibility is to plan and perform the audit to obtain “reasonable” assurance (not “absolute” assurance) about whether the financial statements are free of material misstatements.
• We considered internal control over financial reporting. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
• Communicate with those charged with governance
3/12/2024
366
6 Required Communications (AU-C 260)
3/12/2024
367
7 Required Communications (AU-C 260)
• Ethics and Independence
• Complied with ALL relevant ethical requirements regarding independence • Significant Accounting Policies
• The City disclosed all significant accounting policies in Note 1 to the financial statements. • Significant Estimates
• Investment fair value
• Depreciation and amortization on capital assets
• Lease receivable
• Net pension liability
• Net other postemployment benefits (“OPEB”) liability
3/12/2024
368
8 Required Communications (AU-C 260)
• Sensitive Disclosures
• Note 1 - Summary of Significant Accounting Policies
• Note 4 – Leases Receivable
• Note 8 – Retirement Plans
• Note 10 – Other Postemployment Benefits
• Note 12 – Commitments and Contingencies
• Note 14 – Stewardship, Compliance, and Accountability • Misstatements
• There were no material uncorrected misstatement.
3/12/2024
369
9 Required Communications (AU-C 260)
• Consultation with Other Accountants
• Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and other matters. • Significant Difficulties
• We encountered no significant difficulties in dealing with management. • Disagreement with Management
• We did not have any disagreement with management in terms of accounting treatments nor audit procedures performed.
3/12/2024
370
10 OVERVIEW OF THE FINANCIAL STATEMENTS

AND FINANCIAL INDICATORS
3/12/2024
371
11 City of Hercules
Government-Wide Statement of Net Position
June 30, 2023
Governmental Business-Type
Activities Activities Total
Assets 134,581,000$ 67,550,000$ 202,131,000$
Deferred Outflows of Resources 9,151,000 515,000 9,666,000 Liabilities 46,900,000 32,402,000 79,302,000
Deferred Inflows of Resources 13,687,000 261,000 13,948,000 Net Position:

Net investment in capital assets 60,790,000 19,603,000 80,393,000 Restricted 10,730,000 - 10,730,000 Unrestricted 11,625,000 15,799,000 27,424,000 Total Net Position 83,145,000$ 35,402,000$ 118,547,000$ 3/12/2024
372
12 City of Hercules
Government-Wide Statement of Activities
For the Year Ended June 30, 2023
Governmental Business-Type
Activities Activities Total
Program Revenues:

Charges for Services 3,025,000$ 5,923,000$ 8,948,000$ Operating Grants and Contributions 8,895,000 - 8,895,000 Capital Grants and Contributions 68,000 - 68,000 Total Program Revenues 11,988,000 5,923,000 17,911,000 Expenses 24,600,000 5,086,000 29,686,000
Net Cost of Services (12,612,000) 837,000 (11,775,000) General Revenues (Loss) 17,783,000 294,000 18,077,000 Changes in Net Position 5,171,000$ 1,131,000$ 6,302,000$ 3/12/2024
373
13 City of Hercules
Governmental Activities
Cost of Services to Tax Revenues
For the Years Ended June 30, 2023 and 2022
2023 2022 Change
Cost of Services 12,612,000$ 4,722,000$ 7,890,000$ Tax Revenues 13,465,000 14,092,000 (627,000)
Ratio 94% 34% 60%
3/12/2024
374
14 City of Hercules
General Fund Summary
Fund Balance
June 30, 2023 and 2022
2023 2022 Change
Fund Balance:

Nonspendable 10,000$ 11,000$ (1,000)$ Restricted 2,142,000 2,054,000 88,000
Committed 8,000,000 - 8,000,000 Assigned 6,197,000 6,022,000 175,000
Unassigned 17,529,000 22,927,000 (5,398,000)
Total Fund Balance 33,878,000$ 31,014,000$ 2,864,000$ 3/12/2024
375
15 City of Hercules
General Fund Summary
Revenues, Expenditures and Changes in Fund Balance
For the Years Ended June 30, 2023 and 2022
2023 2022 Change
Revenues 19,495,000$ 27,042,000$ (7,547,000)$
Expenditures (17,657,000) (16,109,000) (1,548,000) Revenues over Expenditures 1,838,000 10,933,000 (9,095,000) Other Financing Sources 1,026,000 1,910,000 (884,000) Speical item - (27,787,637) 27,787,637 Change in Fund Balance 2,864,000$ (14,944,637)$ (9,979,000)$ 3/12/2024
376
16 City of Hercules
General Fund
Unassigned Fund Balance to Annual Expenditures
For the Years Ended June 30, 2023 and 2022
2023 2022 Change
Unassigned Fund Balance 17,529,000$ 22,927,000$ (5,398,000)$ Annual Expenditures 17,657,000 16,109,000 1,548,000 Ratio 99% 142% -43%
Committed/Assigned/Unassigned
Fund Balance 33,868,000$ 28,949,000$ 4,919,000$
Ratio 192% 180% 12%
3/12/2024
377
17 KEY PENSION AND OPEB

INFORMATION
3/12/2024
378
18 Net Pension Liability – Misc. Plan
3/12/2024
2023 2022
Plan Total Pension Liability 33,376,000$ 31,470,000$ Plan Fiduciary Net Position (24,408,000) (26,956,000) Net Pension Liability 8,968,000$ 4,514,000$ Funding Ratio 73% 86%
Contibution Made During the Fiscal Year 863,000$ 961,000$ 379
19 Net Pension Liability – Safety Plan
3/12/2024
2023 2022
Plan Total Pension Liability 43,442,000$ 38,998,000$ Plan Fiduciary Net Position (32,655,000) (33,620,000) Net Pension Liability 10,787,000$ 5,378,000$ Funding Ratio 75% 86%
Contibution Made During the Fiscal Year 1,240,000$ 1,127,000$ 380
20 Net OPEB Liability – PEHMCA PLAN
2023 2022
Plan Total OPEB Liability 2,442,000$ 2,545,000$
Plan Fiduciary Net Position (2,668,000) (2,559,000)
Net OPEB Asset (226,000)$ (14,000)$
Funding Ratio 109% 101%
Contibution Made During the Fiscal Year 110,000$ 144,000$ 3/12/2024
381
21 Net OPEB Liability – SOMAR PLAN
2023 2022
Plan Total OPEB Liability 1,883,000$ 1,341,000$ Plan Fiduciary Net Position - - Net OPEB Liability 1,883,000$ 1,341,000$
Funding Ratio 0% 0%
Contibution Made During the Fiscal Year 44,000$ 44,000$ 3/12/2024
382
22 FINANCIAL AUDIT RESULTS
3/12/2024
383
23 AUDIT RESULTS
• Financial Statements
• Unmodified Opinion
• Financial Statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable
• Disclosures are properly reflected in the financial statements • Agreed Upon Procedures – GANN, Measure B, and Measure N • No exceptions were noted
• Other Results
• No disagreements with management
• No material weaknesses in internal controls over financial reporting were reported • No accounting issues
3/12/2024
384

HQ - ORANGE COUNTY
200 E. Sandpointe Avenue
Suite 600
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SAN DIEGO
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BAY AREA
2121 North California Blvd.

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HQ - ORANGE COUNTY
200 E. Sandpointe Avenue
Suite 600
Santa Ana, CA 92707

SAN DIEGO
4660 La Jolla Village Drive
Suite 100
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SACRAMENTO
1511 Corporate Way
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Las Vegas, NV 89134

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Phoenix, AZ 85004

WALNUT CREEK
2121 North California Boulevard
Suite 290
Walnut Creek, CA 94596
385
DI

SCUSSION AND/OR ACTION

AGENDA ITEM

2. 22-799
386

STAFF REPORT TO THE CITY COUNCIL
DATE: Special Meeting of March 12, 2024
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Michael Roberts, Public Works Director/City Engineer SUBJECT: Memorandum of Understanding with Recyclemore Regarding the Implementation of SB 1383 Requirements
RECOMMENDED ACTION:

Adopt a resolution approving a Memorandum of Understanding (MOU) between West Contra Costa Integrated Waste Management Authority (Recyclemore) and the City of Hercules regarding implementation of SB 1383 regulatory requirements.

BACKGROUND:

The City is a member agency of the West Contra Costa Integrated Waste Management Authority (RecycleMore) , a Joint Powers Authority . RecycleMore is responsible for implementing most State mandated recycling and organics programs in West County and is agreeable to expanding their existing operations to achieve compliance with certain new requirements of Senate Bill (SB) 1383 on behalf of their member agencies . SB 1383’s stated purpose is to reduce short -lived climate pollutants by increasing organics collection and diversion. The law mandates all residents and businesses subscribe to organics waste collection, edible food r ecovery programs, education and outreach, processing of complaints and waivers, record keeping, inspections, monitoring and enforcement.

This MOU will allow RecycleMore to efficiently utilize their specialized expertise to meet the new requirements of SB 1383 while minimally burdening City staffing , which is at minimal levels.
22-799
387

ANALYSIS:

As covered in the MOU (Att #2) and outlined in the Draft Workplan between Member Agencies and RecycleMore (Att #3) , RecycleMore would be responsible for the majority of the new requirements of SB 1383 as follows:

1. Compliance monitoring and site visits.

2. Waiver evaluation.

3. Outreach and education.

4. Route reviews for contamination monitoring.

5. The edible food recovery program, incl uding identifications, inspections, education, and engagement with food recovery organizations.

6. Capacity planning.

7. Enforcement activities, up to the limits described below.

8. Recordkeeping and reporting associated with the above items.

The City would be responsible for the remaining requirements, which cannot be achieved by RecycleMore, either due to operational issues or lack for enforcement authority:

1. Certain updates to the City’s franchise agreement with Republic Services , negotiations for which are currently underway.

2. Procurement of recovered organic waste products, including recycled compost and mulch products.

3. Procurement of recycled content paper products (such as printer paper, toilet paper, paper towels, etc.) that are recycl able as described by SB 1383 and subsequent legislation.

4. Issuance of penalties for violating municipal code requirements, if recommended by RecycleMore and deemed to be appropriate. RecycleMore is responsible for all steps leading to possible issuance of penalties, and it is not anticipated that penalties will be issued except in the case of repeated non- compliance. Example violations may include:
a. Non-subscription to recycling or organics collection. b. Not participating in source separating recycling or or ganics from garbage.
c. Lacking adequate signage or not matching color requirements of collection containers.

5. Recordkeeping and reporting associated with the above items.

FISCAL IMPACT:

There is no fiscal impact associated with approving this MOU.

388

ATTACHMENTS:

1. Resolution approving the Memorandum of Understanding Between West Contra Costa Integrated Waste Management Authority and the City of Hercules Regarding Implementation of SB 1383 Regulations.

2. Memorandum of Understanding

3. Draft Workplan between Member Agencies and RecycleMore

389
RESOLUTION NO. 24-

RESOLUTION OF THE CI TY COUNCIL OF THE CI TY OF HERCULES APPROVING

A MEMORANDUM OF UNDER STANDING (MOU) BETWEEN WEST CONTRA

COSTA INTEGRATED WASTE MANAGEMENT AUTHORITY (RECYCLEMORE) AND THE CITY OF HERCULES REGARDING IMPLEMENTATION OF SB 1383

REGULATORY REQUIREMENTS

WHEREAS, the City is a member agency of the West Contra Costa Integrated Waste Management Authority (RecycleMore), a Joint Powers Authority; and

WHEREAS, RecycleMore is responsible for implementing most State mandated recycling and organics programs in West County and is agreeable to expanding their existing operations to achieve compliance with certain new requirements of Senate Bill (SB) 1383 on behalf of their member agencies; and

WHEREAS, the MOU will allow Recycle More t o efficiently utilize their specialized expertise to meet these new requirements of SB 1 383 while minimally burdening City staffing, which is at minimal levels.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hercules that the City Counc il hereby approves a Memorandum of Understanding between West Contra Costa Integrated Waste Management Authority (Recyclemore) and the City of Hercules regarding implementation of SB 1383 regulatory requirements.

The foregoing Resolution was duly and regu larly adopted at a special regular meeting of the City Council of the City of Hercules held on the twelfth day of March, 2024 by the following vote of the Council:

AYES:

NOES:

ABSENT:

ABSTAIN:

____________________________
Dan Romero, Mayor
ATTEST:

Eibleis Melendez, City Clerk
390

1 Memorandum of Understanding
Between West Contra Costa Integrated Waste Management Authority and the City of Hercules Regarding Implementation of SB 1383 Regulations

This Memorandum of Understanding (“MOU”) is made this day of _______________, 2023 (“Effective Date”) by and between the CITY OF HERCULES (“Hercules”), a municipal corporation hereinafter referred to as “City” and the WEST CONTRA COSTA INTEGRATED WASTE MANAGEMENT AUTHORITY, a California joint powers authority (“Authority”) (individually “Party” and collectively “Parties”).

RECITALS
A. The Authority is a joint powers authority established pursuant to the California Joint Exercise of Powers Act (Gov. Code §§ 6500 et seq.) pursuant to the Joint Exercise of Powers Agreement (“JEPA”); and
B. The City is a party to the JEPA and has entered into a franchise agreement with a solid waste collection services provider (“Provider”) for the collection of Solid Waste and recyclables (“Franchise Agreement”). The Franchise Agreement provides for certain rights and delegated authorities to the respective solid waste service provider; and C. The Authority operates certain core programs on behalf of and for the benefit of its Member Agencies, including but not limited to providing education regarding recycling, composting, and other methods of waste diversion, and conducting, preparing, and submitting all monitoring and reporting pursuant to the Integrated Waste Management Act (California Public Resources Code §§ 40000 et seq.); and
D. Senate Bill 1383, the Short-lived Climate Pollutant Reduction Act (which added Sections 39730.5, 39730.6, and 39730.8 to the Health and Safety Code, and added Chapter 13.1 (commencing with Section 42652) to Part 3 of Division 30 of the Public Resources Code, as amended, supplemented, superseded, and replaced from time to time) (“SB 1383”), sets statewide organic waste disposal reduction targets of 50 percent by 2020 and 75 percent by 2025, based on the 2014 organics waste disposal baseline, set forth in Section 39730.6 of the Health and Safety Code, and requires California Department of Resources Recycling and Recovery (“CalRecycle”) to develop regulations to reduce organics in landfills as a source of methane; and E. CalRecycle adopted the SB 1383 Regulations that created a new Chapter 12 (Short- lived Climate Pollutants) of Division 7 of Title 14 of the California Code of Regulations and amended portions of regulations of Title 14 CCR and Title 27 CCR (“SB 1383 Regulations”). The SB 1383 Regulations impose requirements on counties, cities, residential households, commercial businesses (including multi-family residential dwellings), commercial edible food generators, haulers, self-haulers, food recovery organizations, and food recovery services to support achievement of statewide organic waste disposal reduction targets; and F. The SB 1383 Regulations require cities and counties to adopt and enforce a mechanism to implement relevant provisions of the SB 1383 Regulations concerning regulation of organic waste collection services, generators of organic waste, waste haulers, and generators, and processors of edible food, together with enforcement mechanisms and administrative civil penalties 391

2 for violations of local regulations; and
G. The SB 1383 Regulations also require cities and counties, among other things, to implement programs requiring organic waste generators and waste haulers to meet minimum standards for organic waste collection services, inspect waste containers for prohibited contamination of materials, provide education and outreach information to organic waste generators, report to CalRecycle on compliance with SB 1383 Regulations, and maintain records of compliance with SB 1383 Regulations; and
H. The Provider has developed programs for Organics Waste collection as required by the Franchise Agreement and applicable law; and
I. Pursuant to 14 CCR 18981.2(b), cities and counties may designate a public or private entity to fulfill their SB 1383 obligations to adopt an enforceable mechanism through a MOU.

However, 14 CCR 18981.2(c) specifies that cities and counties shall remain ultimately responsible for compliance with SB 1383 Regulations; and
J. The Parties wish to enter into this MOU to designate certain roles and responsibilities that the Authority shall assume on behalf of the City to implement the SB 1383 Regulations that took effect on January 1, 2022 under the terms and conditions as set forth herein.

NOW, THEREFORE, in consideration of the foregoing, the Parties hereby agree as follows:

AGREEMENT

1. Recitals. The foregoing recitals are true and correct and hereby incorporated herein.

2. Term. This MOU shall commence on the Effective Date and remain in full force and effect until terminated as set forth in Section 9.

3. Definitions.
(a) “Authority” means the West Contra Costa Integrated Management Authority. (b) “Blue Container” shall have the same meaning as in 14 CCR Section 18982.2(a)(5).

The Parties acknowledge that the City may use the term “Recycling Container” in its ordinances to refer to what are defined as Blue Containers herein.
(c) “California Code of Regulations” or “CCR” means the State of California Code of Regulations. CCR references in this MOU are preceded with a number that refers to the relevant Title of the CCR (e.g., “14 CCR” refers to Title 14 of CCR). (d) “CalRecycle” or “Department” means the California State Department of Resources Recycling and Recovery, which is the state agency designated with responsibility for developing, implementing, and enforcing the SB 1383 Regulations among other duties. (e) “City” means the City of Hercules.
(f) “City’s Representative” means the City Manager or the City Manager’s designee. 392

3 (g) “Commercial Business” or “Commercial” means a firm, partnership, proprietorship, joint-stock company, corporation, or association, whether for-profit or nonprofit, strip mall, industrial facility, or a Multifamily Residential Dwelling, or as otherwise defined in 14 CCR Section 18982(a)(6). A Multi-Family Residential Dwelling that consists of fewer than five (5) units is not a Commercial Business for purposes of this MOU. (h) “Commercial Edible Food Generator” includes a Tier One or a Tier Two Commercial Edible Food Generator as defined in 14 CCR 18982(a)(73) and (a)(74). For the purposes of this definition, Food Recovery Organizations and Food Recovery Services are not Commercial Edible Food Generators pursuant to 14 CCR Section 18982(a)(7). (i) “Compliance Review” means a review of records by an Enforcement Agency to determine compliance with SB 1383 Regulations.
(j) “Container Contamination” or “Contaminated Container” means a container, regardless of type or color, that contains Prohibited Container Contaminants, or as otherwise defined in 14 CCR Section 18982(a)(55).
(k) “County” means the County of Contra Costa.
(l) “Edible Food” means food intended for human consumption, or as otherwise defined in 14 CCR Section 18982(a)(18). For the purposes of this MOU or as otherwise defined in 14 CCR Section 18982(a)(18), Edible Food is not Solid Waste if it is recovered and not discarded. Nothing herein requires or authorizes the recovery of Edible Food that does not meet the food safety requirements of the California Retail Food Code, as codified in the Health and Safety Code Section 113700, et seq.
(m) “Enforcement Action" means an action of the relevant Enforcement Agency to address non-compliance with SB 1383 Regulations including, but not limited to, issuing administrative citations, fines, penalties, or other remedies. (n) “Enforcement Agency” means an entity with the authority to enforce part or all of SB 1383 Regulations as specified herein. The Authority and the City are each an Enforcement Agency.
(o) “Food Recovery Organization” means an entity that engages in the collection or receipt of edible food from Commercial Edible Food Generators and distributes that edible food to the public for food recovery either directly or through other entities or as otherwise defined in 14 CCR Section 18982(a)(25).
(p) “Food Recovery Services” means a person or entity that collects and transports edible food from a Commercial Edible Food Generator to a Food Recovery Organization or other entities for food recovery or as otherwise defined in 14 CCR Section 18982(a)(26). (q) “Generator” means a person or entity that is responsible for the initial creation of Organic Waste, or as otherwise defined in 14 CCR Section 18982(a)(48). (r) “Gray Container” shall have the same meaning as defined in 14 CCR Section 18982(a)(28). The Parties acknowledge that the City may use the term “Garbage Container” or 393

4 “Landfill Container” in its ordinances to refer to what are defined as Gray Containers herein. (s) “Green Container” shall have the same meaning as defined in 14 CCR Section 18982(a)(29) and shall be used for the purpose of storage and collection of Organic Waste. The Parties acknowledge that the City may use the term “Organics Container” or “Compost Container” in its ordinances to refer to what are defined as Green Containers herein. (t) “Hauler” means a person or entity who collects Organic Waste from a Generator and delivers it to a reporting entity, end user, or a destination outside of the state. “Hauler” includes public contract haulers, private contract haulers, and Self-Haulers. A person who transports material from a reporting entity to another person is a transporter, not a hauler. (u) “Hauler Route” means the designated itinerary or sequence of stops for each segment of City’s collection service area, or as otherwise defined in 14 CCR Section 18982(a)(31.5).
(v) “Implementation Record” means all records, physical or electronic, that must be stored in one central location and are required by the SB 1383 Regulations. (w) “Inspection” means an Enforcement Agency’s electronic or on-site review of records, containers, and an entity’s collection, handling, recycling, or landfill disposal of Organic Waste or Edible Food handling to determine if the entity is complying with requirements set forth in the SB 1383 Regulations, or as otherwise defined in 14 CCR Section 18982(a)(35). (x) “Member Agencies” mean the parties to the JEPA. Current Member Agencies are the cities of El Cerrito, Hercules, Pinole, Richmond and San Pablo. The Member Agency boundaries for the purpose of this MOU are the legal boundaries of each of the incorporated municipalities. (y) “Organics,” or “Organic Waste” means Solid Waste containing material originated from living organisms and their metabolic waste products, including but not limited to food, green material, landscape and pruning waste, organic textiles and carpets, lumber, wood, Paper Products, Printing and Writing Paper, manure, biosolids, digestate, and sludges or as otherwise defined in 14 CCR Section 18982(a)(46). Biosolids and digestate are as defined by 14 CCR Section 18982(a). (z) “Paper Products” include, but are not limited to, paper janitorial supplies, cartons, wrapping, packaging, file folders, hanging files, corrugated boxes, tissue, and toweling, or as otherwise defined in 14 CCR Section 18982(a)(51).
(aa) “Printing and Writing Paper” include, but are not limited to, copy, xerographic, watermark, cotton fiber, offset, forms, computer printout paper, white wove envelopes, manila envelopes, book paper, note pads, writing tablets, newsprint, and other writing papers, posters, index cards, calendars, brochures, reports, magazines, and publications, or as otherwise defined in 14 CCR Section 18982(a)(54).
(bb) “Prohibited Container Contaminants” means the following: (i) discarded materials placed in the Green Container that are not identified as acceptable Organic Waste for the City’s Green Container; (ii) discarded materials placed in the Grey Container that are acceptable Organic Waste to be placed in the City’s Green Container.
394

5 (cc) “Route Review” means a visual Inspection of containers along a Hauler Route for the purpose of determining Container Contamination, and may include mechanical or electronic Inspection methods such as the use of cameras, or as otherwise defined in 14 CCR Section 18982(a)(65).
(dd) “SB 1383 Regulations,” means Chapter 12 (Short-lived Climate Pollutants) of Division 7 of Title 14 of the California Code of Regulations and amended portions of regulations of Title 14 CCR and Title 27 CCR. Regulatory references to specific sections listed in the MOU shall be to the SB 1383 Regulations, unless specifically noted otherwise. (ee) “Self-Hauler” means a person, who hauls Solid Waste, Organic Waste or recyclable material he or she has generated to another person. Self-Hauler also includes a person who back- hauls waste, or as otherwise defined in 14 CCR Section 18982(a)(66). Back-haul means generating and transporting Organic Waste to a destination owned and operated by the generator using the generator’s own employees and equipment, or as otherwise defined in 14 CCR Section 18982(a)(66)(A).
(ff) “Solid Waste” has the same meaning as defined in Public Resources Code Section 40191, which defines Solid Waste as all putrescible and nonputrescible solid, semisolid, and liquid wastes, including garbage, trash, refuse, paper, rubbish, ashes, industrial wastes, demolition and construction wastes, abandoned vehicles and parts thereof, discarded home and industrial appliances, dewatered, treated, or chemically fixed sewage sludge which is not hazardous waste, manure, vegetable or animal solid and semi-solid wastes, and other discarded solid and semisolid wastes, with the exception that Solid Waste does not include any of the following wastes:
(i) Hazardous waste, as defined in the Public Resources Code Section 40141. (ii) Radioactive waste regulated pursuant to the State Radiation Control Law (Chapter 8 (commencing with Section 114960) of Part 9 of Division 104 of the Health and Safety Code).
(iii) Medical waste regulated pursuant to the State Medical Waste Management Act (Part 14 (commencing with Section 117600) of Division 104 of the Health and Safety Code).

Untreated medical waste shall not be disposed of in a Solid Waste landfill, as defined in Public Resources Code Section 40195.1. Medical waste that has been treated and deemed to be Solid Waste shall be regulated pursuant to Division 30 of the Public Resources Code.

Reference to any SB 1383 Regulations used in these definitions shall include the section cited, or any successor regulation.

4. Authority Responsibilities. The City hereby delegates to the Authority, and the Authority hereby accepts, the responsibilities enumerated in this Section 4 for compliance with the provisions of SB 1383 Regulations to the extent allowed by law and as specified herein. The Authority is concurrently, with its approval of this MOU, approving MOUs with the other Member Agencies in which it is accepting nearly identical delegations from the other Member Agencies (the “Other MOUs”). It is the Authority’s desire to administer responsibilities so delegated in a uniform fashion across all of the Members, so far as is feasible under the specific circumstances prevailing in each Member Agency. In furtherance of this intent, the Authority, in consultation with the Member Agencies, has developed an initial Workplan, attached as Exhibit A and hereby incorporated by 395

6 reference, that details the manner in which it will initially perform its responsibilities under this MOU and the Other MOUs. Each year, in conjunction with the Annual Budget and more often if needed, the Authority Board shall consider and approve any changes to the Workplan, including any amendments to align the Workplan with the Annual Budget and subject to the Executive Director’s ability to make administrative changes to the Workplan as described in this Section 4.

The Workplan is intended to be a flexible framework that the Authority Board can revise from time to time as may be necessary or prudent. Authority shall provide City with proposed changes to the Workplan at least ten (10) days prior to approval by the Authority Board so that City may provide any comments or suggestions for the Authority Board’s consideration.

The Parties agree that, to the extent permitted by law or regulation, the Authority may perform its responsibilities using its own staff or by contracting with public and private entities according to its Board-approved procurement policy. If Authority contracts with any public or private entity to perform its responsibilities, Authority shall notify City and provide contact information for the contracted entity. Whenever the Workplan is changed, the Authority shall provide the City with an updated version of the Workplan within ten (10) calendar days. (a) Education and Outreach. The Authority shall conduct the following education and outreach on behalf of the City:
(i) Generators. Prior to February 1, 2022, the Authority shall make available to Generators, through print and/or electronic media and maintain on its website, the information required pursuant to 14 CCR Sections 18985.1 and 18985.2. The Authority shall update such information as necessary, but at least annually. Prior to disseminating any materials under this paragraph, Authority shall provide the materials to, and obtain approval of the materials from, the City Manager or designee. Each Party shall cooperate in good faith regarding the delivery, review, and approval materials to be disseminated pursuant to this Section, including delivering the materials for review and approval, delivering comments on the materials, and responding to such comments.
(ii) City Procurement Target. The Authority shall annually notify City of its Organic Waste product procurement target, as required and determined by CalRecycle. Before CalRecycle releases the official procurement targets for City on January 1, 2022 and every five years thereafter, the Authority shall assist City in calculating estimates of the procurement targets pursuant to 14 CCR 18993.1. In addition, the Authority will facilitate the City’s procurement of recovered organic waste products.
(b) Reporting and Recordkeeping. The Authority shall conduct the following reporting and recordkeeping services on behalf of City:
(i) Organics Capacity and Edible Food Recovery. The Authority shall submit reports for Organics processing capacity and Edible Food recovery planning requirements to the County within 120 days of the County’s request as required by 14 CCR 18992.3. (ii) Implementation Record. The Authority shall be responsible for maintaining the City’s Implementation Record, and making it available to the Department, in accordance with 14 CCR Sections 18985.3 and 18995.2. The Authority shall endeavor to obtain all records required by Chapter 12 and include them in the Implementation Record, and the City shall reasonably cooperate 396

7 with the Authority in obtaining such records from the City and third parties, including creating such records if necessary. Authority shall provide City with ongoing electronic access to the Implementation Record through a cloud-based software program, to the extent that the Authority maintains one, through the Term of this MOU. In the event that the Department requests access to the Implementation Record, the Authority shall promptly advise the City of the request. (iii) Compliance and Annual Reports. The Authority shall submit the initial City compliance report and City annual reports to CalRecycle as required by 14 CCR 18994.1 and 18994.2. Authority shall provide a draft copy of such reports to the City’s representative for its review and approval at least 14 days prior to the applicable reporting deadlines set forth in these sections.
(c) Edible Food Recovery Programs. The Authority shall coordinate and implement the SB 1383 Regulations’ edible food recovery program requirements to which jurisdictions are subject under 14 CCR §§ 18991.1–18991.2. The Parties agree that these requirements may be wholly or partially satisfied by agreement with the County or other third parties. The Authority’s duties shall include, but are not limited to: assessment of existing capacity for Edible Food recovery, establishing an Edible Food recovery program, inspection of Commercial Food Edible Generators for compliance, and education and outreach to all businesses, residents, Commercial Edible Food Generators, and any other entities or parties required by law. (d) Organic Waste Processing Capacity and Diversion Planning. The Authority shall itself or in conjunction with the County estimate existing Organics processing and Edible Food recovery capacities available pursuant to 14 CCR 18992.1 and 18992.2. If it is found that either are lacking, the Authority shall assist City in creating an implementation plan to expand capacity. (e) Receipt of Complaints. The Authority shall be responsible for receiving all written complaints of alleged SB 1383 Regulations violations relating to Generators, Haulers, Food Recovery Organizations and Food Recovery Services and Self-Haulers occurring or having occurred within City’s jurisdiction (“Complaints”). Such Complaints shall include all of the following information in accordance with 14 CCR 18995.3:
(i) If the Complaint is not anonymous, the name and contact information of the complainant;
(ii) The identity of the alleged violator, if known;
(iii) A description of the alleged violation including location(s) and all other relevant facts known to the complainant;
(iv) Any relevant photographic or documentary evidence to support the allegations in the Complaint; and
(v) The identity of any witnesses, if known.

If the Authority receives a complaint, it shall forward a copy to City within ten (10) working days of receipt.
(f) Investigation of Complaints. Where a Complaint: 1) meets the requirements of 397

8 Section 4(e); and 2) the Authority determines that the allegations, if true, would constitute a violation of SB 1383 Regulations, it shall function as the Enforcement Agency for the purposes of investigation and commence an investigation within ninety (90) days of receiving such Complaint.

The Authority may collaborate with City and/or a Hauler in such investigation where appropriate. It shall not be appropriate to collaborate with a Hauler where it is the subject of the Complaint. The Authority may decline to investigate a Complaint if, in its judgment, investigation is unwarranted because the allegations are contrary to facts known to it. (i) Where the Authority has investigated or declined to investigate a non- anonymous Complaint, it shall notify the complainant regarding the results of the investigation through the contact information provided by the complainant. It shall provide a copy of such notice to the City within ten (10) working days of receipt.
(ii) The Authority shall maintain records of all Complaints received in compliance with Section 4(e) and responses provided in compliance with this subsection in the Implementation Record. The records shall include the Complaint as received and the Authority’s determination of compliance or Notice of Violations issued. (g) Enforcement. The Authority shall function as the Enforcement Agency and enforce Chapter 2 of Title 5 of the Hercules Municipal Code as required by SB 1383 by performing the following actions:
(i) Monitoring compliance of Generators, Haulers, Food Recovery Organizations and Food Recovery Services through Inspections, Compliance Review and Route Review conducted in accordance with SB 1383 Regulations (14 CCR § 18995.1). The Authority may collaborate with City and/or a Hauler in such Inspections, Compliance Review and Route Review where appropriate; and
(ii) Issuing Notice of Violations to Generators, Haulers, Food Recovery Organizations and Food Recovery Services and Self-Haulers in accordance with 14 CCR 18995.4 and providing a copy of such to City within ten (10) working days of issuance. The Authority may collaborate with City and/or a Hauler before issuance of a Notice of Violation where appropriate. It shall not be appropriate to collaborate with a Hauler where it is the subject of the Enforcement Action. If the violator fails to comply with the Notice of Violation within the deadline set forth therein, the Authority shall refer the matter to City to impose penalties pursuant to the SB 1383 Regulations and it shall function as the Enforcement Agency in that matter thereafter. Authority will provide support to City in carrying out the Enforcement Action, including providing testimonial and other evidence at any hearings, if necessary. If the Authority becomes aware that the violator has complied with the Notice of Violation, the Authority shall so notify the City. (h) Waivers. The Authority shall create a standardized waiver request form, which shall be a printable document maintained on the Authority’s website. Each time the Authority updates the form, it shall so advise the City and the Provider. The Authority shall review the following waiver requests and, may consult with the Provider regarding such request. Thereafter, the Authority shall consult with the City, and the City’s Representative shall make the final determination whether to approve, deny, or modify the waiver, and Authority shall notify the applicant of such decision. The Authority will maintain, and regularly provide the City with, a list of Generators operating in its jurisdiction that have applied for waivers. The list shall include the status of the application. 398

9 (i) De Minimis Waivers: The Authority may waive a Commercial Business’s obligation (including Multi-Family Residential Dwellings) to comply with some or all of the Organic Waste requirements of SB 1383 if the Commercial Business provides documentation that the business generates below a certain amount of Organic Waste material as set forth herein.

Commercial Businesses requesting a de minimis waiver shall:
(1) Submit an application specifying the services that they are requesting a waiver from and provide documentation as noted herein; and (2) provide sufficient documentation that either:
(a) The Commercial Business’ total Solid Waste collection service is two cubic yards or more per week and Organic Waste subject to collection in a Green Container comprises less than 20 gallons per week per applicable container of the business’ total waste; or (b) The Commercial Business’ total Solid Waste collection service is less than two cubic yards per week and Organic Waste subject to collection in a Green Container comprises less than 10 gallons per week per applicable container of the business’ total waste; and (3) Acknowledge that it must notify the Authority if circumstances change such that Commercial Business’s Organic Waste exceeds threshold required for waiver, in which case the waiver will be rescinded; and
(4) Acknowledge that, if the de minimis waiver is granted, it will expire after 5 years and that the waiver is only valid as to the Commercial Business that applied for the waiver, and not as to the property or another business in the same location. (ii) Physical Space Waivers: The Authority may waive an existing Commercial Business’ or property owner’s obligations (including Multi-Family Residential Dwellings) to comply with some or all of the recyclable materials and/or Organic Waste collection service requirements if it receives evidence from its staff, City staff, a hauler, licensed architect, or licensed engineer demonstrating that the premises lacks adequate space for the collection containers required for compliance with the Organic Waste collection requirements of SB 1383. A Commercial Business or property owner may request a physical space waiver through the following process:
(1) Submit an application form specifying the type(s) of collection services for which they are requesting a compliance waiver; and (2) Provide documentation that the premises lacks adequate space for Blue Containers and/or Green Containers including documentation from its hauler, licensed architect, or licensed engineer; and
(3) Provide written verification to the Authority that it is still eligible for physical space waiver every five years, if the Authority has approved application for a physical space waiver.
(iii) Emergency Circumstances – Waivers for City: The Authority will notify CalRecycle and apply for a waiver to landfill Organics if City experiences a natural disaster, uses a recyclable materials or Organic Waste processing facility that has a temporary operational failure, or 399

10 unforeseen operational restrictions have been imposed upon it by a regulatory agency pursuant to 14 CCR 18984.13.

5. City Responsibility. City shall be responsible for all other applicable SB1383 and SB 1383 Regulations requirements not expressly delegated to and accepted by the Authority as set forth herein, including the Workplan as it may be amended from time to time pursuant to Section 4. If the City requests that the Authority accept an additional SB 1383 Regulation Responsibility or perform an additional Requirement listed in the Workplan, the Parties shall meet and confer regarding the request and implementation, if the Authority is willing to do so. Any changes to the Workplan shall comply with the provisions of Section 4.

6. Sharing of information. Within thirty (30) days of a request by the Authority, or as soon thereafter as such information is available to City, the City shall share with the Authority all data, documents, contact information for Generators within its jurisdiction, or any other information necessary for the Authority to carry out the responsibilities delegated to it in this MOU.

7. Staffing and funding. In order for the Authority to carry out its responsibilities in connection with the administration and implementation of the SB 1383 Regulations as specified in this MOU, the Parties agree that the Authority’s costs associated with its responsibilities under this MOU and the Other MOUs will be funded through the Authority’s budget and rate setting process, except as otherwise specified herein. These costs may include the Authority’s cost to engage independent contractors to perform some or all of the duties delegated to it herein. Budget changes related to this MOU will be integrated into the Authority’s regular budget process, as approved by the Board of Directors.

8. Indemnification/Hold Harmless. Each Party shall solely be liable for any and all damages, including attorneys’ fees, resulting from the actions or omissions arising from its performance of the terms of this MOU, except as is expressly stated in Section 9. Each Party (the “Indemnifying Party”) shall indemnify, defend and hold harmless the other Party (the “Indemnified Parties”) from and against any and all claims, demands, actions, losses, damages, assessments, charges, judgments, liabilities, costs and expenses (including reasonable attorneys’ fees and disbursements) that may from time to time be asserted by third parties against the Indemnified Parties because of any personal injury, including death, to any person or loss of, physical damage to or loss of use of real or tangible personal property, to the extent caused by the negligence or misconduct of the Indemnifying Party, its agents, employees or contractors in the performance of this MOU.

For purposes of indemnification set forth in this MOU, “Indemnified Parties” means the applicable party, its affiliates, successors and assigns and its and their employees, directors, officers, agents, and volunteers. The Indemnified Parties: 1) shall notify the Indemnifying Party in writing promptly upon learning of any claim or suit for which indemnification may be sought, provided that failure to do so shall have no effect except to the extent the Indemnifying Party is prejudiced thereby; 2) shall have the right to participate in such defense or settlement with its own counsel and at its own expense, but the Indemnifying Party shall have control of this defense or settlement; and 3) shall reasonably cooperate with the defense.

9. Apportionment of Penalties.

(a) Any penalties assessed against the City by CalRecycle that are the result of an 400

11 Authority’s failure to satisfy its obligations under the following provisions of this Agreement and its alleged failure to comply with the corresponding provision of the SB 1383 Regulations shall be paid by the Authority:
(i) Subdivision (a)(i) of Section 4 (14 CCR §§ 18985.1 and 18985.2) (ii) Subdivision (b)(i) of Section 4 (14 CCR § 18992.3) (iii) Subdivision (b)(ii) of Section 4 (14 CCR §§ 18985.3 and 18995.2) (iv) Subdivision (b)(iii) of Section 4 (14 CCR § 18994.1) (v) Subdivision (c) of Section 4 (14 CCR §§ 18991.1–18991.2) (vi) Subdivision (d) of Section 4 (14 CCR §§ 18992.1 and 18992.2), with the express indication that the Authority shall not be required to pay a penalty arising from the City’s failure to expand capacity.
(vii) Subdivision (e) of Section 4 (14 CCR §§ 18995.3(a)-(b)) (viii) Subdivision (f) of Section 4 (14 CCR §§ 18995.3(c)-(e)) (ix) Subdivision (g)(i) of Section 4 (14 CCR §§ 18995.1) (x) Subdivision (g)(ii) of Section 4 (14 CCR §§ 18995.4) with the express indication that the Authority is not required to pay a penalty arising from an alleged failure to commence an action to impose penalties pursuant to 14 CCR sections 18997.1 and 18997.2 as the Authority’s responsibility under subdivision (g) of Section 4 does not extend to commencing such actions.
(xi) Subdivision (h) of Section 4 (14 CCR §§ 18984.11) with the express indication that the Authority is not required to pay a penalty arising from the City’s granting of a waiver that is alleged not to be consistent with 14 CCR § 18984.11. (b) For avoidance of doubt, the Parties hereby indicate that any penalties arising from SB 1383 Regulations requirements not expressly delegated to and accepted by the Authority as set forth herein shall not be payable by the Authority.
(c) In the event that the Authority pays any penalties assessed against the City by CalRecycle that are the result of the alleged failure to comply with Subdivision (a)(i) of Section 4, the Authority shall be entitled to allocate a reasonable portion of the penalty to the City if the Authority had provided compliant educational materials to the City for approval, and the City failed to approve them.
(d) Nothing in this Section shall prevent either the City or the Authority (on the City’s behalf when the Authority is obligated to pay the penalty) from challenging CalRecycle enforcement activities. In the event that the Authority intends to challenge CalRecycle’s imposition of a penalty imposed on the City, the City shall reasonably cooperate and assist the Authority in its legal challenge. Without limiting the generality of the foregoing, the City shall promptly share any Notices of Violation or accusation issued pursuant to 14 CCR 18997.5 that it receives related to any 401

12 alleged violations that subdivision (a) would require the Authority to pay. (e) Any penalties paid by the Authority pursuant to this section shall be paid out of Authority funds.

10. Termination. Either Party may terminate this MOU upon giving at least one hundred and eighty (180) calendar days’ prior written notice to the other Party in the manner set forth in Section

10. The parties expressly acknowledge, notwithstanding anything to the contrary in this Agreement, including specifically Section 7, and/or in the past or then-present Authority budgets, that the Authority shall have no obligation after termination to fund the City’s compliance with the provisions of SB 1383 Regulations delegated to the Authority pursuant to this Agreement. If City terminates the MOU effective at the end of a rate year, the Authority will, in conjunction with its action that November to approve the following year’s rate structure, and the Authority Board will calculate the amount due Pinole to reimburse it for its share of unspent compliance funds based on its percentage share of volume in the rate model during the prior year. The rate model adopted for the following year’s rate structure shall not require the City or customers in the City to pay for any SB 1383 compliance activities undertaken by Authority.

11. Notice. All notices shall be in writing and shall be served by personal delivery during usual business hours at the principal office of the Party, to an officer or person apparently in charge of that office, or by depositing the same in the United States mail, postage prepaid, and addressed to the Party at its principal office, or to such other address as the Party may designate from time to time by written notice given in the manner specified in this Section.

Service of notice pursuant to this Section shall be deemed complete on the day of service by personal delivery or two (2) days after mailing if deposited in the United States mail.

12. Governing Law and Venue. This MOU shall be deemed to be executed within the State of California and construed in accordance with and governed by laws of the State of California. Venue in any proceeding or action among the Parties arising out of this MOU shall be in Contra Costa County, California.

13. Amendment. This MOU may only be modified or amended by a subsequent written agreement signed by all Parties.

14. Entire Agreement. This MOU, including the Workplan, as it may be amended, represents the entire and integrated agreement between the Parties as to the subject matter referenced herein.

15. Severability. No provision of this MOU shall be interpreted to require any unlawful action by any Party. If any term or portion of this MOU is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, then the meaning of that section or clause shall be construed so as to render it enforceable to the extent feasible. If no feasible interpretation would save the section or clause, it shall be severed from this MOU with respect to the matter in question, and the remainder of the MOU shall remain in full force and effect. However, in the event such a section or clause is an essential element of the MOU, the Parties shall promptly negotiate a replacement that will achieve the intent of such unenforceable section or clause to the extent permitted by law.

16. Execution in Counterpart. This MOU may be executed in counterparts and/or by facsimile or 402

13 other electronic means, and when each Party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterpart, shall constitute one MOU, which shall be binding upon and effective as to all Parties.

17. No Waiver. The failure of any Party hereto to enforce any of the provisions of this MOU, or the waiver thereof in any instance, shall not be construed as a general waiver or relinquishment on its part of any such provision, and said provision shall nevertheless be and remain in full force and effect.

18. No Partnership. The relationship between the Parties shall not be that of partners, agents or joint ventures for one another, and nothing contained in this MOU shall be deemed to constitute a partnership or agency agreement between them for any purposes, including, but not limited to federal income tax purposes. The Parties, in performing any of their obligations hereunder, shall be independent contractors or independent parties and shall discharge their contractual obligations at their own risk.
[Signatures on following page]
403

14 IN WITNESS WHEREOF, the Parties hereto have executed this MOU on the day and year first above written.

ATTEST:

City Clerk

APPROVED AS TO FORM:

City Attorney

CITY OF HERCULES

Mayor
ATTEST:

Board Secretary

APPROVED AS TO FORM:

Authority Counsel

WEST CONTRA COSTA INTEGRATED

WASTE MANAGEMENT AUTHORITY

Board Chair
5001258.5

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405

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024

Page | 1
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
General Provisions
18981.2
(a)
Enforceable
Ordinance
Adopt enforceable ordinances
consistent with the requirements of
chapter to mandate organic waste
generators, haulers and entities to
comply with requirements
Member Agencies

One-time;
1/1/2022 Completed
Store in individual member agency
Implementation Records.

Article 3. Organic Waste Collection Services
18984.1
(a)
Organic
Waste
Collection
Implement a three-container organic
waste collection service and
providing a green container
(organics), a blue container
(recycling), and a gray container to
each generator (solid waste)
Member Agencies Haulers One time;
1/1/2022 Completed
Indicate in individual member agency
Implementation Records.
18984.5
(a) Contamination
Monitor the containers provided to
the generators using three-container
service to minimize contamination
RecycleMore Haulers 7/1/2022
Inspection and
Enforcement
Program in
development
w/RecycleMore,
cities, Haulers &
subs
Written plan and agreement with
Haulers. El Cerrito to have their own
plan with credit back based on 7.5%
from PCA rate structure
18984.5
(b)
Contamination
Monitoring
Conduct a route review for prohibited
container contaminants on randomly
selected collection route annually.

Containers may be randomly
selected along a hauler route. This
section should not be construed to
require that every container on a
hauler route must be sampled
annually. Contact or written notice to
generator upon discovering
contaminants (left at door, gate
and/or through mail, email, or
electronic message) is required
RecycleMore
Haulers
and Sub-
consultant
7/1/2022;
Annually
Inspection and
Enforcement
Program in
development w/
RecycleMore,
cities, Haulers
and
subcontractors
Written plan and agreement with
Republic and their sub-consultant
(i.e., Cascadia)
El Cerrito to have their own plan with
credit back based on 7.5% from PCA
rate structure
18984.7
(a)-(b)
Container
Colors
Provide collection containers to
generators that comply with
container color requirements
specified in SB 1383
Member Agencies Haulers 1/1/2022
1/1/2036
Bin & cart color
changes
implemented
with both
haulers for
newly
purchased
containers, and
Current container orders are in
compliance.

406

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024

Page | 2
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
all containers by
2036.

18984.8
(a)-(c)
Container
Labeling
Place a label on each new container
or lid provided to generators
consistent with the applicable
container collection requirements
and limitations of this article
specifying what materials are allowed
to be placed in each container and
items that are prohibited container
contaminants for each container
Member Agencies Haulers 7/1/2022
Bin & cart label
updates by
Haulers for
newly
purchased
containers and
all containers by
2036.

Current container orders are
compliant. Planning a relabeling
project for existing.
18984.11 Waivers
Waive a commercial business’
obligation to comply with some or all
of the organic waste requirements
due to:
- De Minimis organic waste (<20
gallon or <10 gallon per week)
- Physical Space

RecycleMore/
Member Agencies

1/1/2022

RecycleMore
has coordinated
the waiver
process with
Member
Agencies and
Haulers.

Store in individual member agency
Implementation Records.

Article 4. Education and Outreach
18985.1
(a)
Outreach –
Organic
Waste
Generators
Provide the following: information on
organic waste generators
requirements to properly separate
materials in appropriate containers,
methods for prevention of organic
waste, recovering organic waste on
site, community composting and any
other local requirements, information
on methane reduction benefits, the
methods of organic waste recovery,
the organic waste collection service
uses, list of approved haulers, and
how to recover organics, public
health and safety and environmental
impacts, information for edible food
RecycleMore/
Member Agencies
RecycleMo
re &
Haulers
Prior to
2/1/2022;
Annually
RecycleMore
and Hauler
Websites,
Postcards,
Letters to non-
compliant,
commercial &
MFD toolkits
Print:
1) SB 1383 Postcards to commercial
& residential generators
2) SB 1383 Fact Sheet
3) Organic Waste Recycling Poster
(Republic Services)
4) Comprehensive Residential &
Commercial Guide Brochure
(Republic Services)
5) Multifamily Multipage Guide
(Republic Services)
6) Composting at Home Brochure
7) Compost Giveaway Flyer
(Republic Services)
8) Recycling Directory
407

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024 Page | 3
Section
Reference
Type of
Requirement Requirement Responsible
Party Delegation Frequency Action Item(s) Deliverables
recovery programs, information
regarding self-hauling requirements
9) Quarterly Newsletters (Republic
Services & EBS)
Website:
10) Online Recycling Guide/What
Goes in Each Cart
11) SB 1383 Compliance Pages
(Businesses/ Multifamily Property
Owners / Residents / Residents in
Multifamily Properties
12) Backyard Composting info &
resources
13) Compost Giveaway (Republic
Services)
14) Curbside Organics & Food Scrap
Pail Program
15) Online Business Self-Reporting
Form / Self-Haul / Waivers
16) School Recycling and Classroom
Educational Programs/Organic
Recycling at Schools
17) Garbage Collection Services
Hauler Contact Information
Resources
Social Media:
18) SB 1383 Post 1/3: It’s Coming
19) SB 1383 Post 2/3: Food
Waste/Climate Change/Methane
Education
20) SB 1383 Post 3/3: It’s Here/Are
You Ready?
21) Various postings on the
following:
a. Alternative suggestions and
Awareness for Reducing,
Reusing and Recycling
b. Food Savings/
Sustainability/Waste
Reduction Tips
c. Ideas for repurposing food
scraps
408

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024

Page | 4
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
d. Compost Giveaway for
Residents/ Compost
Workshop/ Discount
Compost Bin Program
18985.2
(a)
Outreach –
Edible Food
Recovery
Develop a list of food recovery
organizations and food recovery
services operating within the
jurisdiction and maintain the list on
the jurisdiction’s website
RecycleMore

On or before
2/1/2022
List is
completed and
website
updated. Cities
to add info on
their websites.

RecycleMore has contacted all Food
Recovery Organizations that serve the
region to clarify their acceptance &
contact info.
18985.2
(b)
Outreach –
Edible Food
Recovery
Provide commercial edible food
generators that generate edible food
with the following information: details
about the edible food recovery
program, information about
commercial edible food generators,
requirements and about food
organizations and services operating
within the jurisdiction and where a list
of all services can be found
RecycleMore

Annually Website, Tier 1
letters
RecycleMore is finalizing the Tier 1
Letters to send out
Article 7. Regulation of Haulers
18988.1
(a) Reporting
Require haulers to identify the
facilities to which they will transport
organic waste
RecycleMore
Haulers On or before
2/1/2022 Information
ready for
reporting
Indicate in individual member agency
Implementation Records.

18988.1
(b)
Enforceable
Ordinance
If a jurisdiction allows generators to
self-haul organic waste, adopt an
ordinance or a similarly enforceable
mechanism
Member Agencies
Completed Individual
Ordinances
allow self-haul
Indicate in individual member agency
Implementation Records.

Article 8. CALGreen Building Standards and Model Water Efficient Landscape Ordinance (MWELO) 18989.1(a) Enforceable
Ordinance
Adopt an ordinance or enforceable
requirement complying with Member Agencies On or before 2/1/2022
To be evaluated
by each
Indicate in individual member agency
Implementation Records.
409

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024

Page | 5
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
CalGreen Code Sections 4.410.2,

4.408.1, or 5.408.1
Member
Agency
18989.2(a)
Enforceable
Ordinance
Adopt an ordinance or other
enforceable requirement that
requires compliance with the Model
Water Efficient Landscape Ordinance
Member Agencies
On or before
2/1/2022
To be evaluated
by each
Member
Agency
Indicate in individual member agency
Implementation Records.

Article 10. Jurisdiction Edible Food Recovery Programs, Food Generators, and Food Recovery 18991.1 Edible Food
Recovery
Implement an edible food recovery
program including: educating edible
food generators, increase access to
food recovery organizations and food
recovery services, monitor
commercial edible food generators
compliance, increase edible food
recovery capacity (if needed)
RecycleMore
County &
Sub-
consultant
9/1/2022
RecycleMore is
working with
RecycleSmart &
the County for
the regional
program.

RecycleMore will educate food
generators about edible food recovery
organizations through a brochure with
information on which organizations to
partner with and how to track
donations.

RecycleMore has contracted with
Abbe & Ass. to assist in the Edible
Food Recovery Plan for West County.
18991.1
(b)
Edible Food
Recovery
Jurisdictions may fund actions taken
to comply with this section through
franchise fees, local assessments or
other funding mechanisms
RecycleMore/
Member Agencies
One time;
Assessed
as needed
N/A;
informational

Article 11. Capacity Planning
18992.1
(b)
Organic
Waste
Recycling
Capacity
Planning
A jurisdiction contacted by a county
pursuant to subdivision shall respond
to the county’s request for the
information necessary to comply with
the requirements of this article
RecycleMore County
120 days of
receiving
request from
County
N/A; respond to
County as
needed

18992.1
(d)
Organic
Waste
Recycling
Capacity
Planning
If a county determines that organic
waste recycling capacity, each
jurisdiction that lacks sufficient
capacity is required to submit an
implementation schedule to the
Department that demonstrates how it
will ensure there is enough available
capacity to recover the organic waste
currently disposed
RecycleMore County As needed
N/A; respond to
County as
needed

18992.2
(c)
Edible Food
Recovery
Capacity
Planning
If a county identifies that new or
expanded capacity is needed to
recover the amount of edible food
identified, each jurisdiction within that
RecycleMore County As needed
N/A; respond to
County as
needed

410

EXHIBIT A
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Page | 6
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
county that lacks capacity shall
submit an implementation schedule
to the Department that demonstrates
how it will ensure there is enough
new or expanded capacity to recover
the edible food currently disposed
Article 12. Procurement of Recovered Organic Waste Products 18993.1
(a) (e)
Recovered
Organic
Waste
Product
Procurement
Procure quantity of recovered
organic waste products that meets or
exceeds its current annual recovered
organic waste product procurement
target. City shall comply with
requirement by directly procuring
recovered organic waste products or
requiring, through written contract,
that a direct service provider to the
jurisdiction to procure recover
organic waste products and provide
written documentation
Member Agencies

1/1/2022;
Annually
To be evaluated
and
implemented by
each Member
Agency
Indicate in individual member agency
Implementation Records.
18993.3
(b)
Recycled
Paper Content
Procurement
Procure paper products, and printing
and writing paper, consistent with the
requirements of Sections 22150-
22154 of the Public Contract Code
Member Agencies

1/1/2022;
Ongoing
To be evaluated
and
implemented by
each Member
Agency
Store in individual member agency
Implementation Records.
18993.3
(c)
Recycled
Paper Content
Procurement
Require businesses from whom it
purchases paper products and
printing to certify in writing the
minimum percentage of
postconsumer paper products and
printing and writing paper offered or
sold to jurisdiction
Member Agencies

1/1/2022;
Ongoing
To be evaluated
and
implemented by
each Member
Agency
Store in individual member agency
Implementation Records.

Article 13. Reporting
18994.1
(a) Reporting
Report to the department a copy of
ordinances adopted pursuant to this
chapter and the contact information
for the person responsible for
compliance with the container color
requirements
RecycleMore/
Member Agencies

4/1/2022
Completed Store in individual member agency
Implementation Records.
18994.2
(a) Reporting Report for the period covering the
entire previous calendar year RecycleMore 10/1/2022;
8/1/2023
First Program reporting 10/1/22 and
8/1 thereafter.
411

EXHIBIT A
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Page | 7
Section
Reference
Type of
Requirement Requirement Responsible
Party

Delegation Frequency Action Item(s) Deliverables
and
annually
thereafter
RecycleMore is
working with the
Haulers and will
be prepared to
report.

Article 14. Enforcement Requirements
18995.1
(a) (1) (A) Enforcement
Have an inspection and enforcement
program that is designed to ensure
overall compliance with this chapter
and complete a compliance review of
all garbage accounts for commercial
businesses that generate two cubic
yards or more per week of solid
waste and determine compliance, as
well as conduct route reviews, and
contamination requirements
RecycleMore/Mem
ber Agencies
Haulers –
Initial
Inspections

NOV –
RecycleMo
re

Citations –
Member
Agencies
1/1/2022;
Annually
Inspection and
Enforcement
Program in
development
with
RecycleMore
and Haulers
Store in individual member agency
Implementation Records.
18995.1
(a) (2) Enforcement
Conduct inspection of Tier 1
commercial edible food generators
and organizations 2022, and Tier 2
on or after January 1, 2024
RecycleMore Sub-
consultant 1/1/2022;
1/1/2024
Inspection and
Enforcement
Program to be
implemented
Store in individual member agency
Implementation Records.
18995.1
(a) (3) Enforcement
Inspect, conduct route or compliance
reviews when investigating a
complaint
RecycleMore
1/1/2022
RecycleMore
will follow-up on
complaints.

Store in individual member agency
Implementation Records.
18995.1
(a) (4) Enforcement
Provide educational material
describing the applicable
requirements of this chapter in
response to violations
RecycleMore
1/1/2022-
12/31/2023
Inspection and
Enforcement
Program to be
implemented
Store in individual member agency
Implementation Records.
18995.1
(a) (5) Enforcement Enforce this chapter in response to violations
RecycleMore
1/1/2024
Inspection and
Enforcement
Program to be
implemented
Store in individual member agency
Implementation Records.
18995.1
(a) (6) Enforcement
At least every five years from the
date of issuance, verify through
inspection that commercial
businesses are meeting de minimis
and physical space waivers for
compliance
RecycleMore
Every 5
years
Inspection and
Enforcement
Program to be
implemented
Store in individual member agency
Implementation Records.
18995.1
(b) Enforcement
Conduct a sufficient number of route
reviews and inspections of entities
described in this section to
RecycleMore/ Haulers &
Sub-
consultant
Ongoing
Inspection and
Enforcement
Program in
Store in individual member agency
Implementation Records.
412

EXHIBIT A
Draft SB 1383 Workplan between Member Agencies and RecycleMore January 2024 Page | 8
Section
Reference
Type of
Requirement Requirement Responsible
Party Delegation Frequency Action Item(s) Deliverables
adequately determine overall
compliance with this chapter
development
with
RecycleMore
and Member
Agencies
18995.1
(c) Enforcement
Generate a written or electronic
record for each inspection, route
review, and compliance review
conducted pursuant to this chapter
RecycleMore Haulers &
Sub-
consultant
Ongoing
Inspection and
Enforcement
Program in
development
with
RecycleMore
and Member
Agencies
Store in individual member agency
Implementation Records.
18995.1
(d) Enforcement
Documentation of route reviews,
compliance and inspection reviews,
as well as other records of
enforcement shall be maintained in
the Implementation Record.

Records will include copies of all
documentation, enforcement actions,
date of violation, date of compliance
and educational materials
RecycleMore Haulers &
Sub-
consultant
Ongoing
Inspection and
Enforcement
Program in
development
with
RecycleMore,
Hauler and
Member
Agencies
Store in individual member agency
Implementation Records.
413
DI

SCUSSION AND/OR ACTION

AGENDA ITEM

3. 22-800
414

STAFF REPORT TO THE CITY COUNCIL
DATE: Special Meeting of March 12, 2024
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Timothy Rood, AICP, Community Development Director SUBJECT: Consideration of Establishing a City-Sponsored Event Policy RECOMMENDATION ACTION:

Approve a resolution establishing a policy for City -sponsored events that allows the City Manager to fully or partially waive permit fees as an in -kind contribution to community events that the City co-sponsors with City-recognized nonprofit groups.

BACKGROUND:

Since approximately 2007, the City has recognized and supp orted community -based nonprofit organizations that improve and enhance the quality of life for the residents of Hercules through the City’s Nonprofit Group Recognition Program . Each year, the Recreation Department accepts nominations, which are reviewed and acted upon by the City’s Community and Library Services Commission. Currently there are 14 nonprofits recognized by the City (Attachment 3). City-recognized nonprofits are eligible for reduced rates on facility rentals and are eligible to use certain City facilities at certain times for business meetings.

In 2023, the City completed its first comprehensive fee study since 2011 , and on November 14, 2023 the Council adopted an updated fee schedule based on full cost recovery. The Council adopted new fees for Special Event Permits that vary based on attendance and whether the event is on public or private property. In the past, community events have been permitted through Temporary Use Permits for a nominal fee that essentially only covered printing and mailing the required notices. As the coordination of community events involves considerable staff time from multiple departments, the new cost-based fees are considerably higher than in the past particularly for larger events. For 22-800
415
example, the permit fee for an event on public property with 500 or more attendees is $3,275, compared to the previous fee of $415 for any temporary use permit.

ANALYSIS:

The City often participates in the planning and execution of community events sponsored by City-recognized nonprofit organizations, including the Bayfront Chamber and Rotary Club, among others. Although permit fees were not always consistently collected in the past, there has been no basis in City policy allowing staff to waive or reduce permit fees.

The proposed policy would allow the City, at the discretion of the City Manager, to contribute to permit fees in kind as a contribution to events that the City cosponsors with City-recognized nonprofit organizations. The policy provides that co -sponsored events must be nonpartisan, nonsectarian and open to the entire Hercules community.

The proposed policy provides that community events would continue to be pe rmitted through Special Event Permits , which are Temporary Use Permits administered by the Community Development Department. In addition, events involving street closures also require an encroachment permit from the Public Works Department, which is responsible for ensuring that street closures have proper signage and are safely barricaded in accordance with state and municipal codes, to protect the public health and safety.

Under the proposed policy, City-recognized nonprofits applying for Special Event permits could request a fee waiver or reduction at the time of application. The City Manager would determine within ten business days whether the City wished to co-sponsor the event and the extent of the fee reduction or waiver. For example, the City Manager might choose to collect a reduced fee sufficient to cover required notification printing and mailing costs, waiving the portion of the fee adopted to cover staff costs for reviewing and approving the permit.

FISCAL IMPACT:

The proposed policy would reduce the Special Event Permit fees accruing to the General Fund. The amount of the reduction would depend on the number of events co-sponsored with City-recognized nonprofits, as well as the extent of the fee reductions or waive rs granted by the City Manager.

In 2023, the City issued nine Temporary Use Permits, four of which were for community events sponsored by a City-recognized nonprofit. These were the October 1st Run, Hercules Cultural Festival, Fourth of July, and National Night Out. Assuming 100 to 499 attendees for the October 1st Run and National Night Out, and 500 or more attendees for the Cultural Festival and Fourth of July, the current permit fees for these four events 416
would total $11,940, all or part of which could be contributed in kind by the City under the proposed policy.

ATTACHMENTS:

1. Resolution Establishing a City-Sponsored Event Policy

2. City-Sponsored Event Policy

3. City-Recognized Nonprofit Groups

417
Resolution No. ___

RESOLUTION NO. 24-__

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES

ESTABLISHING A CITY-SPONSORED EVENT POLICY FOR THE CITY OF

HERCULES

WHEREAS, the City of Hercules recognizes and supports community -based nonprofit organizations that improve and enhance the quality of life for the residents of Hercules through the City’s Nonprofit Recognition Program; and

WHEREAS, the City of Hercules values the contribution of City -recognized nonprof it organizations to community life, including sponsorship of community events; and

WHEREAS, in 2023 the City of Hercules conducted its first fee study since 2011 and adopted an updated fee schedule based on full cost recovery; and

WHEREAS, the updated fees for large events are considerably higher than in the past; and

WHEREAS, the C ity often participates in the planning and execution of community events sponsored by City-recognized nonprofit organizations; and

WHEREAS, the C ity may wish to co-sponsor some community events organized by City-recognized nonprofit organizations; and

WHEREAS, the C ity may wish to contribute permit fees in kind as a contribution to events it cosponsors with City-recognized nonprofit organizations.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hercules that the City-Sponsored Event P olicy for the City of H ercules hereto attached is approved and shall guide City sponsorship of community events in the City.

418
Resolution No. ___

The foregoing Resolution was duly and regularly adopted at a special meeting of the City Council of the City of H ercules held on the 12th day of March, 2024 by the following vote of the Council:

AYES:

NOES:

ABSENT:

ABSTAIN:

Dan Romero, Mayor

ATTEST:

__________________________________________
Eibleis Melendez
City Clerk

419
City of Hercules, California
Council Policy on City-Sponsored Events

PURPOSE
To establish guidelines for: (1) City co-sponsorship of community events and (2) in-kind contribution of City permit fees to City co-sponsored events.

POLICY
It is the policy of the City of Hercules that community events sponsored by City- recognized nonprofit organizations may be co-sponsored by the City at the sole discretion of the City Manager.

In order to establish a policy with respect to the types of events the City may wish to co- sponsor and the City’s contribution to such events, the following standards should be followed.

The City Manager is responsible for ensuring the proper execution of this policy.

STANDARDS
A. City Co-Sponsorship of Certain Community Events

1. At the discretion of the City Manager or his or her designee, the City may choose to co-sponsor certain community events that are organized by City-recognized nonprofit organizations.

2. “City-recognized nonprofit organizations” shall refer to organizations recognized by the City through its Nonprofit Group Recognition Program, which is administered by the Recreation Department and reviewed annually by the Community & Library Services Commission.

3. “Co-sponsored events” shall refer to public events organized by City-recognized nonprofit organizations that the City Manager elects to co-sponsor.

4. Co-sponsored events shall be open to the entire Hercules community and shall be nonpartisan and nonsectarian.

5. Publicity for co-sponsored events, such as event registration webpages, marketing communications, banners, and signs, shall include the City’s name and/or logo on an equal basis with those of other sponsors. 420
City of Hercules, California

6. Event organizers must apply for all required Special Event Temporary Use Permits through the City’s Community Development Department and/or Encroachment Permits through the City’s Public Works Department. Requests for City co-sponsorship, if desired, shall be included as part of the permit application(s).

7. The City Manager shall determine, within ten (10) business days of the City’s receipt of an application, whether the City wishes to co-sponsor the event. Such determinations shall apply only to the event date(s) listed on the permit application and shall not apply to subsequent events not listed on the application.

B. In-Kind Contribution of City Permit Fees for Co-Sponsored Events

1. At the sole discretion of the City Manager or his or her designee, the City may choose to make an in-kind contribution of a portion or all of the required permit fees for co-sponsored events.
421
ATTACHMENT 3
2024 City-Recognized Nonprofit Groups
• Bayfront Chamber of Commerce
• Boy Scout Troop 76
• Chinese Association of Hercules
• Friends of the Hercules Library
• Friends of the Hercules Senior Center
• Hercules Community Garden
• Hercules Community Library Foundation
• Hercules Democratic Club
• Hercules Education Foundation
• Hercules Historical Society
• Hercules Senior Citizens Club
• Hercules Sister City Association
• Rotary Club of Hercules
• West Contra Costa Youth Soccer League
422