Hercules City Council
January 14, 2025

20 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s basic 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 City’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
December 19, 2024
298

Hercules Wastewater Fund
(An Enterprise Fund of the City of Hercules, California) Hercules, California
Independent Auditors’ Reports and
Basic Financial Statements
For the Year Ended June 30, 2024
299

300
Hercules Wastewater Fund
(An Enterprise Fund of the City of Hercules, California) Basic Financial Statements
For the Year Ended June 30, 2024

Table of Contents

Page
Independent Auditors’ Reports:

Report on the Financial Statements ................................................................................................................. 1 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 ............................................................................... 5

Basic Financial Statements:

Statement of Net Position .................................................................................................................................... 9 Statement of Revenues, Expenses, and Changes in Net Position ...................................................................... 11 Statement of Cash Flows ................................................................................................................................... 12 Notes to the Basic Financial Statements ........................................................................................................... 15 Required Supplementary Information
Schedule of the Proportionate Share of the Plan’s Net Pension Liability ......................................................... 38 Schedule of Contributions to the Pension Plan ................................................................................................. 40 Schedule of the Proportionate Share of the Plan's Net OPEB Liability (Asset) - PEHMCA ........................... 42 Schedule of Contributions to the OPEB Plan - PEHMCA ................................................................................ 44 Schedule of the Proportionate Share of the Plan's Net OPEB Liability (Asset) - SOMAR .............................. 46 Schedule of Contributions to the OPEB Plan - SOMAR .................................................................................. 47

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INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and Members of the City Council
of the City of Hercules
Hercules, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying 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, 2024, and the related notes to the financial statements, which collectively comprise the Fund’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund as of June 30, 2024, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (“GAAS”) and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States (“Government Auditing Standards”) . Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and the Fund and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter
As described in Note 1 to the basic financial statements, these financial statements present only the Fund and do not purport to and do not present fairly the financial position of the City as of June 30, 2024, the changes in its financial position, or where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether 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 twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
303
To the Honorable Mayor and Members of the City Council
of the City of Hercules
Hercules, California

2 Auditors’ Responsibilities for the Audit 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, and 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. Accordingly, 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 Postemployment 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 OPEB 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 with 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.
304
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 accounting 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 December 19, 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 effectiveness 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
December 19, 2024
305
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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, 2024, 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 December 19, 2024.

Report on Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the City’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.

307
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 the 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
December 19, 2024
308

BASIC FINANCIAL STATEMENTS
7 309
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8 310
ASSETS
Current assets:

Cash and investments 17,298,713$
Cash and investments with fiscal agent 2,888
Total current assets 17,301,601
Noncurrent assets:

Net OPEB asset (PEHMCA) 13,336
Capital assets:

Nondepreciable 13,833,730
Depreciable, net 35,955,211
Total noncurrent assets 49,802,277
Total assets 67,103,878

DEFERRED OUTFLOWS OF RESOURCES
Pension-related deferred outflows of resources 400,110
OPEB-related deferred outflows of resources (PEHMCA) 19,111 OPEB-related deferred outflows of resources (SOMAR) 29,129 Total deferred outflows of resources 448,350

LIABILITIES
Current liabilities:

Accounts payable 1,055,480
Retention payable 569,264
Salaries and benefits payable 12,627
Accrued interest payable 15,331
Long-term debt - due within one year 1,590,320
Total current liabilities 3,243,022
Noncurrent liabilities:

Long-term debt - due in more than one year 26,051,760
Net pension liability 1,091,205
Net OPEB liability (SOMAR) 93,703
Total noncurrent liabilities 27,236,668
Total liabilities 30,479,690

DEFERRED INFLOWS OF RESOURCES
Pension-related deferred outflows of resources 85,610
OPEB-related deferred outflows of resources (PEHMCA) 74,061 OPEB-related deferred outflows of resources (SOMAR) 29,830 Total deferred inflows of resources 189,501

NET POSITION
Net investment in capital assets 20,884,471
Unrestricted 15,998,566
Total net position 36,883,037$
Hercules Wastewater Fund
Statement of Net Position
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 9 311
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10 312
OPERATING REVENUES:

Charges for services 5,891,836$
Total operating revenues 5,891,836
OPERATING EXPENSES:

Salaries and benefits 749,431
Services and supplies 2,959,916
Depreciation 967,632
Total operating expenses 4,676,979
Operating income 1,214,857
NONOPERATING REVENUES (EXPENSES):

Interest income 851,980
Interest (expense) (544,759)
Loss on capital asset disposal (40,395)
Total nonoperating revenues (expenses), net 266,826
CHANGE IN NET POSITION 1,481,683
NET POSITION:

Beginning of year 35,401,354
End of year 36,883,037$
Hercules Wastewater Fund
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 11 313
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers 5,891,836$
Cash paid to suppliers for goods and services (3,831,626) Cash paid to employees for services (756,690)
Net cash provided by operating activities 1,303,520

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Payments related to the acquisition of capital assets (9,947,835) Principal repayments related to capital purposes (1,518,672) Interest repayments related to capital purposes (545,483) Net cash (used in) capital and related financing activities (12,011,990) CASH FLOWS FROM INVESTING ACTIVITIES:

Interest earnings 851,980
Net cash provided by investing activities 851,980
NET CHANGES IN CASH AND CASH EQUIVALENTS (9,856,490)
CASH AND CASH EQUIVALENTS:

Beginning of year 27,158,091
End of year 17,301,601$

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

Cash and investment
s 17,298,713$
Cash and investments with fiscal agent 2,888
Total cash and cash equivalents 17,301,601$
Hercules Wastewater Fund
Statement of Cash Flows
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 12 314

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

Operating income 1,214,857$
Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 967,632
(Increase) decrease in assets and deferred outflows
Pensions-related deferred outflows 45,035
OPEB-related deferred outflows 21,220
Increase (decrease) in liabilities and deferred inflows Accounts payable (871,710)
Salaries and benefits payable 3,851
Net pension liability (1,680)
Net OPEB liability (8,376)
Pensions-related deferred inflows (51,002)
OPEB-related deferred inflows (20,187)
Compensated absences 3,880
Total adjustments 88,663
Net cash provided by operating activities 1,303,520$

NONCASH ITEMS
Loss on disposal of capital assets (40,395)$
For the Year Ended June 30, 2024
Hercules Wastewater Fund
Statement of Cash Flows (Continued)
See accompanying Notes to the Basic Financial Statements. 13 315
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14 316
Hercules Wastewater Fund
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024

15 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 accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the City’s significant policies relating to the Fund:

A. Reporting Entities
The 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, 2024, 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.

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. 317
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

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

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.

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 position 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. 318
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

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

J. Pensions (Continued)

The following timeframes are used for pension reporting:

CalPERS
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 - June 30, 2023

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, 2024
Measurement Period July 1, 2023 - June 30, 2024

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. 319
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

18 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 position 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, 2024 consisted of the following:

Cash and investments pooled with City 17,298,713$
Cash and investments with fiscal agents 2,888
Total 17,301,601$

320
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

19 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, 2024, the Fund has deposited $17,298,713 in the 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 M utual 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. 321
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

20 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 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 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 Months 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, 2024, the Fund’s investment consisted of $17,298,713 pooled with the City and the City invested in the State of California Local Agency Investment fund and $2,888 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.

322
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

21 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 the 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 17,298,713$ 17,298,713$ Investments with fiscal agents:

Money M arket Mutual Funds 2,888 2,888 Total 17,301,601$ 17,301,601$

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 and 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 17,298,713$ N/A -$ 17,298,713$ Investments with fiscal agents:

Money Market Mutual Funds 2,888 N/A 2,888 - Total 17,301,601$ 2,888$ 17,298,713$ S&P Rating as of Fiscal Year Ended

323
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

22 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, 2024, was as follows:

Balance Reclassification/ Balance
July 1, 2023 Additions Retirements Transfers June 30, 2024 Nondepreciable assets:

Land 191,700$ -$ -$ -$ 191,700$ Constrution in progress 3,264,814 10,417,611 (40,395) - 13,642,030 Total nondepreciable assets 3,456,514 10,417,611 (40,395) - 13,833,730 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 (11,144,389) (101,399) - - (11,245,788) Machinery and equipment (219,954) (4,559) - - (224,513) Infrastructure (5,233,749) (861,674) - - (6,095,423) Subtotal (16,598,092) (967,632) - - (17,565,724) Total depreciable assets, net 36,922,843 (967,632) - - 35,955,211 Total capital assets, net 40,379,357$ 9,449,979$ (40,395)$ -$ 49,788,941$

Depreciation expense in the amount of $967,632 was charged to the Fund for the year ended June 30, 2024.

324
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

23 Note 4 – Long-Term Debt
Summary of changes in long-term debt for the year ended June 30, 2024, was as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Yea r State Water Resources
Construction Loan 21,009,706$ -$ (1,153,672)$ 19,856,034$ 1,173,285$ 18,682,749$ Wastewater Revenue Bonds, Series 2021A 8,095,000 - (365,000) 7,730,000 375,000 7,355,000 Compensated Absences 52,166 38,753 (34,873) 56,046 42,035 14,011 Total 29,156,872$ 38,753$ (1,553,545)$ 27,642,080$ 1,590,320$ 26,051,760$

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, 2024. The outstanding balance as of June 30, 2024 was $19,856,034.

The annual debt service requirements to maturity for the State Water Resources Construction Loan as of June 30, 2024 are as follows:

Year Ending
June 30, Principal Interest Total
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 1,255,127 255,712 1,510,839 2030-2034 6,603,033 951,153 7,554,186 2035-2039 7,183,699 370,486 7,554,185 Total 19,856,034$ 2,806,524$ 22,662,558$

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. 325
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

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

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, 2024 are as follows:

Year Ending
June 30, Principal Interest Total
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 410,000 142,086 552,086 2030-2034 2,200,000 557,515 2,757,515 2035-2039 2,485,000 279,115 2,764,115 2040-2041 1,080,000 25,823 1,105,823 Total 7,730,000$ 1,667,430$ 9,397,430$ D. 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).

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 $50,000,000 326
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

25 Note 5 – Risk Management (Continued)
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 10,000 100% of primary $25,000,000; 100% of $75,000,000 excess of $25,000,000

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 participate 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.

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.
327
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

26 Note 6 – Public Employee Retirement System (Continued)

A. General Information About the Pension Plans (Continued)

Benefits Provided (Continued)

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, 2023, the measurement date, the following employees were covered by the Plan’s provisions:

Miscellaneous
Miscellaneous PEPRA
Active employees 25 22
Transferred employees 50 14
Separated employees 91 15
Retired employees and beneficiaries 94 1 Total 260 52

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.

The City contributed $101,808 towards the Fund’s share of the Miscellaneous Pension Plan during the year ended June 30, 2024.
328
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

27 Note 6 – Public Employee Retirement System (Continued)

B. Net Pension Liability
Actuarial Methods and Assumptions Used to Determine Total Pension Liability The June 30, 2022 valuation was rolled forward to determine the June 30, 2023 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 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% 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 and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale M P-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.

Change of Assumptions
There were no changes of assumptions in 2023.

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:

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.

329
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

28 Note 6 – Public Employee Retirement System (Continued)

B. Net Pension Liability (Continued)

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: 6/30/22 (Valuation date) 2,537,625$ 2,173,617$ 364,008$ Balance at: 6/30/23 (M easurement date) 4,080,826 2,989,621 1,091,205 Net changes during 2022-2023 1,543,201$ 816,004$ 727,197$

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, 2023, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 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 pension liability as of the June 30, 2022 measurement date (June 30, 2023 reporting date) and 2023 measurement date (June 30, 2024 reporting date) was as follows:

Fund's Proportion
to City's Share
Measurement date Pool
Proportion - June 30, 2022 0.00946%
Proportion - June 30, 2023 0.00875%
Change - Increase/(Decrease) -0.00071%

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 the net position liability for the Plan, calculated using the discount rate, as well as what the Fund’s proportionate share 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 1,643,119$ 1,091,205$ 636,932$ Plan's Net Pension Liability

330
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

29 Note 6 – Public Employee Retirement System (Continued)

C. Proportionate Share of Net Pension Liability (Continued)

Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

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

For the year ended June 30, 2024, the Fund recognized pension expense $151,254. At June 30, 2024, 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 101,808$ -$ Changes of assumptions 65,881 -
Net difference between projected and actual
earnings on pension plan investments 176,676 - Difference between expected and actual
experience 55,745 (8,647)
Employer contributions in excess/(under)
proportionate share of contributions - (53,021) Adjustments due to difference in proportions - (23,942) Total 400,110$ (85,610)$
Miscellaneous Plan

$101,808 was reported as deferred outflows of resources related 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, 2024. 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
2024 41,329$
2025 38,312
2026 127,982
2027 5,069
2028 -
Thereafter -
Total 212,692$

E. Payable to the CalPERS Pension Plans

At June 30, 2024, the Fund had no outstanding amounts owed to the CalPERS pension plans for contributions for the year ended June 30, 2024.

331
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

30 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 2023 and 2024).

Proportionate share of the City’s postemployment 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, 2024 were $4,282.

Actuarial Assumptions

The net OPEB liability of the Plan was determined using an actuarial valuation as of June 30, 2024 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 1 2021 CalPERS Mortality Healthcare Trend Rate 4%
332
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

31 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: 6/30/23 (Valuation date) (130,814)$ (142,946)$ (12,132)$ Balance at: 6/30/24 (Measurement date) (128,727) (142,063) (13,336) Net changes during 2023-2024 (2,087)$ (883)$ 1,204$

333
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

32 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, 2023, and the total OPEB liability (asset) used to calculate the net OPEB liability (asset) was determined by an actuarial valuation as of June 30, 2023 and rolled forward to June 30, 2024 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 OPEB liability as of the June 30, 2024 measurement date and June 30, 2023 measurement date was as follows:

Fund's Proportion
to City's Share
Pool
Proportion - June 30, 2023 5.35714%
Proportion - June 30, 2024 4.91803%
Change - Increase/(Decrease) -0.43911%

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%)
3,947$ (13,336)$ (27,698)$ 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%
(32,388)$ (13,336)$ 10,791$
Net OPEB Liability (Asset)

334
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

33 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, 2024, the Fund recognized OPEB expense of $3,108 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, 2024, 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 281$ (66,070)$ Changes of assumptions 15,234 (7,991)
Net difference between projected and actual earning on
OPEB plan investments 3,596 -
Total 19,111$ (74,061)$

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
2025 (6,998)$
2026 (5,126)
2027 (9,845)
2028 (9,916)
2029 (8,941)
Thereafter (14,124)
Total (54,950)$

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. 335
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

34 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 Service
Sick 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 Minimum
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 benefits in effect at June 30, 2024, 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

336
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

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

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

Contributions

For the year ended June 30, 2024, the Fund contributions recognized as part of OPEB expense for the SOMAR plan were $2,404.

Actuarial Assumptions

The net pension liability of the SOMAR Plan was determined using an actuarial valuation as of July 1, 2023 using the following actuarial assumptions:

Actuarial Assumptions:

Cost method Entry age normal
Discount Rate 3.93%
Inflation 2.50%
Aggregate payroll increases 2.75%
Mortality 1, retirement, and turnover 2021 CalPERS tables

Cost Method
The cost method used is based on entry age required by GASB 73. Entry age is based on the age at hire for eligible employees. The attribution period is determined as the difference between the expected retirement age and the age at hire. The APVPBP and present value of future service costs are determined on a participant by participant basis and then aggregated.

Discount Rate

The discount rate used to measure the total OPEB liability for the SOMAR plan was 3.93% 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, 2024, measurement date, is as follows:

Plan's Proportion to
Total Plan at June 30,
2024
Proportionate
Share of Net
OPEB Liability

4.918% 93,703$
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%
(2.93%) Rate (3.93%) (4.93%)
111,134$ 93,703$ 80,164$ SOMAR Plan's Total OPEB Liability
337
Hercules Wastewater Fund
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024

36 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, 2024, the City recognized pension expense of $5,634 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, 2024, 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 16,610$ (12,613)$ Changes of assumptions 12,519 (17,217) Total 29,129$ (29,830)$
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
2025 12$
2026 12
2027 12
2028 12
2029 12
Thereafter (761)
Total (701)$

Payable to the OPEB Plan

At June 30, 2024, the Fund had no outstanding amounts owed to the SOMAR OPEB plan for contributions for the year ended June 30, 2024.

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 insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize.

338

REQUIRED SUPPLEMENTARY INFORMATION
37 339
Measurement Date: June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Proportion of the Net Pension Liability 0.0087% 0.0095% 0.0067% 0.0072% 0.0068% Proportionate Share of the Net Pension Liability 1,091,205$ 1,092,885$ 364,008$ 779,817$ 694,727$ Covered Payroll 458,019$ 437,549$ 229,694$ 335,827$ 331,260$ Proportionate Share of the Net Pension Liability
as a Percentage of Covered Payroll 238.24% 249.77% 158.48% 232.21% 209.72% Fiduciary Net Position as a Percentage of the
Plan's Total Pension Liability 73.26% 73.13% 85.66% 73.63% 75.07% 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, 2024
Last Ten Fiscal Years
38 340
Measurement Date: June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 Proportion of the Net Pension Liability 0.0066% 0.0067% 0.0065% 0.0056% 0.0057% Proportionate Share of the Net Pension Liability 637,000$ 659,623$ 562,902$ 481,238$ 462,583$ Covered Payroll 321,063$ 301,916$ 251,715$ 251,715$ 319,046$ Proportionate Share of the Net Pension Liability
as a Percentage of Covered Payroll 198.40% 218.48% 223.63% 191.18% 144.99% Fiduciary Net Position as a Percentage of the
Plan's Total Pension Liability 77.69% 75.39% 75.87% 78.32% 78.10% Miscellaneous Plans
Last Ten Fiscal Years
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, 2024
39 341
Fiscal Year: 2023-24 2022-23 2021-22 2020-21 2019-20
Actuarially Determined Contribution1
101,808$ 105,146$ 88,805$ 102,423$ 95,532$ Contribution in Relation to the Actuarially
Determined Contribution2
(101,808) (105,146) (88,805) (102,423) (95,532) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ Covered Payroll3 462,395$ 449,800$ 437,549$ 229,694$ 335,827$ Contributions as a Percentage of Covered Payroll 22.74% 23.38% 20.30% 44.59% 28.45% Notes to the Schedule:

California Public Employees' Retirement System (CalPERS) 1 As prescribed in GASB 68, paragraph 46, the information presented in the Schedule of Plan Contributions should also be presented as of the employer’s most recent fiscal year-end. The employer is responsible for determining this information as prescribed by the standard as this data is not available to CalPERS. 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 years ended in 2022 and 2023; 2.75% payroll growth assumption for fiscal years ended in 2018 through 2021; 3.00% payroll grow the assumption for fiscal years ended in 2014 through 2017.

Last Ten Fiscal Years
Hercules Wastewater Fund
Required Supplementary Information (Unaudited)
Schedule of Contributions to the Pension Plan
For the Year Ended June 30, 2024
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. 40 342
Fiscal Year: 2018-19 2017-18 2016-17 2015-16 2014-15
Actuarially Determined Contribution1
91,514$ 63,159$ 52,105$ 52,884$ 34,760$ Contribution in Relation to the Actuarially
Determined Contribution2
(91,514) (63,159) (52,105) (52,884) (34,760) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ Covered Payroll3 331,260$ 301,916$ 251,715$ 251,715$ 319,046$ Contributions as a Percentage of Covered Payroll 27.63% 20.92% 20.70% 21.01% 10.89% Last Ten Fiscal Years
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, 2024
Miscellaneous Plans
41 343
Measurement Date: June 30, 2024 June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 Proportion of the Net OPEB Liability
(Asset) 4.92% 5.36% 5.36% 5.88% 6.80%
Proportionate Share of the Net OPEB
Liability (Asset) (13,336)$ (12,132)$ (763)$ (28,052)$ (11,718)$ Covered Payroll 229,694$ 229,694$ 335,827$ 335,827$ 331,260$ Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll -5.81% -5.28% -0.23% -8.35% -3.54%
Fiduciary Net Position as a Percentage
of the Plan's Total Pension Liability 110.36% 109.27% 100.56% 119.65% 106.92% 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, 2024
42 344
Measurement Date: June 30, 2019 June 30, 2018
Proportion of the Net OPEB Liability
(Asset) 5.16% 5.19%
Proportionate Share of the Net OPEB
Liability (Asset) 66,474$ 75,521$
Covered Payroll 321,063$ 301,916$
Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll 20.70% 25.01%
Fiduciary Net Position as a Percentage
of the Plan's Total Pension Liability 65.60% 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, 2024
43 345
Fiscal Year: 2023-242 2022-232 2021-222 2020-212 2019-202 Actuarially Determined Contribution 4,282$ 5,879$ 7,721$ 1,179$ 11,571$ Contribution in Relation to the
Actuarially Determined Contribution (4,282) (5,879) (7,721) (1,179) (11,571) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ Covered Payroll 462,395$ 449,800$ 437,549$ 229,694$ 335,827$ Contributions as a Percentage of Covered
Payroll 0.93% 1.31% 1.76% 0.51% 3.45%
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, 2024
Last Ten Fiscal Years 1
44 346
Fiscal Year: 2018-19 2017-18
Actuarially Determined Contribution 18,642$ 10,641$ Contribution in Relation to the
Actuarially Determined Contribution (18,642) (10,641) Contribution Deficiency (Excess) -$ -$ Covered Payroll 331,260$ 321,063$
Contributions as a Percentage of Covered
Payroll 5.63% 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, 2024
45 347
Measurement Date: June 30, 20241 2 June 30, 20231 2 June 30, 20221 June 30, 20211 2 June 30, 20201 2 Proportion of the Net OPEB Liability
(Asset) 4.92% 5.36% 5.36% 5.36% 5.36%
Proportionate Share of the Net OPEB
Liability (Asset) 93,703$ 100,875$ 71,848$ 86,665$ 99,901$ Covered Payroll 462,395$ 437,549$ 364,008$ 345,902$ 335,827$ Proportionate Share of the Net OPEB
Liability (Asset) as a Percentage of
Covered Payroll 20.26% 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% 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, 2024
46 348
Fiscal Year: 2023-242 2022-232 2021-222 2020-212 2019-202 Actuarially Determined Contribution 2,404$ 2,303$ 2,342$ 2,332$ 2,182$ Contribution in Relation to the
Actuarially Determined Contribution (2,404) (2,303) (2,342) (2,332) (2,182) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ City's Covered-Employee Payroll -$ -$ -$ -$ -$ Contributions as a Percentage of
Covered Payroll 0.00% 0.00% 0.00% 0.00% 0.00%
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, 2024
Last Ten Fiscal Years 1
47 349
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48 350

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, 2024
351
352
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, California (the “City”) in evaluating whether the Measure B – Transactions and Use Tax Revenues is in accordance with the provisions of this measure for the year ended June 30, 2024. The City’s management is responsible for receipt of Measure B - Transactions and Use Tax Revenues and deposit of such proceeds into the City's General Fund, and 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 acknowledged 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 California State Board of Equalization (“BOE”) through online confirmation and calculated variances to the receipts summarized per the general ledger of the City for the year ended June 30, 2024.

2. We traced from the BOE on-line confirmation to the City’s general ledger with no variance noted as detailed below:

Date Posted to G/L Receipts per G/L Payments per BOE Variance 7/31/2023* $ 166,014 $ 166,014 $ - 8/3/2023* 119,069 119,069 - 8/31/2023* 210,923 210,923 - 9/28/2023 178,126 178,126 - 11/1/2023 106,060 106,060 - 11/30/2023 196,387 196,387 - 1/10/2024 175,657 175,657 - 2/1/2024 106,213 106,213 - 2/29/2024 211,341 211,341 - 4/11/2024 181,565 181,565 - 5/2/2024 117,802 117,802 - 5/30/2024 146,974 146,974 - 6/30/2024** 456,520 456,520 - 2,372,651$ 2,372,651$ -$ * The City accrued $496,005 for the fiscal yea
r ended June 30, 2023. Thesepayments apply to
part of that accrual.
** California Department of Tax and Fee Administration (CDTFA) confirmed $187,424, $147,868, and $121,228 were paid towards accruals subsequent to the year end.

Findings: No findings were noted as a result of the above procedures. 353
To the Honorable Mayor and Members of City Council
of the City of Hercules

3. 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: No findings were noted as a result of the above procedures.

4. We noted the proceeds of taxes levied and confirmed under Measure B were paid/deposited into the City’s General Fund for use by the City.

Findings: No findings were noted as a result of the above procedures.

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
December 19, 2024

354

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, 2024
355

356
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 assisting the City of Hercules, California (the “City”) in evaluating whether the Measure N Utility Users Tax Rate Revenues (UUT) is in accordance with the provisions of this measure for the year ended June 30, 2024. 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, and 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 the actual Utility Users Tax (UUT) to the receipts recorded in the City’s general ledger and recalculated the mathematical accuracy of the following schedules provided by the City for the year ended June 30, 2024:
a. Schedule of Expected UUT vs. Actual UUT:

Type of Utility
Estimated Utility
Billings
(FY 23/24
Utility Billings
as a Base) Expected UUT¹
Actual
UUT Variance % Variance
Electricity 18,895,238$ 1,511,619$ 1,708,846$ 197,227$ 13.05% Telephone 4,939,950 395,196 443,848 48,652 12.31% Gas 7,488,388 599,071 577,391 (21,681) -3.62% Water 9,894,000 791,520 788,337 (3,183) -0.40% Cable 5,740,338 459,227 492,744 33,517 7.30% Totals UUT 46,957,914$ 3,756,633$ 4,011,166$ 254,532$ 6.78% ¹ Based on UUT of 8% of estimated utility billings.

FY 2023/24 -Expected UUT vs Actual UUT
357
To the Honorable Mayor and Members of the City Council
of the City of Hercules

b. Schedule of Increase in Revenues Generated by Measure N:

Type of Utility
Actual UUT
with Measure N¹
Estimated UUT
without Measure
N²
Increase in
Revenue due to
Measure N
Increase/
Decrease in Revenue
per Staff Report³ Variance % Variance
Electricity 1,708,846$ 1,281,635$ 427,212$ 470,686$ 43,474$ 9.24% Telephone 443,848 332,886 110,962 90,790 (20,172) -22.22% Gas 577,391 433,043 144,348 192,166 47,818 24.88% Water 788,337 591,253 197,084 201,026 3,942 1.96% Cable 492,744 - 492,744 445,436 (47,308) -10.62% Totals 4,011,166$ 2,638,817$ 1,372,350$ 1,400,104$ 27,754$ 1.98% ¹ Based on the actual UUT collected for FY 2023/2024 at a rate of 8% for the entire year. ² Based on a rate of 6% UUT on electricity, telephone, gas and water, and no UUT on cable. ³ Based on the Adopted Budget for FY 22/23 & FY 23/24.

FY 2023/24 -Increase in Revenue Generated by Measure N
Findings: No findings were noted as a result of the above procedures.

2. We traced and verified that the 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, in accordance with Ordinance 475 Sec 8-8.402 Use of Tax Proceeds and Ordinance 481 Sec 8-8.402 Use of Tax Proceeds.

Findings: No findings were noted as a result of the above procedures.

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, 2024. 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
December 19, 2024
358
City of Hercules
Hercules, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures to
Appropriations Limit Schedule
For the Year Ending June 30, 2025
359
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, 2025. 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, 2025, 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.

Findings: 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.

Findings: 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, 2025 that will benefit the City the most. There is no impact as the City’s appropriations for 2024-25 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.

Findings: 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.

Findings: No exceptions were noted as a result of our procedures. 360
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
December 19, 2024
361
City of Hercules
Appropriations Limit Schedule
For the Year Ending June 30, 2025

See accompanying Notes to Appropriations Limit Schedule. 3 Amount Source
A. Appropriations Limit FY 2023-2024 536 ,017,008$ Prior year appropriation limit adopted by the City
B. Calculation Factors:
1) Population increase % 0.9947 California Department of Finance 2) Inflation increase % 1.0362 California Department of Finance 3) Total adjustment % 1.0307 (B1 x B2) C. Annual Adjustment Increase 16,460,085 {(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 16,460,085 (C+D)
F. Appropriations Limit FY 2024-2025 552,477,093$ (A+E)

362
City of Hercules
Notes to Appropriations Limit Schedule
For the Year Ending June 30, 2025
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 change in population of the county where the jurisdiction is located. The factor adopted by the City of Hercules, California (the “City”) for the year ending June 30, 2025, 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, 2025, 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, 2025. 363
December 19, 2024
To the Honorable Mayor and the Members of the City Council of the City of Hercules
Hercules, California

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Hercules, California (the “City”) for the year ended June 30, 2024. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated May 06, 2024.

Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As described in Note 1 to the basic financial statements, the City implemented the following accounting standards:

New Accounting Standards

GASB Statement No. 100 – In June 2022, GASB issued Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62. The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. Implementation of this Statement did not have a significant effect on the City’s financial statements for the fiscal year ended June 30, 2024.

No other new accounting policies were adopted and the application of existing policies was not changed during 2024.

We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City’s financial statements were:

Management’s estimate of the investment fair market value is based on information provided by the State of California for its investment in the Local Agency Investment Fund. We evaluated the key factors and assumptions used to develop the investment fair market value in determining that it is reasonable in relation to the financial statements taken as a whole. .
364
To the Honorable Mayor and the Members of the City Council of the City of Hercules
Hercules, California

Management’s estimate of the depreciation and amortization on capital assets is based on the industry standard and past experience on actual useful life of the asset groups. We evaluated the key factors and assumptions used to develop the depreciation on capital assets in determining that it is reasonable in relation to the financial statements taken as a whole

Management’s estimate of the net pension liability is based on the actuarial valuation on total pension liability and based on financial statements on fiduciary net position for CalPERS plans. We evaluated the key factors and assumptions used to develop the net pension liability in determining that it is reasonable in relation to the financial statements taken as a whole.

Management’s estimate of the net other postemployment benefits (“OPEB”) liability/(asset) is based on the actuarial valuation on total OPEB liability and financial statements on fiduciary net position. We evaluated the key factors and assumptions used to develop the OPEB liability in determining that it is reasonable in relation to the financial statements taken as a whole.

Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were:

Note 1 – Summary of Significant Accounting Policies
Note 8 – Retirement Plans
Note 10 – Other Postemployment Benefits
Note 12 – Commitments and Contingencies
Note 14 – Stewardship, Compliance, and Accountability

The financial statement disclosures are neutral, consistent, and clear.

Difficulties Encountered in Performing the Audit

We encountered no significant difficulties in dealing with management in performing and completing our audit.

Corrected and Uncorrected Misstatements

Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.

Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report.

We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations

We have requested certain representations from management that are included in the management representation letter dated December 19, 2024.

365
To the Honorable Mayor and the Members of the City Council of the City of Hercules
Hercules, California

Management Consultations with Other Independent Accountants

In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters
We applied certain limited procedures to Management’s Discussions and Analysis (“MD&A”), the Budgetary Comparison Schedules for the General Fund and Major Special Revenue Funds, the Schedules of the City’s Proportionate Share of Net Pension Liability and Related Ratios, the Schedules of the City’s Contributions – Pensions, the Schedules of Changes in Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of the City’s Contributions – Other Postemployment Benefits, which are required supplementary information (“RSI”) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.

We were engaged to report on the Combining and Individual Nonmajor Fund Financial Statements which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

We were not engaged to report on the Introductory and the Statistical Sections, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Restriction on Use
This information 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.

Very truly yours,

Santa Ana, California
366

CITY OF HERCULES
Presentation to the City Council
For the Fiscal Year Ended June 30, 2024
January 14, 2025
367
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
1/14/2025
368
3 SCOPE OF WORK
1/14/2025
369
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 1/14/2025
370
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
1/14/2025
371
6 Required Communications (AU-C 260)
1/14/2025
372
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
• Net pension liability
• Net other postemployment benefits (“OPEB”) liability
1/14/2025
373
8 Required Communications (AU-C 260)
• Sensitive Disclosures
• Note 1 - Summary of Significant Accounting Policies
• 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.
1/14/2025
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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.
1/14/2025
375
10 OVERVIEW OF THE FINANCIAL STATEMENTS

AND FINANCIAL INDICATORS
1/14/2025
376
11 City of Hercules
Government-Wide Statement of Net Position
June 30, 2024
Governmental Business-Type
Activities Activities Total
Assets 135,696,000$ 67,104,000$ 202,800,000$
Deferred Outflows of Resources 8,608,000 448,000 9,056,000 Liabilities 47,832,000 30,480,000 78,312,000
Deferred Inflows of Resources 12,059,000 189,000 12,248,000 Net Position:

Net investment in capital assets 59,889,000 20,884,000 80,773,000 Restricted 13,368,000 - 13,368,000 Unrestricted 11,156,000 15,999,000 27,155,000 Total Net Position 84,413,000$ 36,883,000$ 121,296,000$ 1/14/2025
377
12 City of Hercules
Government-Wide Statement of Activities
For the Year Ended June 30, 2024
Governmental Business-Type
Activities Activities Total
Program Revenues:

Charges for Services 3,389,000$ 5,892,000$ 9,281,000$ Operating Grants and Contributions 6,413,000 - 6,413,000 Capital Grants and Contributions 1,909,000 - 1,909,000 Total Program Revenues 11,711,000 5,892,000 17,603,000 Expenses 29,419,000 5,262,000 34,681,000
Net Cost of Services (17,708,000) 630,000 (17,078,000) General Revenues 18,976,000 852,000 19,828,000 Changes in Net Position 1,268,000$ 1,482,000$ 2,750,000$ 1/14/2025
378
13 City of Hercules
Governmental Activities
Cost of Services to Tax Revenues
For the Years Ended June 30, 2024 and 2023
2024 2023 Change
Cost of Services 17,708,000$ 12,612,000$ 5,096,000$ Tax Revenues 13,343,000 13,465,000 (122,000)
Ratio 133% 94% 39%
1/14/2025
379
14 City of Hercules
General Fund Summary
Fund Balance
June 30, 2024 and 2023
2024 2023* Change
Fund Balance:

Nonspendable 1,322,000$ 1,393,000$ (71,000)$
Restricted 2,392,000 2,142,000 250,000
Committed 7,884,000 8,000,000 (116,000)
Assigned 8,595,000 6,197,000 2,398,000
Unassigned 14,755,000 16,146,000 (1,391,000)
Total Fund Balance 34,948,000$ 33,878,000$ 1,070,000$ * Reclass loan receivable from unassigned to nonspendable 1/14/2025
380
15 City of Hercules
General Fund Summary
Revenues, Expenditures and Changes in Fund Balance
For the Years Ended June 30, 2024 and 2023
2024 2023 Change
Revenues 20,329,000$ 19,495,000$ 834,000$
Expenditures (18,245,000) (17,657,000) (588,000)
Revenues over Expenditures 2,084,000 1,838,000 246,000 Other Financing Sources (Uses) (1,014,000) 1,026,000 (2,040,000) Change in Fund Balance 1,070,000$ 2,864,000$ (1,794,000)$ 1/14/2025
381
16 City of Hercules
General Fund
Unassigned Fund Balance to Annual Expenditures
For the Years Ended June 30, 2024 and 2023
2024 2023* Change
Unassigned Fund Balance 14,755,000$ 16,146,000$ (1,391,000)$ Annual Expenditures 18,245,000 17,657,000 588,000 Ratio 81% 91% -11%
Committed/Assigned/Unassigned
Fund Balance 31,234,000$ 30,343,000$ 891,000$
Ratio 171% 172% -1%
* Reclass loan receivable from unassigned to nonspendable 1/14/2025
382
17 KEY PENSION AND OPEB

INFORMATION
1/14/2025
383
18 Net Pension Liability – Misc. Plan
1/14/2025
2024 2023
Plan Total Pension Liability 35,724,000$ 33,376,000$ Plan Fiduciary Net Position (26,171,000) (24,408,000) Net Pension Liability 9,553,000$ 8,968,000$ Funding Ratio 73% 73%
Contibution Made During the Fiscal Year 891,000$ 863,000$ 384
19 Net Pension Liability – Safety Plan
1/14/2025
2024 2023
Plan Total Pension Liability 45,007,000$ 43,442,000$ Plan Fiduciary Net Position (33,264,000) (32,655,000) Net Pension Liability 11,743,000$ 10,787,000$ Funding Ratio 74% 75%
Contibution Made During the Fiscal Year 1,262,000$ 1,240,000$ 385
20 Net OPEB Liability – PEHMCA PLAN
2024 2023
Plan Total OPEB Liability 2,618,000$ 2,442,000$ Plan Fiduciary Net Position (2,889,000) (2,668,000) Net OPEB Asset (271,000)$ (226,000)$
Funding Ratio 110% 109%
Contibution Made During the Fiscal Year 87,000$ 110,000$ 1/14/2025
386
21 Net OPEB Liability – SOMAR PLAN
2024 2023
Plan Total OPEB Liability 1,905,000$ 1,883,000$ Plan Fiduciary Net Position - - Net OPEB Liability 1,905,000$ 1,883,000$
Funding Ratio 0% 0%
Contibution Made During the Fiscal Year 49,000$ 44,000$ 1/14/2025
387
22 FINANCIAL AUDIT RESULTS
1/14/2025
388
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 wer e noted
• Other Results
• No disagreements with management
• No material weaknesses
in internal controls over financial reporting were reported • No accounting issues
1/14/2025
389

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

SAN DIEGO
4365 Executive Drive
Suite 710
San Diego, CA 92121

BAY AREA
2121 North California Blvd.

Suite 290
Walnut Creek, CA 94596

LAS VEGAS
1050 Indigo Drive
Suite 110
Las Vegas, NV 89145

PHOENIX
4742 North 24th Street
Suite 300
Phoenix, AZ 85016

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

SAN DIEGO
4660 La Jolla Village Drive
Suite 100
San Diego, CA 92122

SACRAMENTO
1511 Corporate Way
Suite 220
Sacramento, CA 95831

LAS VEGAS
1980 Festival Plaza Drive
Suite 300
Las Vegas, NV 89134

PHOENIX
2 N. Central Avenue
Suite 1800
Phoenix, AZ 85004

WALNUT CREEK
2121 North California Boulevard
Suite 290
Walnut Creek, CA 94596
390
DI

SCUSSION AND/OR ACTION

AGENDA ITEM

2. 25-009
391

REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 14, 2025
TO: Mayor and Members of the City Council
SUBMITTED BY: Dante Hall, City Manager
SUBJECT: Professional Services Agreement with Tai Ginsberg & Associates LLC (“TG&A”) for a n amount not to exceed $50,000 to Provide Strategic Federal Advocacy Consulting Services to A dvance the Hercules Hub Project and Appropriating $50,000 from the General Fund Capital Reserves to Fully Fund the Contract
RECOMMENDED ACTION:

Adopt a Resolution approving a $50,000 agreement with Tai Ginsberg & Associates LLC (“TG&A”) to provide strategic federal advocacy consulting services to a dvance the Hercules Hub Project and appropriating $50,000 from the General Fund Capital Reserves to fund the contract fully.

BACKGROUND:

The Hercules Hub is envisioned as a premier, regional, state -of-the-art housing and transportation community along the waterfront that will connect thousands of homes with a new train stop along the Capitol Corridor, bicycle and pedestrian pathways, bus routes, carpool options, and eventual ferry service. The Hub and its surrounding community will be a model for successful transit-oriented communities in the Bay Area.

The project has received full environmental clearance, the right of way has been secured, and $46M in improvements have been constructed to date using multiple funding sources, including grant funding. This includes the extension of Joh n Muir Parkway and Bayfront Boulevard to provide direct access from I -80/SR-4 to The Hub; also, Bay Trail gap closures, including to the north to provide connectivity to Rodeo, a community of concern, and to the south from Railroad Avenue to tie into the e xisting trail towards Sante Fe Avenue.
25-009
392
Since late 2022, the City has worked with the transportation firm Gray‐Bowen‐Scott (GBS) to raise the profile of the Hercules Hub by building relationships with regional, state, and federal officials to help develop and implement a funding plan for the project . The City and GBS have been successful in identifying potential grant opportunities , securing a $2.4M Transit and Intercity Rail Capital Program (TIRCP) grant through a joint application with Capitol Cor ridor JPA to partially fund the design phase , and executing a federal earmark of $850,000 from Congressman John Garamendi . Approximately $107M in additional funding is needed to build the infrastructure for the Capitol Corridor train to stop.

ANALYSIS:

As part of the adopted 2024-2026 Hercules City Council Strategic Goal Workplan, the City Council directed staff to secure the services of a federal lobbyist as an advocate on behalf of the Hercules Hub. City staff has evaluated several federal lobbying fir ms and recommends approving a contract with Tai Ginsberg & Associates LLC (“TG&A”) to provide strategic federal advocacy consulting services to a dvance the Hercules Hub Project. TG&A is a client-focused government relations firm. The firm’s broad yet specialized knowledge base is matched by its experience working with a diverse set of clients. TG&A is comprised of a team of highly knowledgeable and seasoned veteran government relations professionals with substantial experience on Capitol Hill and working with infrastructure, transportation , energy, and technology clients, and trade associations. TG&A has a notable record of successfully delivering for clients, such as the Contra Costa Transportation Authority (CCTA) , Capitol Corridor Joint Powers Authority, and the San Francisco County Transportation Authority (SFCTA).

Staff recommends executing a n agreement with TG&A because of their intimate understanding of our regional railroad system and their specialized experience and success in helping some of our transportation partners secure Federal discretionary funds. TG&A also offers unique insight and experienced coordination with the US Department of Transportation, the Federal Railroad Administration, and the Union Pacific Railroad.

FISCAL IMPACT:

After thoroughly evaluating various federal lobbying firms, staff ha s identified TG&A as the most suitable choice for our needs. This recommendation is grounded in TG&A's extensive knowledge of the city's regional railroad system, which positions them uniquely to navigate the intricacies of our transportation challenges. Their specialized experience in this sector and a proven track record of successfully securing federal discretionary funds make them an invaluable partner for our initiatives.

The General Fund Capital Reserve has sufficient resources to finance this agreement.

Therefore, staff recommends that the City Council approve the appropriation of $50,000 393
from the General Fund Capital Reserve to engage TG&A's services. This investment will enhance o ur ability to effectively advocate for the city's transportation priorities at the federal level.

ATTACHMENTS:

1. Resolution

2. Proposal for Strategic Federal Advocacy Consulting Services 394
HERCULES CITY COUNCIL RESOLUTION NO. XX –

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES AUTHORIZING

THE CITY MANAGER TO CONTRACT WITH TAI GINSBERG & ASSOCIATES LLC (“TG&A”) FOR AN AMOUNT NOT TO EXCEED $50,000 TO PROVIDE STRATEGIC

FEDERAL ADVOCACY CONSULTING SERVICES TO ADVANCE THE HERCULES HUB PROJECT AND APPROPRIATING $50,000 FROM THE GENERAL FUND CAPITAL RESERVES TO FULLY FUND THE CONTRACT.

WHEREAS, the Hercules Hub is envisioned as a premier, regional, state -of-the-art housing and transportation community along the waterfront that will connect thousands of homes with a new train stop along the Capitol Corridor, bicycle and pedestrian pathways, bus routes, carpool options, and eventual ferry service; and WHEREAS, the project has received full environmental clearance, the right of way has been secured, and $46M in improvements have been constructed to date using multiple funding sources, including grant funding; and
WHEREAS, the City has been successful in identifyi ng potential grant opportunities for the Hercules Hub Project , and approximately $107M in additional funding is needed to build the infrastructure for the Capitol Corridor train to stop; and WHEREAS, the City Council directed staff to secure the services of a federal lobbyist as an advocate on behalf of the Hercules Hub as part of the adopted 2024-2026 Hercules City Council Strategic Goal Workplan; and
WHEREAS, after thoroughly evaluating various federal lobbying firms, staff has identified Tai Ginsberg & Associates LLC as the most suitable choice for our needs because of their extensive knowledge of the city's regional railroad system and success in navigating the intricacies of federal funding opportunities; and
WHEREAS, the General Fund/Capital Project Reserve was established to ensure the City had the financial capability to respond when opportunities arose to advance top priority projects, such as the Hercules Hub, and there is sufficient funding in the Capital Project Reserve to fund the contact.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hercules to authorize the City Manager to execute an agreement with Tai Ginsberg & Associates LLC (“TG&A”) for a n amount not to exceed $50,000 to Provide Strategic Federal Advocacy Consulting Services to A dvance the Hercules Hub Project and Appropriating $50,000 from the General Fund Capital Reserves to Fully Fund the Contract.

The foregoing Resolution was duly and regularly adopted at a regular meeting of the City Council of the City of Hercules held on the 14th day of January, 2024, by the following vote of the Council:
395

AYES:

NOES:

ABSENT:

ABSTAIN:
__________________________
Dion Bailey, Mayor
ATTEST:

______________________________
Eibleis Melendez, City Clerk
396

November 22, 2024

Dante Hall, City Manager
City of Hercules, California
111 Civic Drive
Hercules, CA 94547

RE: Proposal for Strategic Federal Advocacy Consulting Services – Phase 1

Dear Mr. Hall:

This letter serves as a proposal and outlines the terms of agreement (“Agreement”) between Tai Ginsberg & Associates LLC ( “TG&A”) and the City of Hercules (“Hercules” or the “c ity”) to provide strategic federal advocacy consulting services.

1. TEAM OVERVIEW.

TG&A is a client focused government relations firm. TG&A’s broad yet specialized knowledge base is matched by the group’s experience working with a diverse set of clients. TG&A is comprised of a team of highly knowledgeable and seasoned veteran government relations professionals with substantial experience on Capitol Hill and working with infrastructure, transportation & energy, and technology issues, clients, and trade associations. Since 2019, Bloomberg Government has ranked TG&A as one of the top performing government relations firms in DC.

TG&A works with a diverse set of clients in the private sector and has a deep understanding of the challenges posed at all levels of government through its work with many public agencies. Over the years, our clients have included a mix of Fortune 500 and other high profile private sector companies such as Canadian National, CSX, Peloton, Tesla & Uber, and public agencies across the country, particularly in California and the Midwest. Our service includes extensive work with the U.S. House of Representatives and U.S. Senate, developing or modifying policies and programs to meet client objectives while building relationships for our clients to leverage. We also help clients with matters before many federal agencies. Specifically, our team has a broad set of bipartisan experiences in federal, state, and local government and political campaigns. TG&A has a notable record of successfully delivering for clients, including those clients that do not fit into neat categories of federal funding.
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TG&A-Hercules Agreement

2. SERVICES & PROPOSED SCOPE OF WORK . During the term of the A greement, TG&A will provide strategic consulting services to the city that includes the following activities:
i. Strategic advice on funding and financing strategies to leverage available funding sources to help fund the Hercules Hub project, including:
• Federal discretionary grants like U.S. DOT RAISE grants and FRA CRISI grants • USDOT innovative financing programs through the Build America Bureau • “Earmarks” or congressionally directed spending – Community Project Funding in the House and Congressionally Directed Spending projects in the Senate ii. Regional stakeholder support and advocacy: Using our expansive relationships with Bay Area transportation entities, TG&A proposes to engage in careful and sustained coordination with the key regional stakeholders to guide and assist the city in delivering the Hercules Hub project. This includes but is not limited to the Capitol Corridor Joint Powers Authority, Contra Costa Transportation Authority (CCTA), and San Joaquin Joint Powers Authority; iii. Building relationships with key federal elected officials : Both the local Congressional and Senate offices, and also key Congressional Committee decisionmakers; and iv. Strategic Counsel: In general, TG&A will provide strategic counsel on overall governmental and political trends with potential impacts to the city.

3. TERM. This agreement is effective on January 1, 2025, and will continue through December 31, 2025.

The agreement may be extended at the discretion of both parties by written agreement.

4. FEES. In consideration of the Services, TG&A will receive a retainer of $4,000 per month. Consulting fees shall be billed monthly and shall be paid within 30 days from receipt of invoice.

5. PROPOSED TEAM BIOS. See below for an overview of the proposed team’s bios:

Jason Tai, Principal at TG&A
Jason has over 20 years of broad and substantive experience in federal and state government with an expertise in technology issues. He has proven successful in negotiating and securing significant federal and state funding for a variety of critical projects and managed complex governmental and political processes to achieve results. Prior to joining the private sector government relations field, Jason served as Chief of Staff for Congressman Dan Lipinski (Illinois -3rd) where he oversaw and managed all policy, projects, communications, intergovernmental, and political issues. Jason also spent time as a Professional Staff Member on the U.S. House Transportation & Infrastructure Committee. Previously, he served as an appointed senior executive at the Illinois Department of Transportation (IDOT) serving dual appointed positions as Director of Public and Intermodal Transportation (DPIT) and Senior Policy Advisor to the Secretary, where he was responsible for a $548 million budget, which funded statewide transit and rail operating and capital needs. DPIT administered federal and state funding for 52 transit agencies across Illinois. Prior to his IDOT stint, Jason was Chief of Staff to former U.S. Congressman William O. Lipinski (Illinois-3rd).

Matt Ginsberg, Principal at TG&A
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TG&A-Hercules Agreement
Matt has extensive government relations experience including campaign, federal government, and over a decade of private sector lobbying experience. He has expertise in drafting and passing legislation, performing business development services, coordinating lobbying strategies, securing federal funding, managing trade associations, and representing clients before Congress, executive branch agencies, and industry associations. Matt excels at promoting the adoption of new technologies within traditional arenas . Over the course of his private sector tenure, he has successfully secured over hundreds of millions of dollars in federal discretionary grants for his clients through direct advocacy and strategic technical assistance. Previously, Matt worked for then-U.S.

Representative and now Colorado Governor Jared Polis (Colorado-2nd), formerly a member of the powerful House Rules Committee. He has experience working in both the U.S. Senate and U.S. House of Representatives. Prior to his time in Washington DC, Matt worked for a political consulting firm in Denver, Colorado helping to manage the media strategy for a major Presidential campaign.

Gus Maples, Vice President at TG&A
Gus Maples joined TG&A after completing five federal budget cycles as Professional Staff Member on the U.S. Senate Committee on Appropriations, overseeing more than $50 billion in budgetary resources and programs at the U.S. Department of Transportation. I n this capacity he advised Transportation Subcommittee Chairman Susan Collins (R -ME) on policy and funding issues, departmental rulemakings, and grant programs administered by agencies including the Federal Highway Administration, Federal Motor Carrier Safety Administration, and National Highway Traffic Safety Administration. He gained broad experience working with many Senate offices, on both sides of the aisle, as well as participating in conference negotiations with the House of Representatives to enact Appropriations bills. Before Senator Thad Cochran (R-MS) hired Maples to the Appropriations Committee staff, he worked at the Student Veterans of America organization.

Annie G. Toro, J.D., Senior Vice President and Counsel
Annie Toro has worked in the field of policy for more than 25 years. She has held senior management level positions at various widely recognized and leading entities . Ms. Toro began her career in Congress serving as Democratic Staff Director at the U.S. House Financial Services Committee Subcommittee on Oversight and Investigations, and as Senior Legislative Counsel to U.S.

Representative Luis V. Gutierrez. In her position at Representative Gutierrez’ office, she developed, wrote legislation, and provided legal counsel on a comprehensive number of key legislative issues, including new, strategic initiatives to advance priority issues of significance to the Congressional Hispanic Caucus (CHC) – working closely with its members. She also led and developed all appropriations initiatives of the congressional office, including the member’s commitment to improve affordable housing, transit, rail, and economic development. Specifically, Ms. Toro served as the focal point in the member’s work when the Chicago Transit Authority decided to close down the Douglas Branch of the former Blue Line, serving primarily Latino communities. These efforts culminated with successfully securing $320 million in federal fundi ng to reconstruct Blue Line stops and its full-service reinstatement.

Brooke Kintz, Strategic Policy Advisor
Brooke Kintz is a Strategic Policy Advisor to TG&A out of the greater Washington, D.C area. Brooke has nearly 18 years of experience in state and federal government relations. Previously, Brooke was Director of North America policy for Tesla, Inc. During her almost ten year tenure, she led and 399

TG&A-Hercules Agreement
managed a team that advocated for clean energy policy in the automotive sector focusing on dealer franchise law, autonomous vehicle policy, electric vehicle incentives, and electric vehicle charging initiatives. Before joining Tesla, Brooke was Director of Federal Affairs for Associated Builders and Contractors. There she managed a portfolio of issues on workforce development, immigration and labor related issues in the commercial construction industry.

6. CONFIDENTIALITY. If either party provides information or materials indicated to be confidential, the receiving party will maintain the confidentiality of such matters and not disclose any such matters except in the proper performance of this Agreement. The receiving party agrees: (a) not to disclose or otherwise make available Confidential Information of the disclosing party to any third party without the prior written consent of the disclosing party; provided, however, that the receiving party may disclos e the Confidential Information of the disclosing party to its officers, employees, consultants, and legal advisors who have a “need to know”, who have been apprised of this restriction, and who are themselves bound by nondisclosure obligations at least as restrictive as those set forth in this Section; (b) to use the Confidential Information of the disclosing party only for the purposes of performing its obligations under the Agreement or, in the case of the City of Hercules, to make use of TG&A services or deliverables; and (c) to promptly notify the disclosing party in the event it becomes aware of any loss or disclosure of any of the Confidential Information of the disclosing party. For the purposes of this Agreement, Confidential Information is defined as information that is treated as confidential by a party, including but not limited to all non- public information about its business affairs, products or services, intellectual property rights, trade secrets, third-party confidential information, and other sensitive or proprietary information. Confide ntial Information shall not include information that: (a) is already known to the receiving party without restriction on use or disclosure prior to receipt of such information from the disclosing party; (b) is or becomes generally known by the public other than by breach of this Agreement by, or other wrongful act of, the receiving party; (c) is developed by the receiving party independently of, and without reference to, any Confidential Information of the disclosing party; or (d) is received by the receiving party from a third party who is not under any obligation to the disclosing party to maintain the confidentiality of such information.

400

TG&A-Hercules Agreement
Th
is Agreement sets forth the entirety of the Agreement between TG&A and the City of Hercules, CA as to the services to be provided and compensation to be made during the term thereof. If the city is agreeable to the terms and conditions set out above, please sign below. A fully executed Agreement will be transmitted to you for your records.

Jason Tai, Principal
Tai Ginsberg & Associates, LLC (TG&A)
____________________________________
City of Hercules, California
Date Date
401

DISCUSSION AND/OR ACTION

AGENDA ITEM

3. 25-1045

402

REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 14, 2025
TO: Mayor and Members of the City Council
SUBMITTED BY: Dante Hall, City Manager
SUBJECT: Quarterly Update on FY 2024-2026 Hercules City Council Strategic Goals
RECOMMENDATION ACTION:

Receive and file the report on the FY 2024-2026 Hercules City Council Strategic Goals.

BACKGROUND:

In February 2024, the City of Hercules hired Tripepi Smith Talent Solutions (TSTS) to help the City Council develop a Two -Year Strategic Plan (FY202 4-2026). The development of the Council’s Strategic Plan began with a goal-setting workshop on Saturday, April 13, 2024, at the City Hall Senior Center. The workshop facilitated by TSTS provided an opportunity for Council members , City staff leadership, and the public to celebrate recent successes, discuss best practices, strengthen teamwork , and discuss priorities for the next two years.

On May 28, 2024, the Hercules City Council adopted the attached Strategic Plan, which outlines seven goals identified by the City Council, along with tactical steps and metrics for each (ATTACHMENT 1).

ANALYSIS:

Strategic planning is a common best practice for all organizations. Identifying broad goals, defining success for the organization, and helping to set a direction for the team that works daily to deliver is a logical management practice. In city governments, this takes on a particularly important role, where the function of the elected leaders is to set targets and priorities for the agency staff and then charge the city staff to work on accomplishing the goals and delivering for the community. An effective strategic planning process 22-1045
403
informs city staff about the city council's priorities and helps council members resolve their competing priorities and visions for the city they serve.

City managers find the strategic planning process particularly helpful as it gives them a chance to hear from all the council members in a public forum where they can engage each other in a healthy dialogue of shared missions and visions. This process also aids the city staff leadership team, allowing them to share their expertise to help inform the elected leaders about areas of concern, potential focus areas, and strategic solutions.

The robust exchange can align the city staff to the aspirations of the city council and provide a three-to-five-year vision for their work and budget priorities.

As part of the strategic planning process , the Hercules City Council also established a work plan with reportable objectives to be implemented . The report this evening is a quarterly update on the progress of the work plan . The mandated obligations of local government remain the core function of the City and need not be fully detailed in the Work Plan, including but not limited to public infrastructure, public safety, governmental transparency, financial accountability, and implementation of regulations. This balance between core services and strategic goals is well depicted by the “Iceberg Model” depicted below (Figure 1).

Figure 1 - Nalbandian Consulting & Training, May 2003
404
To ensure effective implementation, the City Council and community will review progress toward objectives quarterly and adjust the work plan and objectives as needed. The Quarterly Strategic Goals Update is included as part of this staff report (Attachment 2).

FISCAL IMPACT:

The recommended action carries no fiscal impact. Funding for programs and projects described in the document will become part of the City’s normal annual and long -term planning and budgeting processes.

ATTACHMENTS:

1. FY 2024-2026 Hercules City Council Strategic Goals Report

2. City of Hercules FY 2024-2026 Strategic Goals Work Plan Update – January 14, 2025 405
City of Hercules
2024 Strategic Goals
Plan Assembled By:

Authors:

Ryder T odd Smith, Principal
Christine Martin, Director
Kylie Sun, Business Analyst
Completed May 2024
1 406
T able of Contents
Summary 3
Key Concepts for Strategic Planning 4
Review of Vision, Mission and Values 4
City of Hercules’ Vision 4
City of Hercules’ Mission 4
City of Hercules’ Values 4
Strategic Goals 5
Goal #1 – Advance Progress of the Hercules Hub 5
Goal #2 – T ake Steps to Address the City’ s Fiscal Sustainability 6 Goal #3 – Improve Community Transparency and Communication 6 Goal #4 – Continue Investing in a Winning T eam at City Hall 7 Goal #5 – Plan and Fund Major Infrastructure 7
Goal #6 – Develop a Comprehensive Land-Use Strategy 8
Goal #7 – Develop a Comprehensive Economic Development Strategy 9 Exhibit A – April 13, 2024 Agenda 10
Exhibit B – April 13, 2024 Tripepi Smith PowerPoint Deck 11 2 407
Summary
Strategic planning is a common best practice for all organizations. Identifying broad goals, defining success for the organization and helping to set a direction for the team that works daily to deliver is a logical management practice. In city governments, this takes on a particularly important role where the function of the elected leaders is to set targets and priorities for the agency staff, and then to unleash the city staff to work on accomplishing the goals and delivering for the community. An effective strategic planning process both informs city staff about the priorities of the city council they serve and helps council members resolve their competing priorities and visions for the city they serve.

City managers
find the strategic planning process to be particularly helpful as it gives them a chance to hear from all the council members in a public forum where they can engage each other in healthy dialogue of shared missions and visions. This process also aids the city staff leadership team, allowing them to share their expertise to help inform the elected leaders about areas of concern, potential focus areas, and strategic solutions. The robust exchange can align the city staff to the aspirations of the city council and provide a three-to- five-year
vision for their work and budget priorities.

The City of Hercules engaged Tripepi Smith T alent Solutions (TSTS) to lead a strategic planning process for the City Council in April 2024. The process included an interview with the City Manager, individual interviews with four of
five council members, a facilitated City
Council workshop, a debrief of the workshop with city staff and the assembly of this report.

The purpose of the process is not only to identify goals, but also to establish a work plan with reportable objectives to accomplish those goals and provide ongoing progress reports to the City Council.
3 408
Key Concepts for Strategic Planning
T o create a uniform understanding of key terms used in strategic planning, the following explanations are offered:

Vision What is Hercules’ overarching aspiration for the City and community? Think 30+ years out.

Mission What is Hercules currently focusing on to achieve the vision? Values What core principles guide Hercules in pursuit of its vision and mission? Strategic Goals What definable elements are necessary to deliver or show progress on the mission in the two-year goal cycle?
Review of Vision, Mission and Values
Given time constraints, TSTS advised the City Council to give a cursory review of the vision, mission and values to ensure there were no egregious issues. A deeper review of the vision, mission and values requires a more extensive and detailed process that can be undertaken at a later date. During the workshop, the City Council offered modest suggestions for future adjustments to vision, mission and values, but no edits were formally approved. The Council agreed to revisit the vision, mission and values at a later date.

City of Hercules’ Vision
The City of Hercules is a richly diverse community, serving as a major transportation hub and a prime destination for the Bay Area. It is built on a sound economic and physical infrastructure, and its residents enjoy public safety, security, well-maintained parks, streets and public facilities. We conduct our work in an atmosphere of trust and respect. We constantly look for better ways to deliver services and always strive for excellence.

City of Hercules’ Mission
Our mission is to lead our diverse community and enhance the quality of life in the City of Hercules, now and in the future. We do this by providing effective, ef ficient, responsive, and
innovative services with integrity and a culture of transparency.

City of Hercules’ Values
● Integrity – Honesty, transparency, fair dealing
● Professionalism – Exemplary conduct, competence, continuous improvement, respect ● Service – Customer orientation, courtesy, hard work, striving for excellence ● Collaboration – T eamwork, communication, community interaction and outreach ● Creativity – Thinking, innovating, encouraging critical analysis ● T enacity – Setting priorities, staying focused, not getting discouraged ● Responsibility – T aking ownership of one's work, accountability, going the extra mile 4 409
Strategic Goals
Each City Council member was offered the opportunity to fill out a questionnaire and participate in a one-on-one interview with TSTS to provide initial insight and feedback on individual concerns and priorities. After meeting with four of five council members, TSTS reviewed the feedback, identi fied and consolidated concerns and priorities and presented six goals at a special meeting held on April 13, 2024 1. The council members engaged in robust discussion, agreed with the six goals in concept, identi fied one new goal and offered language adjustments and/or additional objectives within each goal. While the meeting was publicly noticed and open to the public, no members of the public were present at the strategic planning workshop. TSTS relied on the discussion to assemble this report, and it is anticipated that the City Council, when adopting the report, will also be adopting the objectives and tactical steps noted within those goals.

Following the facilitated meeting, city staff met to discuss and develop a work plan with department-level objectives and tactical steps that will provide a measurable way to track and report progress on the strategic goals. This report outlines the seven goals identi fied by City
Council, along with tactical steps and metrics for each. *Please note: The goals are not listed in any particular order.

Goal #1 – Advance Progress of the Hercules Hub
Objective T actical Steps Timeline
Develop regional
partnerships
Participate and collaborate with other
agencies, their boards and commissions, and
other stakeholder groups to raise awareness
of the Hercules Hub and regional
transit-related issues, surface opportunities for
partnership, and support appropriate
transportation revenue-generating measures.

Ongoing
Enhance lobbying
efforts/contracts
Secure the services of a federal lobbyist as an
advocate on behalf of the Hercules Hub. Winter 2024
Continue to keep the
community informed
Utilize social media and other informational
platforms to disseminate information regularly
and when new developments occur.

Ongoing
Initiate the Train Station
design
Secure sufficient grant funding to begin the
station design. Summer 2025
1 Exhibit A includes the special meeting agenda; Exhibit B includes the PowerPoint deck presented by TSTS 5 410
Goal #2 – T ake Steps to Address the City’ s Fiscal Sustainability Objective T actical Steps Timeline
Improve efficiency
through a budget review
process
Continue to improve and create a more robust
Capital Improvement Plan (CIP) with special
attention to service delivery methodology,
addressing deferred maintenance, and
prioritizing projects.

Spring 2025;
Ongoing
Explore revenue sources
to meet current and
future needs
Present to Council future revenue-generating
options that include:
● Sales T ax
● UUT (Utility User T ax)
● Grant opportunities
● General Obligation (GO) bonds
● Lease Revenue/Certificate of
Participation (COP) bonds
● Real Property Transfer T ax
Winter 2024
Goal #3 – Improve Community Transparency and Communication Objective T actical Steps Timeline
Improve communication
on the progress of
Strategic Goals
Provide quarterly updates at City Council
meetings and post the progress to a
dedicated strategic plan web page on the
City’ s website.

Fall 2024;
Ongoing
Provide community
engagement
opportunities outside of
Council meetings
Provide twice-a-year workshops/town halls to
allow residents to connect with the City
outside of Council meetings and the rigid
public comment process.

Winter 2024;
Ongoing
Encourage residents to
be more involved in civic
affairs
Evaluate and report back on ways to improve
resident engagement. Winter 2024
6 411
Goal #4 – Continue Investing in a Winning T eam at City Hall Objective T actical Steps Timeline
Address staff capacity
Initiate a gap analysis of strategic goal
priorities and staff capacity. Spring 2025
Initiate a staf fing comparison study of
comparable cities (population, city services,
department size, and total FTEs).

Spring 2025
Develop a succession
plan
Identify critical and vulnerable positions;
Identify a talent pipeline; and identify
employees in the qualified positions who
could temporarily fill the vacancy and
potentially apply as candidates for the
position should the need arise.

Winter 2024
Create a succession development plan with
training and learning opportunities that are
aligned with the successor position.

Winter 2025
Invest in ongoing staff
education and training
through conferences and
other learning tools
Survey staff to assess service and/or training
gaps in each department and the City
organization, as a whole.

Summer 2025
Use the above-mentioned (succession plan)
education/experience assessment and cross
reference with survey/interviews.

Spring 2026
Identify training opportunities/conferences,
including complimentary webinars, for each
department.

Spring 2025;
Ongoing
Build a high-performance
culture that both yields
efficient results and
increases staff retention
Review and analyze potential standards to
define and measure high performance
culture.

Spring 2025
Survey and initiate standards for ef ficiency. Spring 2025 Survey and initiate standard retention goals,
to include impediments and opportunities. Spring 2025
7 412
Goal #5 – Plan and Fund Major Infrastructure
Objective T actical Steps Timeline
Identify and set priorities
related to major
infrastructure
Review and refine policy for prioritizing capital
projects as part of the budgeting process. Spring 2025
Continue progress on the
Capital Improvement
Plan
Continue to update the City Council on
progress during the mid-year CIP progress
report process.

Spring 2025
Devise a plan for funding
the Parks and Recreation
Facilities Master Plan
Identify grant opportunities, sponsorships,
partnerships, and available Capital
Improvement funds for projects called out in
the 5–year Park Master Plan Action Plan.

Ongoing
Devise a plan for funding
facilities assessment and
maintenance
Maintain and refine the recently established
Facility Replacement Fund to address the
backlog of large unfunded maintenance and
infrastructure projects.

Spring 2025
Goal #6 – Develop a Comprehensive Land-Use Strategy
Objective T actical Steps Timeline
Complete the Housing
Element certification
process and begin
implementation
Work with the State Department of Housing
and Community Development to complete
the review and certification of the Housing
Element.

Spring 2025
Update the General Plan
Secure the services of a consultant to update
the General Plan, which will include land-use
strategies for the redevelopment of shopping
centers and commercial sites with mixed-use.

Spring 2025
Complete the General Plan update. Spring 2027 2
Update Council and
community on affordable
housing progress and
RHNA3 obligations
Continue annual reporting to the City Council
on the status of development projects and
Housing Element RHNA (Regional Housing
Needs Allocation) progress.

Ongoing
3 RHNA stands for Regional Housing Needs Allocation
2 The timeline for completing the General Plan update is outside of the two-year goal cycle 8 413
Goal #7 – Develop a Comprehensive Economic Development Strategy Objective T actical Steps Timeline
Devise strategies to
expand retail and attract
businesses
Develop an Economic Development strategy. Spring 2026
Continue to implement the Business
Attraction Grant program. Ongoing
9 414
Exhibit A – April 13, 2024 Agenda
10 415
Exhibit B – April 13, 2024 Tripepi Smith
PowerPoint Deck
11 416
12 417
13 418
14 419
15 420
16 421
17 422
18 423
19 424
ATTACHMENT 2
CITY OF HERCULES FY 2024-2026 STRATEGIC GOALS UPDATE – January 14, 2025

GOAL #1 – ADVANCE PROGRESS OF THE HERCULES HUB

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

DEVELOP REGIONAL

PARTNERSHIPS
Participate and collaborate with other agencies, their
boards and commissions, and other stakeholder
groups to raise awareness of the Hercules Hub and
regional transit-related issues, surface opportunities
for partnership, and support appropriate
transportation revenue-generating measures.

Ongoing
On Target – Our consistent work with the
Capital Corridor JPA over the past several
years has resulted in them including the Hub
Project on their Corridor ID plan, which they
will submit for approval in early 2025. Once
approved, the Hub inclusion means we have a
streamlined, less competitive process to
receive federal funds from the Federal
Railroad Administration (FRA). This favored
position with FRA should also help us with
future Union Pacific Railroad approvals. In
2025, we will continue to expand project
support from local and regional to federal
partners.

ENHANCE LOBBYING

EFFORTS/CONTRACTS
Secure the services of a federal lobbyist as an
advocate on behalf of the Hercules Hub.

Winter
2024 On Target

CONTINUE TO KEEP

THE COMMUNITY

INFORMED
Utilize social media and other informational platforms
to disseminate information regularly and when new
developments occur.

Ongoing On Target
425

INITIATE THE TRAIN

STATION DESIGN
Secure sufficient grant funding to begin the station
design.

Summer
2025
On Target – City was unsuccessful in
obtaining the Federal CRISI Grant. Staff is
pursuing a design funding partnership in the
Corridor ID Program and a Sustainable
Transportation Planning Grant (administered
by Caltrans)

GOAL #2 – TAKE STEPS TO ADDRESS THE CITY’S FISCAL SUSTAINABILITY

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

IMPROVE EFFICIENCY

THROUGH A BUDGET
REVIEW

PROCESS
Continue to improve and create a more robust
Capital Improvement Plan (CIP) with special
attention to service delivery methodology,
addressing deferred maintenance, and prioritizing
projects.

Spring
2025;
Ongoing
On Target

EXPLORE REVENUE

SOURCES TO MEET

CURRENT AND

FUTURE NEEDS
Present to Council future revenue-generating
options that include Sales Tax; UUT (Utility User
Tax); Grant opportunities; General Obligation (GO)
bonds; Lease Revenue/Certificate of Participation
(COP) bonds; Real Property Transfer Tax
Winter
2024
On Target - A special meeting is scheduled for
February 18, 2025, to discuss long-term
financial planning and revenue
enhancement options.

426
GOAL #3 – IMPROVE COMMUNITY TRANSPARENCY AND COMMUNICATION

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

IMPROVE

COMMUNICATION ON

THE PROGRESS OF

STRATEGIC GOALS
Provide quarterly updates at City Council meetings
and post the progress to a dedicated strategic plan
web page on the City’s website.

Fall 2024;
Ongoing On Target

PROVIDE COMMUNITY

ENGAGEMENT

OPPORTUNITIES

OUTSIDE OF COUNCIL

MEETINGS
Provide twice-a-year workshops/town halls to allow
residents to connect with the City outside of Council
meetings and the rigid public comment process.

Winter
2024;
Ongoing
On Target – Special Town Hall style meeting
scheduled for February 18, 2025, regarding
City finances

ENCOURAGE

RESIDENTS TO BE

MORE INVOLVED IN

CIVIC AFFAIRS
Evaluate and report back on ways to improve
resident engagement.

Winter
2024
On Target

427
GOAL #4 – CONTINUE INVESTING IN A WINNING TEAM AT CITY HALL

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

ADDRESS STAFF

CAPACITY
Initiate a gap analysis of strategic goal priorities and staff capacity. Spring 2025 On Target
Initiate a staffing comparison study of comparable
cities (population, city services, department size,
and total FTEs).

Spring 2025 On Target

DEVELOP A

SUCCESSION PLAN
Identify critical and vulnerable positions; Identify a
talent pipeline; and identify employees in qualified
positions who could temporarily fill the vacancy and
potentially apply as candidates for the position
should the need arise. Winter 2025
On Target
Create a succession development plan with training
and learning opportunities that are aligned with the
successor position
On Target

INVEST IN ONGOING

STAFF EDUCATION

AND TRAINING

THROUGH

CONFERENCES AND

OTHER LEARNING
TOOLS
Survey staff to assess service and/or training gaps
in each department and the City organization as a
whole.

Summer
2025 On Target
Use the above-mentioned (succession plan)
education/experience assessment and cross
reference with survey/interviews
Spring 2026 On Target
Identify training opportunities/conferences, including
complimentary webinars, for each department.

Spring
2025;
Ongoing
On Target

BUILD A HIGH-

PERFORMANCE

CULTURE THAT BOTH

YIELDS EFFICIENT

RESULTS AND

INCREASES STAFF

RETENTION
Review and analyze potential standards to define
and measure high-performance culture Spring 2025 On Target Survey and initiate standards for efficiency. Spring 2025 On Target Survey and initiate standard retention goals, to
include impediments and opportunities. Spring 2025 On Target 428

GOAL #5 – PLAN AND FUND MAJOR INFRASTRUCTURE

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

IDENTIFY AND SET PRIORITIES

RELATED TO MAJOR

INFRASTRUCTURE
Review and refine policy for prioritizing capital projects as part of the budgeting process.

Spring
2025 On Target

CONTINUE PROGRESS ON THE

CAPITAL IMPROVEMENT PLAN
Continue to update the City Council on progress during
the mid-year CIP progress report process.

Spring
2025 On Target

DEVISE A PLAN FOR FUNDING THE

PARKS AND RECREATION FACILITIES

MASTER PLAN
Identify grant opportunities, sponsorships, partnerships, and available Capital Improvement funds for projects
called out in the 5–year Park Master Plan Action Plan.

Ongoing On Target

DEVISE A PLAN FOR FUNDING

FACILITIES ASSESSMENT AND

MAINTENANCE
Maintain and refine the recently established Facility
Replacement Fund to address the backlog of large
unfunded maintenance and infrastructure projects.

Spring
2026 On Target

429
GOAL #6 – DEVELOP A COMPREHENSIVE LAND-USE STRATEGY

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

COMPLETE THE HOUSING ELEMENT

CERTIFICATION PROCESS AND BEGIN

IMPLEMENTATION
Work with the State Department of Housing and
Community Development to complete the review and
certification of the Housing Element.

Spring
2025
FILED – Pending
certification by HCD by
January 2025

UPDATE THE GENERAL PLAN
Secure the services of a consultant to update the
General Plan, which will include land-use strategies for the redevelopment of shopping centers and
commercial sites with mixed-use.

Spring
2025 On Target
Complete the General Plan update. Spring
2027 On Target

UPDATE COUNCIL AND COMMUNITY

ON AFFORDABLE HOUSING
PROGRESS AND RHNA 3

OBLIGATIONS
Continue annual reporting to the City Council on the
status of development projects and Housing Element
RHNA (Regional Housing Needs Allocation) progress.

Ongoing
On Target – City Council
presentation provided
December 4, 2024
GOAL #7 – DEVELOP A COMPREHENSIVE ECONOMIC DEVELOPMENT STRATEGY

OBJECTIVE TACTICAL STEPS TIMELINE STATUS

DEVISE STRATEGIES TO EXPAND

RETAIL AND ATTRACT BUSINESSES
Develop an Economic Development strategy. Spring
2026 On Target
Continue to implement the Business Attraction Grant
program Ongoing On Target
430

DISCUSSION AND/OR ACTION

AGENDA ITEM

4. 25-008
431

STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 14, 2025
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Eibleis Melendez, City Clerk
SUBJECT: 2025 Council Appointments on Regional Committees and Council Subcommittees
RECOMMENDED ACTION:

Review and make Council Appointment s to Regional Committees and Council Subcommittees for 2025.

BACKGROUND:

In January of each year, the Mayor appoints members of the Council to both Regional Committees and Council Subcommittees for a one year term.

Mayor Bailey requested each Council Member to send their interests to the City Clerk via email for consideration by Mayor Bailey. The City Clerk has forwarded the Committee interests received to Mayor Bailey for consideration.

Attached is the List of Regional Committees and Council Subcommittees i dentifying the appointees for 2024.

FISCAL IMPACT OF RECOMMENDATION:

There is no fiscal impact associated with this item.

ATTACHMENTS:

1. 2024 City Council Representation on Regional Committees and City Subcommittee List
25-008
432

CITY COUNCIL REPRESENTATION ON REGIONAL COMMITTEES

AND CITY SUB-COMMITTEES
APPROVED – 1/9/2024

COMMITTEES

APPOINTED

COUNCIL
MEMBER

ALTERNATE

MEETING SCHEDULE

AND/OR LOCATION

REGIONAL COMMITTEES
ABAG
101 Eighth Street
Oakland, CA 94607
510-464-7900
www.abag.ca.gov
Walker-Griffin Grimsley Exec. Bd. Meets 3rd Thursday every other month 7:00 p.m. (Jan., Mar., May,
July, Sept. and Nov.) Attendance
Optional
Contra Costa Mayors Conference
http://www.ccmayors.org/
Mayor Vice Mayor First Thursday/mo. – 6:30 p.m.

Location Rotates
Hercules/Pinole - Wastewater
Management
Romero/Grimsley Walker-Griffin 1st Thursday/mo. – 8:30 a.m.

Location alternates with City of Pinole
League of Cities-E. Bay Division Walker-Griffin Grimsley 4th Thurs./mo. – Bd. Mtg. - 6:30 p.m.

Location Rotates
Capital Corridor JPA Board (Liaison) Romero Walker-Griffin 3rd Wed/Feb., June, Sept. Nov. – 10:00 a.m., alternates SJ, Sacramento and Suisan
Water Emergency Transportation
Authority (WETA) Liaison
Walker-Griffin Grimsley 1st Thursday/mo. – 1:00 p.m., alternates between SF and Alameda
West County Integrated Waste Mgmt

JPA (WCCIWMA)
Hercules City Hall
111 Civic Drive
Hercules, CA 94547
www.recyclemore.com
Romero Walker-Griffin 2nd Thursday/mo. - 7:00 p.m.

Hercules Council Chambers

Form 806 required - $50 stipend
Form 700 required
WCCTAC
13831 San Pablo Avenue
San Pablo, CA 94806
510-215-3221
www.wcctac.org
Kelley Bailey Last Friday/mo. – 8:00 a.m.

El Cerrito City Hall

Form 700 Required
West Co. Mayors & Supervisors
Assoc.

Mayor Vice Mayor 4th Thursday/mo. – 8:00 a.m.

The location rotates
WestCat
601 Walter Avenue
Pinole, CA 94564
www.westcat.org
Bailey/Grimsley Kelley 2nd Thursday/mo. – 6:00 p.m.

Pinole Council Chambers, Pear St.

Form 700 required
MCE Clean Energy (Board Meetings)
Mt. Diablo Room – 2300 Clayton Road
Suite 1150 Concord, CA 94920

https://www.mcecleanenergy.org

Bailey Walker-Griffin 3rd Thursday/mo. – 6:30 p.m.

Office Locations -Concord and San Rafeal

Meetings can also be watched remotely

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CITY COMMITTEES

COMMITTEES

APPOINTED

COUNCIL
MEMBER

ALTERNATE

MEETING SCHEDULE

AND/OR LOCATION
Agenda Setting Mayor Vice Mayor Thursday prior to meeting 8:00 a.m.

Economic Development
Subcommittee
Bailey/
Grimsley
Romero As needed and at least quarterly (In-Active)
Education Subcommittee Bailey/W-Griffin Grimsley As needed and at least quarterly (In-Active) Public Safety/Traffic Bailey/Grimsley Kelley As needed and at least quarterly

CITY COMMISSIONS – COUNCIL LIAISONS
Planning Commission Bailey/Grimsley 1st and 3rd Mondays Community & Library Services
Commission
Romero/Bailey 2nd Monday
Finance Commission W-Griffin/Kelley 4th Monday

COMMITTEES NOT ASSIGNED BY THE CITY COUNCIL
East Bay Economic Development
Alliance
Kelley Not a City Appointment
(Appointed by CC Mayors)
CCTA Kelley Not a City Appointment
(Appointed by CCTA)

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