Agenda Packet — Hercules City Council, May 27, 2025

Tuesday, May 27, 2025
6:30 PM
City of Hercules
111 Civic Drive
Hercules, CA 94547
City Council
Mayor Dion Bailey
Vice Mayor Chris Kelley
Council Member Alex Walker-Griffin
Council Member Dilli Bhattarai
Council Member Tiffany Grimsley
Dante Hall, City Manager
Christie Crowl, City Attorney
Eibleis Melendez, City Clerk
Meeting Agenda
CLOSED SESSION - 6:30 P.M., REGULAR MEETING - 7:00 P.M
In-Person in Council Chambers or To Watch or Listen only:

Zoom ID: 889 6795 4386 Zoom Passcode: 733185
Zoom Phone Number: 1-669-900-6833
1 May 27, 2025City Council Meeting Agenda
See last pages of agenda for information regarding meeting procedures To view webcast of meetings, live or on demand, go to the City's website at www.ci.hercules.ca.us I. SPECIAL CLOSED SESSION – CALL TO ORDER - ROLL CALL - 6:30 P.M. 1A. CONSIDER AND TAKE ACTION ON ANY REQUEST FROM A COUNCIL MEMBER TO

PARTICIPATE IN A MEETING REMOTELY DUE TO JUST CAUSE OR EMERGENCY CIRCUMSTANCES PURSUANT TO AB 2449
II. PUBLIC COMMUNICATION - CLOSED SESSION ITEMS
III. CONVENE INTO CLOSED SESSION
The Hercules City Council will meet in Closed Session regarding the following:

1. 25-157

CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION
Pursuant to Government Code Section 54956.9(e)(1) in one matter IV. REGULAR MEETING – CONVENE TO OPEN SESSION - ROLL CALL - 7:00 P.M.

V. REPORT ON ACTION TAKEN IN CLOSED SESSION
VI. PLEDGE OF ALLEGIANCE
VII. MOMENT OF SILENCE
VIII. INTRODUCTIONS/PRESENTATIONS/COMMISSION REPORTS

1. 25-153
Proclamation - Recognizing Jewish American Heritage Month Jewish American Heritage Month 2025Attachments:

2. 25-158 Proclamation - Honoring the Lifetime Achievements of Contra Costa County Supervisor Federal Glover
Proclamation Recognizing the Lifetime Achievements of Supervisor Federal GloverAttachments:

3. 25-154 MCE Enrollment Update
PresentationAttachments:

IX. AGENDA ADDITIONS/DELETIONS

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2 May 27, 2025City Council Meeting Agenda
X.

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

Individuals wishing to address the City Council are asked to complete a form indicating the name and address of the speaker and the general topic to be addressed. Speakers must make their comments from the podium and will be allowed 3 minutes to discuss their concerns. All public comments are recorded and become part of the public record. A limit of 30 minutes will be devoted to taking public comment at this point in the agenda. If any speakers remain at the conclusion of the initial 30 minute period, time will be reserved at the conclusion of the meeting to take the remaining comments.

XI. PUBLIC HEARINGS

1. 25-149
Compliance with Assembly Bill 2561/Government Code Section 3502.3: Public Agency Vacancies, Recruitment, and Retention Efforts RECOMMENDATION:

Staff recommends that the City Council receives the presentation for information purposes only during the public hearing at which the City will report on workforce vacancies, recruitment, and retention efforts. The City's recognized employee organizations will be provided an opportunity to make a presentation on such subjects.

Staff Report - AB 2561 Compliance (Vacancies, Recruitment, and Retention Efforts) Presentation
Attachments:

2. 25-152 Public Hearing on Proposed FY 2025-26 City of Hercules Budget Plan including the First Year of the Ten Year 2026-35 Capital Improvement Plan (CIP)
RECOMMENDATION:

Open the public hearing, receive the staff report, take public testimony, and tentatively continue the public hearing to June 10, 2025. The City Council is encouraged to discuss and provide policy directions to staff regarding the approval of the proposed FY 2025-26 Annual Budget.

Staff Report - FY 25-26 Proposed Annual Budget
Attach 1 - Proposed FY 25-26 Annual Budget
Attachments:

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3 May 27, 2025City Council Meeting Agenda
XII. CONSENT CALENDAR

1. 25-156 Meeting Minutes for the Regular Meeting of May 13, 2025 Meeting Minutes for the Regular Meeting on May 13, 2025Attachments:

2. 25-150 Adoption of a List of Projects for Fiscal Year 2025-26 funded by SB 1:
the Road Repair and Accountability Act of 2017
RECOMMENDATION:

Adopt a resolution adopting a list of projects for Fiscal Year 2025-26 funded by SB 1: the Road Repair and Accountability Act of 2017.

Staff Report - SB1 FY 25-26
Attach 1 - Resolution - SB1 FY 25-26
Attachments:

XIII. DISCUSSION AND/OR ACTION ITEMS

1. 25-151 Presentation of City’s 2025 Comprehensive Sewer Utility Rate Study Report
RECOMMENDATION:

Receive Willdan Financial Services’ (Willdan’s) presentation of their May 13, 2025 Comprehensive Sewer Utility Rate Study Report (Report) results and recommendations, set the Proposition 218 public hearing date, and approve the mailing of public hearing notices (Attachment 2) to conduct a public hearing at the July 22, 2025 City Council meeting.

Staff Report - Willdan Sewer Rate Study Report
Attach 1 - Hercules Sewer Rate Study - Final Report
Attach 2 - Hercules 2025 Prop 218 Sewer Rate Notice
Presentation
Attachments:

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

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4 May 27, 2025City Council Meeting Agenda
XV. CITY COUNCIL/CITY MANAGER/CITY ATTORNEY ANNOUNCEMENTS,

COMMITTEE, SUB-COMMITTEE AND INTERGOVERNMENTAL COMMITTEE REPORTS

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

1. Regional Committee
a. Contra Costa Mayors Conference
b. Hercules/ Pinole - WasteWater Management
c. League of Cities
d. Water Emerg. Transportation Authority
e. WCCIWMA
f. WCCTAC
g. West Co. Mayors & Supervisors Assoc. Meeting
h. WestCat
I. MCE
j. CCTA
k. East Bay Wildfire Coalition of Governments

2. City Council Committees and Subcommittees
a. Econ. Dev. Subcommittee
b. Traffic and Public Safety Committee
c. East Bay Economic Development Alliance
d. Education Subcommittee

3. Commission Liaisons
a. Community & Library Services Commission
b. Finance Commission
c. Planning Commisison
XVI. ADJOURNMENT
The next Regular Meeting of the City Council will be held on Tuesday, June 10, 2025 at 7:00p.m. in the Council Chambers.

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

Members of the public can view electronic agendas and staff reports by accessing the City website at www.ci.hercules.ca.us and can receive e-mail notification of agenda and staff report postings by signing up to receive an e-notice from the City’s homepage. Agendas and staff reports may also be obtained by contacting the City Clerk at (510) 799-8200 (Posted: May 22, 2025)

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5 May 27, 2025City Council Meeting Agenda

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

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

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

Via Zoom: Members of the public may submit a remote public comment via Zoom video conferencing. Download the Zoom mobile app from the Apple Appstore or Google Play. If you are using a desktop computer, you can test your connection to Zoom by clicking here or go to: https://www.zoom.us/join. Zoom also allows you to join by phone at +1-669-900-6833 or +1-929-205-6099 or +1-253-215-8782.

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

Written comments submitted in person or via mail: Additional ways to provide your public comment is to either drop off your comment in person to the front desk receptionist located in the City Hall lobby or to mail your comment to City of Hercules, ATTN: City Clerk – Public Comment (Meeting Date), 111 Civic Drive, Hercules, CA 94547 in time to reach the City Clerk no later than 3:00 p.m. on the day of the meeting or you can submit your comment by telephone by calling (510) 799-8208 no later than 3:00 p.m. on the meeting date.

If you need assistance with public comment, please contact: Eibleis Melendez, City Clerk at [email protected] or by calling (510) 799-8200.

All public comments will become part of the official meeting record. As email containing public meeting comments are part of the official record, note that personal contact information may be published if it is included with your email. The City cannot guarantee that its network and/or the website will not be uninterrupted. To ensure that the City Council receives your written comments, you are strongly encouraged to submit your comments in writing in advance of the meeting by 3:00 p.m. on the day of the Council or Commission meeting.

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6 May 27, 2025City Council Meeting Agenda

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

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

Video Streamed Live on the City’s Website:

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

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

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

2. Locate the desired meeting and date.

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

Video = Video is available for on demand viewing.

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

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

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7 May 27, 2025City Council Meeting Agenda

THE HERCULES CITY COUNCIL ADHERES TO THE FOLLOWING POLICIES,

PROCEDURES AND REGULATIONS REGARDING CITY COUNCIL MEETINGS

1. SPECIAL ACCOMMODATIONS: In compliance with the Americans with Disabilities Act, if you require special accommodations to participate at a City Council meeting, please contact the City Clerk at 510-799-8208 at least 48 hours prior to the meeting.

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

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

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

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

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

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

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

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

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8 INTRO

DUCTIONS/PRESENTATIONS/

COMMISSION REPORTS

AGENDA ITEMS

1. 25-153

2. 25-158

3. 25-154
9 PROCLAMATION

RECOGNIZING JEWISH AMERICAN HERITAGE MONTH IN THE

CITY OF HERCULES
WHEREAS, Jewish American Heritage Month was established in 2006 by President George W. Bush to honor the significant religious, cultural, political, economic, athletic, scientific, academic, and philanthropic contributions Jewish Americans have made to the United States; and
WHEREAS, when the first Jewish settlers came to this land, they sought a place of promise where they could practice their faith in freedom and liv e in liberty. During Jewish American Heritage Month, we celebrate the rich history of the Jewish people in America and honor the great contributions they have made to our country; and WHEREAS, Jewish American Heritage Month is an annual tribute to commemorate the more than 350-year history of Jewish contributions to American society and recognizes the rich history, traditions, and remarkable achievements that Jewish Americans have brought to American society across the generations such as Albert Einstein and his contributions to physics, Henry Kissinger and his work in U.S. foreign policy, Marcus Loew, Californian and founder of MGM Studios, and Louis Rose, one of San Diego ’s earliest settlers; and
WHEREAS, Jewish American Heritage Month , serves as a time to celebrate the enduring spirit of the Jewish community and help foster mutual understanding, tolerance and respect, and promote the values of equality, justice, and liberty.

NOW THEREFORE BE IT PROCLA IMED, that I, Dion Bailey, Mayor of the City of Hercules, on behalf of the entire City Council, do hereby recognize May 202 5 as Jewish American Heritage Month in the City of Hercules and call upon all residents to learn more about Jewish history and culture through related books, films, and other resources, and by taking part in local events.

In witness whereof, I hereunto set my hand and cause the seal of the City of Hercules to be affixed this 27th day of May 2025.
________________________________
Dion Bailey, Mayor
25-153
10 INT

RODUCTIONS/PRESENTATIONS/

COMMISSION REPORTS

AGENDA ITEMS

2. 25-158
11 PROCLAMATION

HONORING THE LIFETIME ACHIEVEMENTS OF CONTRA

COSTA COUNTY SUPERVISOR FEDERAL GLOVER IN THE

CITY OF HERCULES
WHEREAS, Federal Glover dedicated his life to public service, tirelessly advocating for the people of Contra Costa County and workin g to build a stronger, more equitable community; and
WHEREAS, he was first elected to the Contra Costa County Board of Supervisors in 2000, making history as the first African American to serve on the board; and
WHEREAS, throughout his 24-year tenure as Contra Costa County Supervisor, Federal Glover championed initiatives that enhanced economic development, environmental sustainability, public safety, and youth empowerment, leaving an enduring legacy that continues to shape the region; and WHEREAS, his unwavering commitment to social justice, inclusion, and community-building inspired generations of leaders and transformed countless lives for the better; and
WHEREAS, Federal Glover’s profound impact on Contra Costa County will be remembered with gratitude, admiration, and deep respect, ensuring that his contributions will live on through the people he served and the institutions he strengthened.

NOW, THEREFORE, BE IT PROCLAIMED, that I, Dion Bailey, Mayor of the City of Hercules, on behalf of t he entire City Council, do hereby resolve that we honor the remarkable legacy of Federal Glover, posthumously recognizing his lifetime achievements and expressing profound appreciation for his service, leadership, and dedication to Contra Costa and beyond.

In witness whereof, I have hereunto set my hand and caused the seal of the City of Hercules to be affixed this 21st day of May 2025 and issue this proclamation in solemn remembrance and heartfelt celebration of the lasting contributions of Federal Glover. __________________________________
Dion Bailey, Mayor
25-158
12 INTROD

UCTIONS/PRESENTATIONS/

COMMISSION REPORTS

AGENDA ITEM

3. 25-154
13 MCE
A local, not-for-profit
electricity provider
May 27, 2025
Hercules City Council
Presentation
25-154
14 Welcome to MCE, Hercules
• Starting in April 2025, all eligible
Hercu
les electric customers—
residential, commercial, and
municipal—were automatically
transitioned to MCE electric
generation service.
• Customers now have the option to
choo
se their energy source: PG&E or
MCE.
• This change reflects a decision made by
the C
ity Council in 2023 and was
approved by the California Public
Utilities Commission.

Your Energy,
Your Choice
2 15
Choice is Power
Default Service
100%
MCE
Deep Green

RENEWABLE
60%
MCE
Light Green

RENEWABLE
33%
PG&E

RENEWABLE
3 16
How We Got the Word Out
Direct Mail and Emails
• All customers received direct mail in
Fe
bruary.
• Customers then received follow-up
notif
ication emails in March, April, and May.

Community Workshops
• In-person workshops a t Hercules City Hall
• February 26 and March 26
• Virtual workshops
• March 5, March 12 (Solar , Storage, EV)
A
pril 16, May 7
Dedicated Hercules Webpage
mcecleanenergy.org/Hercules
4 17
By The Numbers
5 • 7,782 customers enrolled – 93%
participation rate
• An additional 1,471 solar customers are
eligible to join at their true-up date
• 1,300 calls to MCE’s in-house call center
• 336 requested opt-out
• 167 (50%) customers were retained
• 623 online case requests
• 541 were opt out requests
• 197 (36%) were retained
• 84 Deep Green Opt-ups
• 52 pounds of Carbon Dioxide reduced a
year
• (Average household - Assuming 6.5
MW
h of usage annually)
18 Key Feedback Theme
Affordability
• Residents are concerned about rising
cos
t of electricity and utility costs.
• Hercules customers are saving 9% on
aver
age with MCE.
• However, some opted out due to a
per
ception that savings weren’t real,
or that MCE is a double charge,
despite actual cost benefits.
• We emphasized that MCE is not-fo
r-
profit and locally controlled – a key
d
ifferentiator that resonates when
communicated clearly.
6 19
Community
Engagement
MCE does not
set rates for
electric delivery
or natural gas.
• Sponsors of:
• Bay Front Festival and 5k ( Oct. ‘24)
• Lunar New Year Parade ( Feb. ‘25)
• Hercules Library 25th Anniversary
Celebration (May ’25)
• Hercules Cultural Festival (Jun. ‘25)
• Active members of the Bay Front Chamber
o
f Commerce
• Presentation to Hercules Rotary (Mar. ‘25)
7 20
Customer Programs
Income-Qualified
EV Rebates
$3,500 per vehicle
Stacks with other incentives
MCE Cares Credit
$5M allocated to customer
bill savings, available to
Hercules Customers
Workplace &
Multifamily Charging
2,000+ ports
Up to $4,500 rebates for
workplace
and multifamily properties
8 21
Thank you!
mceCleanEnergy.org
[email protected]
22 PUBLIC

HEARINGS

AGENDA ITEM

1. 25-149

2. 25-152
23 STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of May 27, 2025
TO: Mayor and Members of the City Council
SUBMITTED BY: Kristi Carter, Human Resources Manager
REVIEWED BY: Dante Hall, City Manager
SUBJECT: Compliance with Assembly Bill 2561/Government Code Section 3502.3: Public Agency Vacancies, Recruitment, and Retention Efforts
RECOMMENDED ACTION:

Staff recommends that the City Council receive the presentation for information purposes only during the public hearing at which the City will report on workforce vacancies, recruitment, and retention efforts. The City's recognized employee organizations will be provided an opportunity to make a presentation on such subjects.

BACKGROUND:

On September 22, 2024, Governor Newsom signed Assembly Bill 2561 ("AB 2561") into law to amend the Meyers -Milias-Brown Act ("MMBA") and creating Government Code Section 3502.3 (“GC 3502.3”) and a new obligation for public agencies to publicly address the status of their vacancies. As the basis for the new requirements, the California Legislature determined that vacancies are a widespread and significant problem in the public sector. Vacancies require employees to ta ke on heavier workloads, resulting in burnout and increased turnover, which negatively impacts the delivery of public services.

Further, the legislature declared there is a statewide interest in ensuring that public agency operations are appropriately staffed and that high vacancy rates do not undermine public employee relations.

GC 3502.3 requires public agencies to present the status of their vacancies and recruitment and retention efforts during a public hearing before their governing board at least once per fiscal year prior to the adoption of a final budget for the fiscal year. During the presentation, the public agency is also required to identify any changes to policies, procedures, or recruitment activities that may lead to obstacles in the hiring process. 25-149
24 Additionally, if the number of vacancies meets or exceeds 20% of the total number of authorized full-time positions in a particular bargaining unit, the public agency shall include the following information in its presentation upon request of the recognized employee organization:

1. The total number of job vacancies within a bargaining unit.

2. The total number of applicants for vacant positions within the bargaining unit.

3. The average number of days to complete the hiring process from when a position is posted.

4. Opportunities to improve compensation and other working conditions.

GC 3502.3 entitles recognized employee organizations, regardless of the vacancy rate, to make a presentation before the governing board of a public agency during the same public hearing in which the public agency makes its annual presentation on vacancies.

REVIEW AND ANALYSIS:

Employee Groups
The City of Hercules’ staff is composed of five (5) employee groups - three unrepresented and two represented – consisting of 64 authorized full-time regular positions which are reflected in the table below. The City Manager position is a contracted position.

Employee Group Budgeted FTEs
Teamsters Local 315 24
Hercules Police Officers’ Association 23
Executive Level Employees 6
Mid-Management Employees 3
Non-Represented Employees 7
Vacancies
Position vacancies are created for a number of reasons, including when newly budgeted positions are approved, there is internal movement such as a promotion or transfer, or when an employee leaves the organization due to retirement, voluntary resignation, or involuntary termination.

When vacancies occur, it is a high priority for the Human Resources Department and the City's hiring managers to fill vacant positions in order to ensure co ntinuity of services, maintain operational efficiency, minimize the need for overtime, and minimize disruptions to departmental functions. Timely recruitment and hiring efforts help the City sustain its workforce, meet community needs, and uphold service s tandards while also providing opportunities for internal growth and external talent acquisition.

Although AB 2561 now requires staff to present annually on the status of vacancies and efforts to recruit and retain staff, it has always been a priority for departments to fill vacancies as soon as reasonably possible. The City's average vacancy rate across all bargaining units at the end of 2024 was 4.69% calculated as the quantity of vacancies divided by the quantity of positions.
25 The following is a breakdown of the vacancy rate by employee group as of December 31, 2024:

Employee Group Vacancy Rate (%)
Teamsters Local 315 4.17%
Hercules Police Officers’ Association 4.35%
Executive Level Employees 16.67%
Mid-Management Employees 0%
Non-Represented Employees 0%
Recruitment and Retention Efforts
The Human Resources Division recognizes recruitment is about identifying, attracting, and hiring the right people, and retention is about keeping employees engaged, satisfied, and committed to the organization long-term. Both are critical for the success of the organization, especially in today's competitive job market.

To initiate a recruitment, the hiring department notifies Human Resources, who then open the job posting. Once a candidate is screened and selected, a conditional job offer is extended. The candidate then completes all required pre-employment steps, a start date is confirmed, and the new employee is onboarded.

To meet the evolving needs of its workforce, the City has implemented and/or maintained several key retention strategies. Non-sworn employees benefit from a four -day, 38-hour workweek, promoting greater work-life balance. Telecommuting options are also available for eligible positions, providing flexibility and support for various work styles. To further prioritize employee well-being, the City offers an Employee Assistance Program (EAP), which provides confidential support for mental, emotional, and personal challenges.

Professional growth and development are supported through the City ’s Tuition Reimbursement Program, which allows employees to receive reimbursement for educational programs directly related to their roles. Additionally, the City invests in employee training and development by providing access to City-paid workshops and trainings. These efforts reflect the City’s commitment to fostering long -term career growth and skill enhancement for its workforce.

Employee engagement is essential to retention, and the City recognizes its importance. A dedicated Social Committee helps foster connection and camaraderie through fun events and activities that bring employees together. When employees feel valued, supported, and connected to their workplace, they are more likely to be motivated, enthusiastic about their roles, and committed to the City’s mission.

FISCAL IMPACT:

There is no fiscal impact to receive this report and presentation.

ATTACHMENTS:

Presentation
26 AB 2561 Compliance:

Vacancies and
Recruitment and Retention Efforts
May 27, 2025
Presented by:

Kristi Carter, Human Resources Manager
27 Presentation Agenda

1. AB 2561 Summary

2. Workforce Overview

3. Vacancy Information

4. Recruitment Cycle and Efforts

5. Retention Statistics and Efforts
28 AB 2561 Summary
 Effective January 1, 2025, Assembly Bill 2561
mandates that public agencies present the status of
job vacancies and recruitment and retention efforts
at a public hearing before their governing body at
least once per fiscal year prior to the adoption of the final budget.
 Applies to public agencies subject to the Meyers-
Milias-Brown Act (Gov. Code Section 3502.3).
 First presentation under the new law.
29 Workforce Overview
• Total Budgeted/Authorized Full-Time Positions for calendar year ending December 31, 2024: 64
• Services Rendered to Public by Budgeted/Authorized Workforce:
• City Manager’s Office
• City Clerk’s Office
• Community Development (Planning, Building, Code Enforcement) • Finance (Information Technology)
• Human Resources
• Parks & Recreation
• Police/Public Safety
• Public Works (Engineering & Maintenance)
30 Vacancy Information
Employee Group # of Budgeted
Positions
# of Vacancies Vacancy Rate
Teamsters Local 315 24 1 4.17%
Hercules Police Officers’
Association
23 1 4.35%
Executive Level Employees 6 1 16.67%
Mid-Management Employees 3 0 0%
Non-Represented Employees 7 0 0%
As of December 31, 2024
31 Recruitment Life Cycle
Vacancy
Approved
Recruitment
Opened
Applicant
Screening
Interview &
Testing Eligibility List
Conditional
Offer &
Background
Check
Start Date and
New Employee
Orientation
32 Recruitment Efforts
 Enhanced Job Postings
 NEOGOV/Governmentjobs.com
 Enhanced Advertising
 Collaboration with Hiring Managers/Departments
 Comprehensive Benefits Package
33 Retention Statistics
Calendar Year 2024 Count
Total Vacancies 4
Vacancies Created by Newly Budgeted Positions 1
Vacancies Created by Internal Promotions and Transfers 0 Vacancies Created by Retirement 1
Vacancies Created by Resignation 2
Vacancies Created by Involuntary Separation 0
Retention Rate 94%
34 Retention Efforts
 Work-Life Balance Initiatives
 Four-day, 38-hour workweek for non-sworn employees
 Telecommuting options available for eligible positions  Comprehensive Benefits Package
 Professional Development Programs
 Supportive Work Environment
 Collaborative culture fostering teamwork and innovation  Community Engagement and Recognition
35 THANK YOU
36 QUESTIONS
37 PUBL

IC HEARINGS

AGENDA ITEM

2. 25-152
38 STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of May 27, 2025
TO: Members of the City Council
SUBMITTED BY: Dante Hall, City Manager
Edwin Gato, Director of Finance
SUBJECT: Public Hearing on Proposed FY 2025-26 City of Hercules Budget Plan including the First Year of the Ten-Year 2026–35 Capital Improvement Plan (CIP)
RECOMMENDED ACTION:

COMMISSION/SUBCOMMITTEE ACTION AND RECOMMENDATION:

During a special meeting held on April 16, 2025, the Finance Commission convened to thoroughly review and engage in a detailed discussion of the proposed budget for fiscal year 2025-26. After careful consideration of the various elements and implications of the budget, the Commission unanimously expressed its strong support for the proposal, indicating confidence in its potential to meet the community's needs.

BACKGROUND:

On April 22, 2025, the City Council held a budget workshop during its regular meeting to conduct a thorough review of the proposed Ten-Year Capital Improvement Plan (CIP) and the Annual Budget for Fiscal Year 2025-2026.

Tonight’s meeting is the first public hearing for the comprehensive recommended annual budget, providing an opportunity for community input and engagement. The feedback received during this session, along with any alternative suggestions, will be carefully considered. All necessary revisions will be incorporated into the final version of the Annual Budget for Fiscal Year 2025 -26. The Council is expected to tentatively recommend this finalized budget for adoption on June 10, 2025, facilitating the planning and implementation of future projects that will benefit the community.
25-152
39 ANALYSIS:

In addition to the overall assumptions articulated during the budget workshops, the budget documents provide a comprehensive list of significant budget increases, as outlined on page 37 of Attachment 1.

The following additions have been made to the budget since the budget workshop on April 22, 2025:

The complete proposed FY 2025-26 Annual Budget, including the City Manager’s Budget Message, is available for review on the City’s website (www.ci.hercules.ca.us) and can be accessed via the following link: https://www.ci.hercules.ca.us/government/finance/budgets.

It is important to note that the proposed FY 2025-26 Budget is a dynamic document and is subject to modification before its finalization and tentative adoption on June 10, 2025. The public hearing held this evening was announced in the local newspaper on May 15, 2025, to provide a formal platform for community input. Furthermore, any additional inquiries or proposals from the City Council will be integrated into Budget Referr als, which will be addressed in the Continued Public Hearing tentatively scheduled for June 10, 2025. During the City Council meeting on that date, there will be another opportunity for public input, and it is anticipated that the City Council will proceed with adopting the final budget.

FISCAL IMPACT:

Should the City Council grant approval for all the proposed expenditures, the General Fund—the principal operating fund—is anticipated to conclude the fiscal year with a positive balance of $423,000. The fund is projected to uphold a substantial operating reserve of $5.1 million, representing 25% of the total General Fund budget. This reserve provides a critical financial buffer to support the city's ongoing operations and future initiatives.

General Other
Fund Funds Total
Ongoing costs: Funding Sources:

DocuSign Contract Lifecycle
Management Platform
Internal Service Fund - $19,624 $19,624
Total, Ongong $0 $19,624 $19,624
One-Time Costs:

Marshfield Consulting Internal Service Fund - $50,000 $50,000 Quad-City CORE Homeless
Services Pilot Program
General Fund Reserve $48,965 - $48,965
Total, One-Time $48,965 $50,000 $98,965
Total $48,965 $69,624 $118,589
Budget Impact
40 Additionally, it is anticipated that non -general funds will conclude the fiscal year in the following manner:
(In millions)
ATTACHMENTS:

1. FY 2025-26 Proposed Annual Budget
Fund Groups
Beginning
Available Fund
Balances
Estimated
Revenues
Appropriations
& Change in
Reserves
Projected
Ending
Available Fund
Balances
Special Revenues $13.3 $6.4 $8.5 $11.2
Capital Projects $0.0 $5.3 $5.3 $0.0
Debt Service $0.0 $1.7 $1.7 $0.0
Sewer $10.0 $7.7 $15.5 $2.2
Internal Service Funds $1.3 $2.6 $2.6 $1.3
41 CO

NSENT CALENDAR

AGENDA ITEMS

1. 25-156

2. 25-150
42 111 Civic Drive
Hercules, CA 94547City of Hercules
Meeting Minutes
City Council
Mayor Dion Bailey
Vice Mayor Chris Kelley
Council Member Alex Walker-Griffin
Council Member Dilli Bhattarai
Council Member Tiffany Grimsley
Dante Hall, City Manager
Christie Crowl, City Attorney
Eibleis Melendez, City Clerk
6:00 PMTuesday, May 13, 2025
CLOSED SESSION - 6:00 P.M., REGULAR MEETING - 7:00 P.M
In-Person in Council Chambers or To Watch:

Zoom ID: 812 9402 0591 Zoom Passcode: 049617
Zoom Phone Number: 1-669-900-6833
I. SPECIAL CLOSED SESSION – CALL TO ORDER - ROLL CALL - 6:00 P.M.

Vice Mayor Kelley and Council Member Bhattarai arrived late to Closed Session and were not present during roll call.

Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley

Present: 5 -
II.

PUBLIC COMMUNICATION - CLOSED SESSION ITEMS
NONE
III. CONVENE INTO CLOSED SESSION
The Hercules City Council will meet in Closed Session regarding the following:

City Attorney, Christie Crowl, read the title of the Items to be discussed in Closed Session. City Council and Staff recessed into CLosed Session.

1. 25-134 CONFERENCE WITH LABOR NEGOTIATORS Pursuant to Government Code Section 54957.6 - City Negotiators: Dante Hall, City Manager; Edwin Gato, Director of Finance; relative to the following employee groups:
a. Teamster Local 315 Employee Organization
b.

Hercules Police OfficersAssociation
c. Hercules Senior Manager Employee Group
d. Confidential Unrepresented Employee Group
e. Mid Management Employee Group

2. 25-133

CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION

Page 1 ends

25-156
43 May 13, 2025City Council Meeting Minutes
Pursuant to Government Code Section 54956.9(e)(1) in one matter IV. REGULAR MEETING – CONVENE TO OPEN SESSION - ROLL CALL - 7:00 P.M.

Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley

Present: 5 -
V. REPORT ON ACTION TAKEN IN CLOSED SESSION
City Attorney, Christie Crowl, reported out that there was not final or reportable action taken in CLosed Session.

VI. PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was lead by Vice Mayor Kelley.

VII. MOMENT OF SILENCE
Mayor Bailey requested a Moment of Silence for Lloyd Madden, a long-time resident of Hercules that passed away recently.

VIII. INTRODUCTIONS/PRESENTATIONS/COMMISSION REPORTS

1. 25-136
Proclamation - National Public Works Week
National Public Works Week ProclamationAttachments:

Mayor Bailey read the proclamation. Council Members provided their remarks. City Manager, Dante Hall, introduced and welcomed the new Public Works Director, Glenn Dombeck. Director Dombeck accepted the proclamation and thanked Council for the acknowledgement.

2. 25-145
Proclamation - Recognizing Asian American, Native Hawaiian, and Pacific Islander Heritage Month
AANHPI Heritage Month 2025 ProclamationAttachments:

Mayor Bailey read the proclamation. Council Members provided their remarks.

IX. AGENDA ADDITIONS/DELETIONS
NONE
X. PUBLIC COMMUNICATIONS
Public comment was provided by Marion Vasquez

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44 May 13, 2025City Council Meeting Minutes
This time is reserved for members of the public to address issues not included in the agenda. In accordance with the Brown Act, Council will refer to staff any matters brought before them at this time, and those matters may be placed on a future agenda.

XI. PUBLIC HEARINGS

1. 25-129
Hercules Local Hazard Mitigation Plan and Consistency Updates to the General Plan Safety Element
RECOMMENDATION:

Staff recommends that the City Council adopt Resolution No. 25-XX (Attachment 1) adopting an updated Local Hazard Mitigation Plan (LHMP) to replace the existing LHMP attachment to the General Plan Safety Element, making minor text modifications to the Safety Element for consistency purposes, and finding the action exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3).

Staff Report - LHMP
Attach 1 - Draft City Council Resolution
Exhibit A - Proposed Text Updates to the Hercules Safety Element Attach 2 - Planning Commission Resolution 25-02
Attach 3 - Hercules Local Hazard Mitigation Plan
Attach 4 - FEMA Approvable Pending Adoption Letter
Attachments:

Community Development Director, Tim Rood, introduced and presented the item. Council asked questions and provided comment. Director Rood provided a response. Mayor Bailey opened the Public Hearing. No public comment was provided. Mayor Bailey closed the Public Hearing. There was no further discussion from Council. Action was taken on this item.

MOTION: A motion was made by Council Member Grimsely, seconded by Council Member Bhattarai to adopt Resolution 25-026. The motion was carried by the following vote:

Aye: Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley 5 -

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45 May 13, 2025City Council Meeting Minutes
XII. CONSENT CALENDAR
MOTION: A motion was made by Council Member Walker-Griffin, seconded by Vice Mayor Kelley to adopt the Consent Calendar. The motion was carried by the following vote:

Aye: Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley 5 -

1. 25-135
Meeting Minutes for the Regular Meeting of April 22, 2025 Meeting Minutes for the Regular Meeting of April 22, 2025Attachments:

APPROVED

2. 25-114 Authorize City Manager to execute an amendment to the City’s October 22, 2024 Professional Services Agreement with LSA Associates, Inc. (LSA) (Resolution No. 24-069) Increasing the Total Cost by $11,800 RECOMMENDATION:

Adopt a Resolution authorizing the City Manager to execute an amendment LSA to provide additional services pursuant to the City’s October 22, 2024 Professional Services Agreement with LSA Associates, Inc. (LSA) (Resolution No. 24-069) increasing the total cost by $11,800.

Staff Report - Contract Amendment With LSA Associates
Attach 1 - Resolution
Attach 2 - Terraphase Proposal Letter
Attachments:

Resolution 25-027, APPROVED

3. 25-130 Accept the Investment Report for the Quarter Ending March 31, 2025 RECOMMENDATION:

Accept the Investment Report for the Quarter Ending March 31, 2025.

Staff Report - Investment Quarterly Report Ending March 31, 2025 Attach 1 - Quarterly Investment Report March 31,2025
Attachments:

APPROVED
XIII. DISCUSSION AND/OR ACTION ITEMS

1. 25-132 Approve Traffic Calming Improvements on John Muir Parkway between Albert Nobel Drive and future Bayfront Loop north of Tioga Loop, and authorize the City Manager to initiate preparation of plans and bid documents
RECOMMENDATION:

Approve Traffic Calming Improvements on John Muir Parkway between Albert Nobel Drive and future Bayfront Loop north of Tioga Loop, and authorize the City Manager to prepare the plans and bid documents.

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46 May 13, 2025City Council Meeting Minutes
Staff Report - John Muir Pkwy Traffic Calming Improvements Attach 1 - Resolution - Traffic Calming Improvements
Attach 2 - Kimley Horn Memorandum
Presentation
Attachments:

City Manager, Dante Hall, introduced the items. Representatives from Kimley- Horn presented. No public comment. Council asked questions and provided comment. Kimley- Horn and Interim Public Works Director provided a response. Action was taken on this item and direction was provided by Council.

MOTION: A motion was made by Council Member Walker-Griffin, seconded by Council Member Grimsley to adopt Resolution 25-029 and to approve the recommended Traffic Calming Improvements for John Muir Parkway provided by Kimley- Horn and authorize the City Manager to initiate preparation of plans and bid documents. The motion was carried by the following vote:

Aye: Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley 5 -

2. 25-124
Approval of Quad-City CORE Homeless Services Pilot Program Agreement in the Amount of $48,965
RECOMMENDATION:

Staff recommends that the City Council adopt a resolution to approve the Quad-City CORE Homeless Services Pilot Program Agreement between the cities of Hercules, Pinole, El Cerrito, and San Pablo in partnership with the Contra Costa County CORE Program and authorize the City Manager to execute the agreement.

Staff Report - Approval of Quad-City CORE Homeless Services Pilot Program Agreement
Attach 1 - Resolution
Attach 2 - FY 2025-26 Quad City Core Services Agreement Presentation
Attachments:

City Manager, Dante Hall, introduced. Representatives from the CORE program presented. Public comment was provided by Tanya Little. Council asked questions and provided comment. CORE representatives and CIty Manager Hall provided a response. Action was taken on this item.

MOTION: A motion was made by Council Member Walker-Griffin, seconded by Vice Mayor Kelley to adopt Resolution 25-028. The motion was carried by the following vote:

Aye: Council Member Dilli Bhattarai, Mayor D. Bailey, Vice Mayor C. Kelley, Council Member A. Walker-Griffin, and Council Member T. Grimsley 5 -

3. 25-131
Update on the City of Hercules Community Development Department RECOMMENDATION:

Receive an update on the City of Hercules Community Development Department.

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47 May 13, 2025City Council Meeting Minutes
Staff Report - Community Development Update
Presentation
Attachments:

City Manager, Dante Hall, introduced the item. Community Development Director, Tim Rood, presented. No public comment. Council asked questions and provided comment. Director Rood provided a response.

This was an informational item. No action was taken.

4. 25-123
Quarterly Update on FY 2024-2026 Hercules City Council Strategic Goals RECOMMENDATION:

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

Staff Report - 2024-2026 Hercules City Council Strategic Goals Update
Attach 1 - FY 2024-2026 Hercules City Council Strategic Goals Report
Attach 2 - City Of Hercules 2024 Strategic Goals Work Plan Update Attachments:

City Manager, Dante Hall, introduced and presented the item. No public comment. This was an informational item. No action was taken.

XIV. PUBLIC COMMUNICATIONS
NONE
This time is reserved for members of the public who were unavailable to attend the Public Communications period during Section X of the meeting, or were unable to speak due to lack of time. The public speaker requirements specified in Section X of this Agenda apply to this Section.

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48 May 13, 2025City Council Meeting Minutes
XV. CITY COUNCIL/CITY MANAGER/CITY ATTORNEY ANNOUNCEMENTS,

COMMITTEE, SUB-COMMITTEE AND INTERGOVERNMENTAL COMMITTEE REPORTS

2. City Council Committees and Subcommittees
a. Econ. Dev. Subcommittee
b. Traffic and Public Safety Committee
c. East Bay Economic Development Alliance
d. Education Subcommittee

3. Commission Liaisons
a. Community & Library Services Commission
b. Finance Commission
c. Planning Commisison
Parks and Recreation Director, Christopher Roke, announced upcoming events which included the Hercules Cultural Festival and he advertised summer program registration.

1. Regional Committees
Vice Mayor Kelly reported out on the Contra Costa Mayors Conference, the WestCat Board Meeting and the East Bay Economic Development Alliance. Council Member Grimsley also reported out on the WestCat Board meeting. Mayor Bailey reported out on the Marin Clean Energy(MCE) Board meeting.

2. City Council Committees and Subcommittees

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49 May 13, 2025City Council Meeting Minutes
No reports were provided

3. Commission Liaisons
No reports were provided
Community Events -
Council Members reported out on events they attended throughout the City and County, which included the Clean Up Day and the Community Meeting on Public Safety.

There were no Future Agenda Item Requests from City Council.

XVI. ADJOURNMENT
Mayor Bailey adjourned the meeting at 9:56 P.M.
_________________________________
Dion Bailey, Mayor
Attest:
_______________________________
Eibleis Melendez, City Clerk

Page 8 ends

50 CONS

ENT CALENDAR

AGENDA ITEMS

2. 25-150
51 STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of May 27, 2025
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Glenn Dombeck, Public Works Director/City Engineer Jeff Brown, Public Works Superintendent
SUBJECT: Adoption of a List of Projects for Fiscal Year 2025-26 funded by SB 1: The Road Repair and Accountability Act of 2017.

RECOMMENDED ACTION:

Adopt a resolution approving a list of projects for Fiscal Year 202 5-26 funded by SB 1:
the Road Repair and Accountability Act of 2017.

BACKGROUND:

Senate Bill 1 (SB 1), the Road Repair and Accountability Act of 2017, was passed by the Legislature and signed into law by the Governor in April 2017 to address transportation funding shortfalls statewide.

SB 1 includes accountability and transparency pro visions to ensure interested residents are aware of the projects proposed for funding in Hercules. Specifically, the City is required under the Act to approve a list of all projects proposed to receive funding from the Road Maintenance and Rehabilitation Account (RMRA) created by SB 1. In addition to the project name, the project list must include a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the improvement.
25-150
52 ANALYSIS:

The City’s SB1 list consists of projects in the Capital Improvement Program (CIP) for FY 2025-26 that meet the eligibility criteria for SB1 funds. Th e list includes maintenance, active transportation, and safety projects.

The following proposed project will be funded in part or solely by Fiscal Year 2025-26 Road Maintenance and Rehabilitation Account funds:

Project Title: Hercules by the Bay Pavement Rehabilitation Project Project Description: Base failure repair, grind, asphalt overlay, striping, ramp replacements.

Project Locations: Hercules by the Bay Neighborhood
Estimated Project Schedule: January 2026 through December 2027 Estimated Project Useful Life: 20 years

FISCAL IMPACT:

The City will receive an estimated $6 83,809 in Road Maintenance and Rehabilitation Account funding. The Road Maintenance and Rehabilitation Account was created by SB1 and is funded by fuel taxes and vehicle fees.

ATTACHMENTS:

Attach 1 - Resolution

53 RESOLUTION NO._______

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES APPROVING A LIST OF PROJECTS FOR FISCAL YEAR 2025-26 FUNDED BY SB 1: THE ROAD REPAIR AND ACCOUNTABILITY ACT OF 2017

WHEREAS, Senate Bill 1 (SB 1), the Road Repair and Accountability Act of 2017 (Chapter 5, Statutes of 2017) was passed by the Legislature and Signed into law by the Governor in April 2017 to address the significant multi-modal transportation funding shortfalls statewide; and

WHEREAS, SB 1 includes accountability and transparency provisions that will ensure the residents of our City are aware of the projects proposed for funding in our community and which projects have been completed each fiscal year; and

WHEREAS, the City must approve by resolution a list of projects proposed to receive fiscal year funding from the Road Maintenance and Rehabilitation Account (RMRA) created by SB 1, which must include a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the improvement; and

WHEREAS, the City of Hercules, will receive an estimated $683,809 in RMRA funding in Fiscal Year 2025-26 from SB 1; and

WHEREAS, this is the ninth year in which the City is receiving SB 1 funding to continue essential road maintenance and rehabilitation projects, safety improvements, repairing and replacing aging bridges, and increasing access and mobility options for the traveling public that would not have otherwise been possible without SB 1; and

WHEREAS, the City has undergone a robust public process to ensure public input into our community’s transportation priorities and the project list; and

WHEREAS, the City used a Pavement Management System to develop the SB 1 project list to ensure revenues are being used on the most high-priority and cost- effective projects that also meet the communities priorities for transportation investment; and

WHEREAS, the funding from SB 1 will help the City maintain and rehabilitate streets and add active transportation throughout the City this year and similar projects into the future; and
54 WHEREAS, the 2018 California Statewide Local Streets and Roads Needs Assessment found that the City’s streets and roads are in an “At-Risk” condition and this revenue will help us with the overall quality of our road system and over the next decade; and

WHEREAS, the SB 1 project list and overall investment in our local streets and roads infrastructure will focus on basic maintenance and safety, invest in complete streets infrastructure, and use cutting-edge technology, materials and practices, which will have significant positive co-benefits statewide.

NOW, THEREFORE IT IS HEREBY RESOLVED, ORDERED AND FOUND by the City Council of the City of Hercules, State of California, as follows:

1. The foregoing recitals are true and correct and are incorporated herein as findings.

2. The following proposed projects will be funded in part or solely with Fiscal Year 2025-26 Road Maintenance and Rehabilitation Account funds:

Project Title: Hercules by the Bay Pavement Rehabilitation Project Project Description: Base failure repair, grind, asphalt overlay, striping, ramp replacements.

Project Locations: Hercules by the Bay Neighborhood
Estimated Project Schedule: January 2026 through December 2027 Estimated Project Useful Life: 20 years

PASSED AND ADOPTED by the City Council of the City of Hercules State of California this 27th day of May 2025, by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

__________________________
Dion Bailey, Mayor
55 ATTEST:

Eibleis Melendez, City Clerk
56 DIS

CUSSION AND/OR ACTION

AGENDA ITEM

1. 25-151
57 1

STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of May 27, 2025
TO: The Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Glenn Dombeck, City Engineer
SUBJECT: Presentation of City’s 2025 Comprehensive Sewer Utility Rate Study Report
RECOMMENDED ACTION:

Receive Willdan Financial Services’ ( Willdan’s) presentation of their Comprehensive Sewer Utility Rate Study Report (Report) results and recommendations, set the Proposition 218 public hearing date, and approve the mailing of public hearing notices (Attachment 2) to conduct a public hearing at the July 22, 2025 City Council meeting.

BACKGROUND:

The City’s sewer rates are submitted annually to the Contra Costa County Auditor - Controller’s Office for placement each year on the Secured Property Tax Roll. Utility rates must be set at a level such that operating, maintenance, debt, and capital expenses are funded with the revenues received from customers. City sewer rates, which are collected twice a year through the County tax roll, have not been updated since 2014.

On May 28, 2024, the City Council received a presentation on the Fiscal Year (FY) 23/24 Sewer Fund financial model prepared by Wildan. The presentation included findings of the model run conducted by Wildan and recommendations for rate adjustments to meet the budgeted and projected financial needs in future years. The presentation als o included a recommendation to proceed with a Proposition 218 process in Spring 2025 to increase rates in FY 25/26.

Wildan’s Report (Attachment 1) includes the development and presentation of a pro - forma sewer financial plan for a 5 -year planning period, as well as the development of cost-based rates through a cost-of-service and rate design analysis. The purpose of this 25-151
58 2

study is to provide a review of the City’s existing utility rates to determine if rate adjustments are necessary to meet the budgeted an d/or projected financial needs in future years. The report provides the results of Wildan’s investigations, analyses, and conclusions from this study.

The rate study methodology applied in the development of updated sewer rates, outlined in the Report, consisted of reviewing the historical operating results of the sewer utility system, analyzing the budget to identify the net revenue requirements to be r ecovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be removed from user rates. The findings and conclusions of the rate analysis, as well as the resulting revised rate recommendations, were utilized to develop a projection of future operating results for a 5 -year planning period from FY 2026 (beginning July 1, 2025) through FY 2030 (ending June 30, 2030), referred to as the “Projection Period”.

The purpose for developing the 5-year projections is to determine the financial capability of the sewer revenues to support system operations and maintenance and fund planned capital improvements. The following table summarizes the maximum proposed sewer rates covering the 5-fiscal year Projection Period through June 30, 2030:

The City Council would implement new annual sewer rates as a series of annual adjustments starting on July 1, 2025, and each July 1 thereafter until July 2029.

For the upcoming resolution authorizing the new annual sewer rates, staff recommends that the City continue the appeal process established in April 2009. Continuing this process will enable residents of townhomes or condominiums who can demonstrate low water usage to be billed at the senior living service rate. Currently, four townhomes and two condominiums are participating in the waiver program.

FISCAL IMPACT:

None.
59 3

Financial Impact

Description: Presentation of 2025 Sewer Rate Study Report

Funding Source: N/A

Budget Recap:

Total Estimated cost: None New Revenue: None
Amount Budgeted: None Lost Revenue: N/A
New funding required: Yes No

ATTACHMENTS:

Attachment 1 – May 13, 2025 City of Hercules, CA Comprehensive Sewer Utility Rate Study Report
Attachment 2 – Notice of Public Hearing Regarding Proposed Changes to Annual Sewer Rates
Attachment 3 - Presentation

60 City of Hercules, CA

Comprehensive Sewer
Utility Rate Study
Report
61 i Sewer Rate Study
May 13, 2025

TABLE OF CONTENTS
TABLE OF CONTENTS ................................ ................................ ................................ ............................... i Section 1 – Executive Summary................................ ................................ ................................ ...........1

1.1 Introduction ......................................................................................................................................... 1

1.1.1 Sewer System Background ..................................................................................................... 1

1.1.2 Rate Study Background .......................................................................................................... 1

1.2 Overview of the Rate Study Process ............................................................................................ 2

1.3 Summary of Proposed Rates .......................................................................................................... 3 Section 2 – Revenue Sufficiency Analysis ................................ ................................ .......................... 5

2.1 Financial Planning Principles .......................................................................................................... 5

2.2 Existing Rates ....................................................................................................................................... 5

2.3 Revenue Sufficiency Process ......................................................................................................... 6

2.3.1 Budget .......................................................................................................................................... 6

2.3.2 Capital Improvement Plan (CIP) .......................................................................................... 7

2.3.3 Debt Service ............................................................................................................................... 8

2.3.4 Gross and Net Revenue Requirement ................................................................................ 9

2.4 Customer Data ................................................................................................................................... 9

2.4.1 Customer Billing Analysis........................................................................................................ 10

2.5 Financial Projections Under Existing Rates ................................................................................ 10 Section 3 – Cost-of-Service (COS) Analysis ................................ ................................ ..................... 12

3.1 General .............................................................................................................................................. 12

3.2 Sewer Cost-of-Service .................................................................................................................... 12

3.2.1 Functional Unbundling of Revenue Requirements ........................................................ 12

3.2.2 Classification of Revenue Requirements .......................................................................... 13

3.2.3 Allocation to Customer Classes and Unit Cost Development.................................... 14

3.2.4 Rate Design by Unit Cost ....................................................................................................... 16

3.2.5 Cost-of-Service and Revenue Check ............................................................................... 17 Section 4 – Proposed Test Year Rates ................................ ................................ ............................... 19

4.1 General .............................................................................................................................................. 19 62 ii Sewer Rate Study
May 13, 2025

4.2 Rate Comparison with Other Utilities ......................................................................................... 20 Section 5 – Projected Operating Results ................................ ................................ .......................... 22

5.1 General .............................................................................................................................................. 22

5.2 Projected User Rate Revenues .................................................................................................... 22

5.3 Debt Service Coverage ................................................................................................................ 24

5.4 Summary of Projected Operating Results ................................................................................ 25 Section 6 – Conclusions and Recommendations ................................ ................................ ............ 27

6.1 Disclaimers............................................................................................................................................... 27

6.1.1 General Disclaimer ................................................................................................................. 27

6.1.2 Municipal Advisory Disclaimer ............................................................................................. 27

6.2 Conclusions ....................................................................................................................................... 28

6.3 Recommendations ......................................................................................................................... 29

63 1 | P a g e

Section 1 – Executive Summary

1.1 Introduction
Willdan Financial Services (Willdan) is pleased to submit to the City of Hercules (City) the following Sewer Rate Study report (Report) for your consideration. Willdan has completed this study of the City’s sewer rates, which are submitted annually to the Contra Costa County Auditor-Controller’s Office for placement each year on the Secured Property Tax Roll. The results of the investigations, analyses, and conclusions from this study are summarized in this Report.

1.1.1 Sewer System Background
The City’s wastewater collection system serves the area within the City limits and collects and conveys an average dry weather flow of approximately 1.7 million gallons per day (MGD) of wastewater. This service area includes 8,300 parcels through 7,000 private laterals, which encompasses a population of approximately 26,000 residents.

The wastewater generated by the City is conveyed to and treated by the Pinole -Hercules Water Pollution Control Plant (WPCP), located southwest of the City limits in the City of Pinole.

All wastewater conveyed to the WPCP is processed before being safely discharged into the San Francisco Bay. The system is built exclusively for sanitary waste and operates 24/7 to protect public health and the environment. While Hercules and Pinole share the WPCP, The City of Pinole handles the daily operations of the WPCP, and The City of Hercules reimburses Pinole for their respective share of wastewater treatment plant operating and maintenance costs incurred. All capital costs associated with the WPCP are split 50/50 between the City and The City of Pinole.

The City’s collection system consists of gravity sewer mains, force mains, and lift stations. The collection system includes approximately 62 miles of gravity sewer mains and 1,660 manholes, most of which were constructed after 1970. Gravity sewers located in the older areas of the City are believed to be constructed of asbestos cement (AC) pipe, also known as “Transite” pipe. New gravity sewer construction is typically polyvinylchloride (PVC) pipe.

The City also owns seven lift stations within the collecti on system, and their associated 4.5 miles of force mains.

1.1.2 Rate Study Background
The City has focused a significant amount of attention and effort on strategic and master planning measures in all areas of sewer utility operations to ensure that it is able to continue providing uninterrupted service to its customers and maintaining the critical infrastructure that ensures the health and safety of the community , and a stable and well -functioning wastewater system that is prepared for the future. As part of its ongoing planning efforts, the City commissioned Willdan to perform a sewer rate study to analyze the revenue sources 64 2 | P a g e

and expenditures of the sewer utility system , develop a five -year financial analysis, and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City. The primary objectives of the rate study include:

➢ Full recovery of costs related to utility operations (i.e., operating and maintenance costs, debt, and other expenditure requirements);
➢ Development of cost-based rate structures;
➢ Maintaining consistency with Water Environment Federation (WEF) guidelines; ➢ Providing for equity among customer classes;
➢ Meeting substantive and procedural Proposition 218 requirements; ➢ Maximizing administrative efficiency (i.e., easy to understand and implement); and ➢ Incorporation into the analysis of a 5-Year capital funding plan.

1.2 Overview of the Rate Study Process
This study includes the development and presentation of a pro-forma sewer financial plan for a 5-year planning period, as well as the development of cost-based rates through a cost- of-service and rate design analysis. Utility rates must be set at a level such that operating, maintenance, debt , and capital expenses are funded with the revenues received from customers. In addition, the revenues generated from utility rates must only be used for this purpose and for the sewer system only. This is a significant point, as failure to achieve the revenues needed can lead to unacceptable service levels and inadequately maintained facilities. Therefore, a rate study typically consists of the following three interrelated analyses:

I. Financial Planning/Revenue Requirement Analysis : Creates a five-year plan to support an orderly, efficient program of on -going maintenance and operating costs, capital improvement and replacement activities, debt financing, and retirement of outstanding debt. In addition, the plan should fund and maintain appropriate reserve balances based on industry standards, as well as the City’s fiscal policies and specific needs.

II. Cost -of-Service Analysis : Identifies and apportions annual revenue requirements (i.e., expenditures) to operational and functional cost components based on the demand placed on the sewer utility system. The purpose of this analysis is to develop rates that generate revenues relatively proportionate to the share of the utility’s costs. This objective is consistent with industry standards as well as the requirements of Proposition 218 (Prop 218).

III. Rate Design: Develops an equitable and proportionate schedule of rates for the City’s customer base. The policy objectives are coordinated with Prop 218 requirements and cost-of-service objectives to achieve a balance between customer equity and financial stability goals.
65 3 | P a g e

This rate study utilizes generally accepted rate-making principles and standards established by industry experts such as the WEF in its “Financing and Charges for Sewer Systems, Manual of Practice No. 27”. The principles established by WEF are used as guidelines in the development of the proposed sewer rates. A discussion of some of the key principles of ratemaking is presented in the following subsection of this Report.

1.3 Summary of Proposed Rates
The rate study methodology applied in the development of updated sewer rates, outlined in this Report, consisted of reviewing the historical operating results of the sewer utility system, analyzing the budget to identify the net revenue requirements to be recovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be recovered from user rates. In additio n, an analysis of the system’s customers was performed to identify the rate determinants since they drive the recommended rates, which are the primary source for generating revenues. The allocated revenue requirements were utilized in conjunction with the rate determinants and rate structure to develop the proposed sewer rates.

The findings and conclusions of the rate analysis, as well as the resulting revised rate recommendations, were utilized to develop a projection of future operating results for a 5 - year planning period from Fiscal Year (FY) 2026 (beginning July 1, 202 5) through FY 2030 (ending June 30, 20 30), herein referred to as the “Projection Period”. The purpose for developing the 5 -year projections is to demonstrate the financial capability of the sewer revenues to support system operations and maintenance, and fund pl anned capital improvements. The analyses, findings and accompanying recommendations are presented in the subsequent sections of the Report.

Rate Design Analysis
Considers both the level and structure of the rate design to collect the appropiate and targeted level of revenues.

Cost of Service Analysis
Allocates the revenue requirements to the fixed/variable cost components based on cost of service.

Revenue Requirement Analysis
Compares the revenues to the expenses of the utility
to determine the overall rate adjustment required.
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The sewer rate analysis described in the Report is performed based on the general guidelines of the defined objectives, as well as common industry standards for setting utility rates. In addition to focusing on these major objectives, the rate analyses performed herein may consider other factors in designing rates. As discussed in detail later in this Report, other rate considerations may generally include sensitivity to the impact of rate changes on existing customers, relative comparability with neighboring utilities, and variations or changes (if any) from the City’s existing rate structure. The proposed sewer rates for assumed implementation effective July 1, 2025 (or other such date as determined by the City) for FY 2025/26 (FY 2026, herein referred to as the “Test Year”) are provided in Table 1 . It is anticipated that the charges, based on these rates, will be submitted to Contra Costa County for placement on Fiscal Year 202 5/2026 Annual Secured Property Tax Bills, which are typically sent out to property owners in early fall each year. The existing rates are provided in Table 2.

Table 1 – Proposed Annual Sewer Rates

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Section 2 – Revenue Sufficiency Analysis

2.1 Financial Planning Principles
While the individual rates for a utility system vary based on a variety of factors, rates should be consistent with common rate-making principles within the utility industry . The guiding principle is that rates designed for any utility should provide a reasonable balance between several key factors. In general, the utility rates should:
➢ Generate a stable revenue stream that, when combined with other sources of funds, is sufficient to meet the expenditure requirements and goals of the system; ➢ Be based upon the proportionate cost of providing the service and not exceed the cost of providing the service – in compliance with California Proposition 218; ➢ Be equitable – that is, they should generate revenue from customer classes in a manner which is reasonably in proportion to the cost of providing the service to that customer class;
➢ Be easy to understand by customers; and
➢ Be easy to administer by the utility.

Striking the appropriate balance between the principles of ratemaking is the result of a detailed process of evaluation of revenue requirements and cost-of-service, and how those translate into the rate design alternatives which meet legal requirements and the specific objectives of the utility under the circumstances in which it operates.

2.2 Existing Rates
As described in the Introduction to this report, The City has established sewer charges that are submitted annually to Contra Costa County for inclusion on the annual secured property tax roll. These charges are based on customer classification, and these rates charged for sewer service are approved by the City Council and are not subject to administrative review or approval by any other local or state agency. The City has historically adjusted rates , as necessary, to provide for recovery of financial oblig ations including operating expenses, debt service, capital expenditures and any other expenses and transfers.

The existing annual sewer rates consist of 1) a separate flat rate for different types of residential customers that is applied per dwelling unit regardless of their usage, 2) a fixed fee for commercial/non-residential customers that designates the minimum amount they will pay by account, regardless of usage, and 3) a commercial /non-residential volumetric rate component per 100 cubic feet that recovers the costs of treatment and disposal of wastewater. The existing rates for sewer service are provided in Table 2.

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Table 2 – Existing Annual Sewer Rates

2.3 Revenue Sufficiency Process
In evaluating whether the existing rates will generate sufficient revenue to meet the expenditure requirements of the sewer system, the annual expenditures required for the sewer utility system (herein referred to as the “Revenue Requirements”) must be developed.

The Revenue Sufficiency Analysis compares the forecasted revenues f or the sewer utility system under existing rates (including customer growth) to the projected Revenue Requirements.

2.3. 1 Budget
The Revenue Sufficiency Analysis performed as part of this study and summarized in this Report utilizes the City’s adopted budget for FY 2024/25 (the “Budget” for FY ending June 30, 2025) as one source of data and information to determine the gross Revenue Requirements to be recovered from user rates over the Projection Period. The Budget, as prepared by the City, is provided on a line-item basis, and is used for projecting the budgeted financial needs for the Test Year and the remainder of the Projection Period. In developing the rate analysis, certain adjustments are made such that the expenditures are categorized into either Operating and Maintenance (O&M) expenses or non-operating expenses. In addition, only recurring costs included in the current Budget were included as part of the Revenue Sufficiency Analysis. One-time costs were identified and evaluated in discussions with City Staff and removed if appropriate. Recurring annual costs were escalated using suitable cost 69 7 | P a g e

indexes or cost escalation factors, again in discussion with City Staff and based on historical trends.

The O&M expenses are primarily those ongoing costs for labor, materials, supplies, services, etc., required to manage and operate the utility system on a day -to-day basis while maintaining a dependable level of service. The O&M requirements are generally a function of a budgetary process and are directly related to the level of service provided to customers of the utility system. The largest O&M expense identified in the City’s budget is the reimbursement to Pinole for operating costs associated with the WPCP. The non-operating expenses include such items as capital outlay and any other expenses & transfers.

The Budget also identifies estimated revenues to be derived from sources other than sewer user rates. Such other revenue sources include interest earnings on investments and various other miscellaneous service charges . The revenues generated from the other sources are applied to the gross Revenue Requirements to reduce the amount of revenue required from user rates. The result is the net Revenue Requirement.

2.3. 2 Capital Improvement Plan (CIP)
The City provided a list of anticipated capital projects to be funded over the Projection Period. These are also included in the development of the gross Revenue Requirements. The capital projects provided by and identified by the City in the CIP are required in order to maintain uninterrupted service to customers by investing in improvements, repairs, or replacements of aging system components as they wear over time. The City provided cost estimates for the identified capital projects by the fiscal year in which they are estimated to be undertaken. Along with the City provided list of anticipated capital projects, The City of Pinole identified shared capital costs associated with the WPCP, which are also included in the list of anticipated capital projects to be undertaken over the Projection Period . The funding for the City’s and shared WPCP capital projects was then used in the analysis, along with O&M and non-operating expenses, to determine the gross Revenue Requirements for the sewer system. The capital projects included in the CIP for the Projection Period are provided in Table 3.

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Table 3 – Sewer CIP ($1,000s)

2.3. 3 Debt Service
The City currently has two outstanding debt issuances for the sewer system. A minimum debt service coverage ratio of 1.20 times is required to be maintained on an annual basis, based on the City’s current bond covenants associated with the existing debt. In simple terms, this means that the utility must have at least $1.20 in net operating revenues for every $1.00 of debt service they are committed to pay on existing debt. The debt service coverage is calculated by dividing net operating revenues (revenues less operations and maintenance expenses) by annual debt service. There are no future or additional debt issuances assumed to take place over the Projection Period outside of the current outstanding debt obligations.

The annual existing debt payments over the Projection Period are provided in Table 4.

Table 4 – Annual Debt Service Payments

2025 2026 2027 2028 2029 2030
Sewer System Improvements
Sycamore Ave (Lower Trunk Main) 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ Sycamore Trunk Sewer Overflow Line Project 202 1,000 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Promenade Lift Station 0 185 1,170 0 0 0 Repair/ Replace Sewer Lines under SR-4 & Along Willow Ave 0 200 100 1,080 0 0 Total Sewer System Improvements 202$ 1,385 $ 1,270 $ 1,080 $ - $ 0 $ Hercules Share of Pinole WW Plant
As-Built WWTP Drawings 13$ 0 $ 0 $ 0 $ 0 $ 0 $ Boiler Rehabilitation 23 0 0 0 0 0 Centrifuge Feed Pump Replacement 25 0 0 0 0 0 Digester Feed Pump Replacement 38 0 0 0 0 0 Energy Recovery Building and Admin Roof 40 0 0 0 0 0 Misc. Plant Improvements 38 0 0 0 0 0 SCADA System Upgrade 23 0 0 0 0 0 SS2002 Water Pollution Control Plant Lab Remodel 50 0 0 0 0 0 SS2101 Second Clarifier - Center Column Rehabilitation 213 0 0 0 0 0 SS2102 Air Release Valve Replacement 25 0 0 0 0 0 SS2203 Effluent Outfall Project Design 75 500 1,000 0 0 0 Effluent Pipe Coating - Rodeo Creek Crossing 15 0 0 0 0 0 Spare Influent Pump 50 0 0 0 0 0 Chlorine Contact Basin - Coating 0 100 0 0 0 0 Energy Recovery System Replacement 0 0 0 100 650 0 Aeration Basin - Coating 0 0 150 0 0 0 Water Pollution Control Plant Boiler Replacement 0 0 330 0 0 0 Water Pollution Control Plant Centrifuge Replacement 0 0 0 495 0 0 Total Hercules Share Of Pinole WW Plant Improvements 625$ 600$ 1,480 $ 595$ 650$ - $ Total Sewer Projects 827$ 1,985 $ 2,750 $ 1,675 $ 650$ - $ Projected for Fiscal Year Ending June 30, ($1,000s)Description 71 9 | P a g e

2.3. 4 Gross and Net Revenue Requirement
The proposed sewer rates developed in the Report are designed for assumed implementation in FY 2025/26 (the Test Year as previously defined). The projected Test Year gross and net Revenue Requirements are estimated by utilizing the Budget , actual debt service requirements as provided in the applicable debt service schedules, capital estimates and assumed funding sources for capital projects as provided by the City, a long with anticipated transfers. The Test Year Revenue Requirements that are used for developing the user rates proposed herein are detailed in Appendix A at the end of this report and summarized in Table 5.

Table 5 – Test Year Revenue Requirements – FY 2026

The projected Revenue Requirements for the sewer system over the entire Projection Period are provided in Table 6.

Table 6 – Sewer Revenue Requirements for the Projection Period

2.4 Customer Data
The rate study described herein, particularly the cost -of-service analysis, is heavily reliant upon a detailed analysis of system customers and demand characteristics. The existing utility customer base provide s the determinants utilized in the cost -of-service analysis, and ultimately in calculating the sewer charges, which become the foundation for projecting future revenues generated by the sewer system.

It is important to note that the customer analysis focuses primarily on the customer classifications that will be subject to and impacted by the user rates and charges to be developed in the Report. This consists of the general service (retail) customers that currently 72 10 | P a g e

pay for utility service pursuant to the existing user rates and charges as previously detailed.

For the purposes of the rate study, it is these customers that will generate revenues based upon the proposed user rates and charges.

2.4.1 Customer Billing Analysis
For the rate study, detailed billing information was provided for each customer. This data offered a breakdown of customers by class, usage characteristics, and billed charges. An analysis of the billing data was conducted to obtain an understanding of the existing customers, customer classes, and usage characteristics per customer class. In accordance with the data, as well as discussions with the City staff, the utility system provides service to various identifiable retail customer classes consisting of:
➢ Single-Family Residential
➢ Multi-Family Residential
➢ Senior Housing, and
➢ Commercial/Non-Residential
Each of these customer classes embodies certain common characteristics in their utility use and service demand profiles that provide the basis for establishing an equitable allocation of system costs. The billing data was utilized to identify the number of customer accounts within each class, the applicable equivalent residential units (ERUs) based on dwelling units, usage profiles, and strength characteristics.

The historical customer data was also utilized to establish growth trends for each customer classification. The growth trends were then used to project the average number of customers, ERUs, and usage within each class for the Test Year plus the remaining years of the Projection Period.

2.5 Financial Projections Under Existing Rates
The projected customers and accompanying billable flows are applied to the existing rates to develop a projection of user rate revenues that would be generated under existing rates.

The revenues are then compared to the projected revenue requirements/expenditures to determine if revenue adjustments are needed. Based on this comparison, it is projected that under the existing rates, the sewer system would not meet its collective projected operating (O&M) financial obligations , debt service payment s or coverage requirements, costs of capital projects , and transfers . Therefore, revenue increases are required to generate additional cash to fund projected costs of operations and capital projects , meet debt service requirements, and maintain adequate cash reserves.

The City has established an objective of maintaining at least 180 days of cash reserves to help fund ongoing operations in the event of periodic fluctuations in cash flow , and to address unexpected needs that may require cash funding. Since the City currently collects sewer user revenues through the annual secured property tax roll, as opposed to receiving cash through monthly or bi -monthly billings , it is essential that there are adequate cash 73 11 | P a g e

reserves to cover expenditures between cycles of revenue collection from annual secured tax roll payments. The cash-flow statement outlining the projected operating results under existing rates is summarized in Table 7 for the sewer system. The proposed rates and projected financial results are addressed in the subsequent sections of this Report.

Table 7 – Sewer System Projected Operating Results - Existing Rates ($1,000s)

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Section 3 – Cost -of-Service (COS) Analysis

3.1 General
The costs incurred by a sewer utility system are generally driven by specific service requirements imposed on the system by its customers. There are several different options that can be used to perform a cost -of-service (COS) analysis, and the allocation methodology depends upon the basis applied. The sewer COS analysis detailed in Section 3.2 involves an examination of the number and type of customers served in accordance with the California State Water Resources Control Board (SWRCB) Revenue Program Guidelines for Wastewater Agencies.

3.2 Sewer Cost -of-Service
The COS analysis for the sewer utility utilizes the revenue requirements for the Test Year as the cost basis. The Test Year revenue requirement s are functionally unbundled, classified and allocated to customer classes to determine the cost-of-service by class. More detail relating to the sewer COS approach can be found in Appendix B.

3.2.1 Functional Unbundling of Revenue Requirements
The sewer system costs are unbundled into Collection, Treatment, Customer and Administrative functions. A brief description of each component is as follows:
• Collection – costs associated with lines and facilities that transport wastewater from customer properties to treatment facilities;
• Treatment – costs associated with treating wastewater for disposal reclamation and/or discharge;
• Customer – costs associated with billing, and providing other services to customers (e.g., printing, delivering, and collecting utility bills, recordkeeping, etc.). • Administration – various overhead and other non-operating costs.

The allocation of the functionally unbundled revenue requirement s for the Test Year are summarized in Table 8.

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Table 8 - Functional Unbundled Cost Allocations

3.2.2 Classification of Revenue Requirement s
The functionally unbundled Revenue Requirements for the sewer system are classified into fixed and volumetric customer components based on methodology consistent with the WEF, Manual of Practice No. 27. Since the City is mostly built out, and there are no anticipated losses or gains of significant wastewater customers, it is anticipated that the allocation percentages will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time ( i.e., the most recent fiscal year). To the extent that weather conditions, economic conditions and customer usage characteristics change during the Projection Period, the cost allocations can be impacted. The system-wide costs by service characteristics are shown in Table 9. 76 14 | P a g e

Table 9 - Classification of Unbundled Revenue Requirements

3.2.3 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Collection – Based on relative percentage of annual sewer usage; • Treatment – Based on relative percentage of sewer strength discharge (BOD and TSS);
• Customer – Based on relative percentage of units by customer class.

The units of service for each component of cost by customer class (if applicable) are provided in Table 10. The units of service consist of the number of ERUs, annual flows in 100 cubic feet, and sewer strength discharge . ERUs are based on the number of residential dwelling units and commercial/non -residential customers by account as provided in the customer data. Collection is the total annual sewer flows projected for the Test Year. BOD and TSS reflect the strength per pound of the sewer discharge collected by the City from each customer class based on standards for wastewater discharge included in the SWRCB Guidelines.
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Table 10 – Units of Service

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The revenue requirement for each cost component is divided by its respective unit of service to calculate a unit cost. The unit cost for each cost component is demonstrated in Table 11.

Table 11 – Cost Per Unit

The allocation of the revenue requirement to each customer class is based on the unit costs for each component multiplied by the units of service for each customer class. The total costs to be recovered from each customer class by rate component are shown in Table 12.

Table 12 – Cost of Service by Customer Class and Cost Component

3.2.4 Rate Design by Unit Cost
The unit costs developed in the previous section are used to develop the proposed rates for the Test Year. The fixed rate components are based on accounts, ERUs and the allocated customer-related costs. The volumetric rate component is based on the annual usage and sewer strength discharge.

The fixed rate component s by ERU for single -family and multi -family customers are determined using the total number of residential dwelling units being served. Each residential dwelling unit is equivalent to one ERU. The fixed rate components for commercial/non- residential customers are determined based on the total number of non-residential customers.

The volumetric rate componen t is determined by the sewer usage and the strength characteristics associated with each customer classification based on the standards for wastewater discharge included in the State Water Resources Control Board Guidelines .

Residential customers will pay a flat fee, regardless of their usage, so all costs relating to the volumetric rate component are included in the flat fee. This is a common industry standard 79 17 | P a g e

for setting residential sewer rates since residential customers have similar usage profiles and place similar demand on a sewer utility system, and their wastewater discharge is not directly metered.

For commercial/non-residential customers, the volumetric rate component is determined by dividing the volume, capacity, BOD, and TSS volumetric cost categories by the total commercial/non-residential sewer flows to determine the commercial/non-residential volumetric rate per 100 cubic feet. It is a common industry practice to have commercial/non-residential customers pay a volumetric rate per unit of sewer usage since the commercial/non -residential customer class varies in usage and strength discharge characteristics between customers. Section 3.2.5. demonstrates how the sewer rates are developed from the fixed and volumetric cost components, respective to each customer classification, to recover their proportional cost of providing service to them.

3.2.5 Cost -of-Service and Revenue Check
Once the unit costs are developed and the costs associated with each customer class based on the units or service are determined in Section 3.2.3, rates can be developed to ensure that each customer class is generating sufficient revenues to cover their allocated cost of service. The proposed rate structure for the sewer rates are as follows:
• Single -Family , Multi -Family , & Senior Housing Residential Customers – For single-family, multi-family, and senior housing residential customers, the proposed rates will consist of only a flat annual fixed charge based on the number of dwelling units.
• Commercial/Non -Residential Customers – For commercial/non -residential customers, the proposed rates will consist of an annual fixed charge per account and a volumetric rate per 100 cubic feet of sewer usage.

The revenues generated by each customer class vs the cost allocated to each customer class are provided in Table 13.

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Table 13 – Proposed Rate Revenues vs COS

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Section 4 – Proposed Test Year Rates

4.1 General
The methodology used to calculate the recommended sewer rates proposed herein involves applying the projected customers , ERUs, and sewer flows to the user rates developed in the preceding COS and rate analysis to calculate the estimated revenues that would be generated. Then, these projected revenues are compared to the estimated Test Year Revenue Requirements, and the sewer rates are adjusted on a percentage basis as necessary until the revenues generated are sufficient to meet the revenue needs of the sewer utility system. In addition, there are other factors that must be considered in designing rates to satisfy the City’s objectives. Such other rate considerations include, but are not limited to:

1. Sensitivity to existing customers - the proposed rates must consider the impact on existing customers and avoid putting an inequitable financial burden on any particular customer class.

2. Comparability with neighboring utilities - the proposed rates should consider the rates and charges applied to customers of neighboring utilities of relatively similar size for similar service.

3. Existing rate structure - the proposed rates must consider the logistics and cost/benefit implications of instituting changes to the existing rates and rate structure.

4. Economic and property development - the proposed rates must consider the potential for future development within the City’s service area and ensure that the rates do not make it cost-prohibitive for future development.

The proposed rates developed herein utilize these considerations, as well as discussions with the City staff, professional judgment, and prior experience with comparable utility systems .

When reviewing potential rate structure options in conjunction with the need for additional revenues, it was determined that revenue adjustments are needed, and the existing rate structure needs to be adjusted based on the COS analysis.

In conjunction with the existing rate structure, the proposed sewer rates for the upcoming fiscal year are composed of two rate components consisting of an annual fixed charge and a volumetric rate per 100 cubic feet for commercial/non -residential customers only . The proposed annual sewer rates for the Test Year are provided again in Table 14.

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Table 14 – Proposed Annual Sewer Rates

4.2 Rate Comparison with Other Utilities
In order to provide the City with additional insight regarding the proposed rate levels, the analysis includes a comparison of both the existing and proposed user rates relative to the user rates imposed by other sewer utility systems located in the same region. A summary analysis is provided comparing the cost of the annual sewer service for a typical single-family residential customer calculated under the existing and proposed rates of the City with those of the other utilities. Since the City currently bills customers annually through the Contra Costa County Secured Property Tax Roll, for purposes of a meaningful comparison, the bills for sewer utilities that do not bill annually (i.e., monthly, or bi -monthly) were converted into annual bills. The rates utilized for the other neighboring utilities bills shown in Figure 1 were in effect as of January 2025 and are exclusive of local taxes, outside surcharges, franchise fees, regulatory fees, or other rate adjustments. An annual summary comparison with other utilities for a typical single-family residential customer is illustrated in Figure 1.

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It should be noted that when making comparisons of sewer service, several factors affect the level of rates and charges. Such factors may include:
1) Terms of wholesale service agreements;
2) Time since last rate update for comparison providers; 3) Level of treatment and effluent disposal methods of sewer service; 4) Anticipated capital improvement programs and capital financing methods; 5) Plant capacity utilization, age of facilities, and assistance in construction by federal or state grants, connection fees, developer contributions, etc.; 6) General Fund and/or administrative fee transfers made by other systems which may account for differences in the level of rates charged; and 7) Bond covenants and funding requirements of the rates.

For the utilities included in the rate comparisons, no analysis has been performed with consideration of the above-mentioned factors as they relate to the reported sewer rates currently being charged.

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Section 5 – Projected Operating Results

5.1 General
As a conclusion to the study, a pro-forma operating statement is developed for the sewer system. The statement summarize s the projected financial results based on the system’s revenues, expenses and other Revenue Requirements anticipated in future years.

The operating statement cover s the 5-fiscal year Projection Period through June 30, 20 30, and is prepared on a cash -flow basis. In addition, the pro-forma statement includes the applicable annual percentage rate adjustments necessary to meet the projected Revenue Requirements. The following discussions describe the development of the major components of the projected operating results.

5.2 Projected User Rate Revenues
The user rate and charge revenues are estimated by applying the existing and proposed rates to the projected customer accounts, ERUs, and sewer flows. The resulting revenues are then compared to the projected Revenue Requirements (i.e., O&M expenses, debt service, capital outlay, CIP, transfers, etc.) in each fiscal year to determine if the revenues are sufficient to satisfy the expenditure needs of the system. To the extent that there are revenue shortfalls in any given year of the Project Period , the sewer rates developed from the COS and Rate analysis outlined in Section 3 of this Report are adjusted on a percentage basis each year as necessary to generate the required level of revenues. The projected sewer user rate revenues are provided in Table 15.

Table 15 – Projected User Rate Revenues

The projected revenues include the annual sewer rate adjustments anticipated for the remaining years of the Projection Period beyond the Test Year. The proposed user rates, from which the projected operating results are developed for the entire 5 -fiscal year Projection Period are provided in Table 16. The rates identified in the table below reflect the cost o f providing service to individual customer classes based on accounts, ERUs, volume of flow, and strength characteristics.
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Table 16 – Proposed Annual Sewer Rates

The projected user rates provided herein for the periods beyond the Test Year are intended for strategic planning purposes, and to provide the City with the estimated future rates that may be needed to satisfy the projected cash flow requirements. The rates are developed in accordance with the assumed customer , flow, expenditure, and revenue estimates projected in this rate study. It is important to note that, since it is necessary to utilize numerous assumptions to develop the projected operating results, to the extent that actual customers, flows and/or system expenditures differ from those assumed herein, additional rate adjustments may be necessary. For informative purposes, the annual charge for a representative City residential customer based on the projected rates, as well as the accompanying change in the annual charge for each year of the Projection Period is included herein. An illustration of the projected annual flat fee charge for a single-family residential customer is provided in Figure 2.

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5.3 Debt Service Coverage
The sewer operating statement also include s a calculation of the annual debt service coverage. Debt service coverage is generally viewed as an indicator of the financial strength of the utility. The debt service coverage ratio is broadly calculated by dividing the net revenues by the annual debt service requirement. For the purposes of the debt service coverage calculation developed herein, the net revenues consist of the total operating revenues (user rate revenues plus other revenues) less the O&M expenses. In accordance with the requirements of the outstanding loan agreements, the City must maintain coverage of at least 120% (1.20 times) of the annual debt service payment. The pro-forma operating statement indicate s that the sewer system is expected to meet or exceed the required minimum level of debt service coverage in each fiscal year of the Projection Period. It is important to note that the coverage results are provided for informative purposes only and are not intended as a legally supportable calculation for representation to bondholders. The debt service coverage for the sewer system over the projection period is provided in Table

17. 87

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Table 17 –Sewer Utility System Projected Debt Service Coverage

5.4 Summary of Projected Operating Results
The cash-flow statement outlining the projected operating results is summarized in Table 18 for the sewer system. The results demonstrate that the proposed rates and charges along with the other system revenues are anticipated to be sufficient to satisfy the projected Revenue Requirements and capital needs of the utility system.

Projected Minimum
2026 1.26 1.20
2027 1.35 1.20
2028 1.44 1.20
2029 1.47 1.20
2030 1.50 1.20
Fiscal Year Sewer Enterprise
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Table 18 – Sewer System Projected Operating Results - Proposed Rates ($1,000s)

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Section 6 – Conclusions and Recommendations

6.1 Disclaimers

6.1.1 General Disclaimer
In the development of the proposed user rates and charges, certain historical reviews and analyses have been performed, together with the application of assumptions based on prudent financial, operational, and ratemaking relationships. The cost criteria and customer usage characteristics associated with general ratemaking procedures are representative of averages and are not intended as indicators of any individual customer.

In the preparation of the rate study, certain assumptions have been made with respect to conditions that may occur in the future. While it is believed that these assumptions are reasonable for the purpose of this update, they are dependent upon future even ts and actual conditions may differ from those assumed. In addition, the study has used and relied upon certain information that was provided by other parties not associated with Willdan.

Such information includes, among other things, the City’s audited f inancial statements, annual operating budgets, periodic reports, and other information and data provided by the City, its independent auditors, and other sources. While the sources are believed to be reliable, there has been no independent verification of the information, and no assurances are offered with respect thereto. To the extent that future conditions differ from those assumed herein or provided by others, the actual results may vary from those projected.

6.1.2 Municipal Advisory Disclaimer
Unless the City of Hercules, California (the “City”) has a written engagement from Willdan Financial Services (“Willdan”) for municipal advisory services, Willdan is not advising or recommending any action be taken by the recipient of this information with respect to any prospective, new, or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms and other similar matters concerning such financial products or issues). The City shall discuss any such informatio n and material contained in Willdan’s work product with any and all internal and/or external advisors and experts, including its own municipal advisor, that it deems appropriate before acting on the information and material.

provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, including any revisions or amendments thereto.

6.2 Conclusions
As previously addressed, the purpose of this study is to provide a review of the City’s existing utility rates to determine if rate adjustments are necessary to meet the budgeted and/or projected financial needs in future years. This Report is the result of the collaborative efforts of representatives from both the City and Willdan. City staff were diligent and cooperative in their efforts to ensure the availability and quality of source data on financial and operating matters. Based on the reviews, analyse s and assumptions discussed herein, it is concluded that:

1. The proposed user rates and charges are anticipated to generate sufficient revenues to meet the Revenue Requirements of the system based upon the projected expenditures, transfers, customers, and billable flows estimated for the Test Year. The proposed rates are based on an assumed implementation date of July 1, 2025. To the extent that the actual implementation date varies from the assumed implementation date , additional rate adjustments and/or appropriations from existing reserves may be necessary.

2. The estimated revenues and resulting rate adjustments for the remaining years of the Projection Period beyond the Test Year are developed based on the customer growth assumptions generated from the historical analyses and discussions with City staff. If the customer growth projections are not realized, additional rate adjustments may be necessary.

3. Customer growth for the sewer system is projected based on historical customer data as provided by the City as well as discussions with the City staff regarding development activity and anticipated construction. If it turns out that the customer growth assumptions are not realized, the resulting revenues could be different than projected.

4. Future capital improvement projects are assumed to occur as reported by the City in its CIP. To the extent that the timing of such projects may change from that estimated herein, the cost of such projects and resulting impact on future rates and charges may vary from those indicated

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5. The proposed rates and rate structure are consistent with industry standards for rate-setting practices, comply with Proposition 218 and conform to the City’s financial policies with respect to:
a. Equitably recovering costs;
b. Being based upon the proportionate cost of providing services; and c. Generating sufficient revenue to recover system Revenue Requirements, meet debt service coverage requirements and annual payment obligations, fund capital needs, and meet reserve requirements.

6.3 Recommendations
Based on the reviews, analyses and assumptions addressed herein, as well as the resulting conclusions provided above, it is respectfully recommended that the City:

1. Adopt the proposed sewer rates to be placed on the annual secured property tax roll.

2. Enact the proposed rates to become effective as of July 1, 2025 (or other such date as determined by the City). Based on the timing of the project and the required public hearing notice procedures, it is expected that the effective date will occur on the recommended date.

3. Readdress the COS analysis portion of this study every three to five years to ensure costs are recovered consistent with COS principles and customer characteristics.

We appreciate the opportunity to be of service to the City in this engagement. In addition, we would like to thank City staff for the valuable assistance provided during the completion of the rate study.

Respectfully Yours,

WILLDAN FINANCIAL SERVICES
92 APPENDIX

DETAIL FOR THE COMPREHENSIVE

SEWER UTILITY RATE STUDY

COMPREHENSIVE SEWER UTILITY RATE STUDY FOR THE

CITY OF HERCULES, CALIFORNIA

93 APPENDIX A
Revenue Requirement for
User Rates

94 APPENDIX - A

CITY OF HERCULES, CA
Development of Rate Revenue Requirements
[A] [B] [C]=[A]*[B]
FY 2026 % to Sewer Sewer
1 Total Operating Revenues 7,809,792$ 7,809,792$ Less:

Other Operating Revenues
2 Interest Income 238,000$ 100% 238,000$ 3 Sewer Connection Fee - 100% - 4 Sewer Facilities Fees - 100% - 5 Sewer Lateral Inspection - 100% - 6 Rate Stabilization - 100% -
7 Sewer Ent. Fund - 100% -
8 Total Other Operating Revenues 238,000 238,000 9 Total Rate Revenue Requirement 7,571,792$ 100% 7,571,792$ Line No: Description Test Year for Rate Revenue Requirement A - 1
95 APPENDIX B
Sewer Cost-of-Service
Analysis
96 APPENDIX - B

CITY OF HERCULES, CA
Allocation of Test Year Costs to Sewer Function
Line No: Expense Group FY 2026
1 Collection $321,347
2 Treatment 3,080,232
3 Administration 1,746,738
4 Pumping 60,564
5 Customer Service 0
6 Transfers 0
7 Existing Debt 2,066,306
8 New Debt 0
9 CIP 1,985,000
10 Capital Outlay 0
11 Total 9,260,187$
Test Year Revenue Requirement
B - 1
97 APPENDIX - B

CITY OF HERCULES, CA
Sewer Customer Account & Stength Characteristics by Customer Class - Test Year FY 2026 Total Total CCF BOD BOD TSS TSS
Parcels ERUs Flow Factor [1] Pounds Factor [1] Pounds
Residential Classes
1 Resid. Single Family 6,378 6,378 474,268 200 591,727 200 591,727 2 Multi-Family 1,876 2,650 149,988 200 187,135 200 187,135 3 Senior Housing 2 111 4,015 200 5,009 200 5,009 4 Sub-total Residential 8,256 9,139 628,271 783,871 783,871 Non-Residential Classes
5 Amusement Services 3 3 3,660 150 4,579 150 4,579 6 Auto Laundries 1 1 2,573 150 3,219 150 3,219 7 Construction 1 1 119 200 198 200 198 8 Eating Places, Fast 5 5 3,534 1,000 29,474 600 17,684 9 Electrical Machinery 1 1 73 200 122 200 122 10 Food Sales 3 3 5,368 150 6,715 150 6,715 11 Food Service 3 8 1,264 1,000 10,542 600 6,325 12 Gasoline And Oil 2 2 3,441 180 5,166 280 8,035 13 Health Services 2 2 1,114 250 2,323 100 929 14 Laboratories 3 3 8,007 150 10,017 150 10,017 15 Metal Products 1 1 1,697 150 2,123 150 2,123 16 Non-Profit 4 4 2,439 130 2,644 80 1,627 17 Offices 25 31 20,755 130 22,503 80 13,848 18 Personal Services 1 1 271 130 294 80 181 19 Retail Trade, Other 20 51 12,470 150 15,600 150 15,600 20 Schools 9 9 4,025 130 4,364 100 3,357 21 Specialty Food 1 1 277 150 347 150 347 22 Warehousing 5 5 1,665 150 2,083 150 2,083 23 Wholesale Trade 9 9 420 150 525 150 525 24 Sub-Total Non-Residential 99 141 73,172 122,836 97,514 25 Sewer System Total 8,355 9,280 701,443 906,707 881,385 Notes: 1.52% 10.43% 13.55% 11.06%
Line No: Description
(1) Average strength factors for BOD and TSS are based on the State Water Resources Control Board Revenue Program Guidelines, Appendix G.

B - 2
98 APPENDIX - B

CITY OF HERCULES, CA
Allocation of Sewer Costs - Test Year FY 2026
Line No: Description Sewer Costs Volume Capacity Strength - BOD Strength - SS Customer Total (Check)
Allocation Factors:
1 Treatment 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
2 Collection 50.00% 50.00% 0.00% 0.00% 0.00% 100.00%
3 Administration 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 4 Pumping 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
5 Customer Service 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 6 Transfers 40.00% 40.00% 10.00% 10.00% 0.00% 100.00%
7 CIP 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
8 Capital Outlay 14.09% 14.09% 36.42% 35.40% 0.00% 100.00% 9 Existing Debt 0.00% 0.00% 0.00% 0.00% 100.00% 100.00% 10 New Debt 14.09% 14.09% 36.42% 35.40% 0.00% 100.00%
Allocation of Costs:
11 Treatment 3,080,232$ 434,005$ 434,005$ 1,121,843$ 1,090,379$ -$ 3,080,232$ 12 Collection 321,347 160,674 160,673 - - - 321,347 13 Administration 1,746,738 - - - - 1,746,738 1,746,738 14 Pumping 60,564 8,533 8,533 22,058 21,440 - 60,564 15 Customer Service - - - - - - -
16 Transfers - - - - - - -
17 CIP 1,985,000 279,643 279,643 722,952 702,762 - 1,985,000 18 Capital Outlay - - - - - - -
19 Existing Debt 2,066,306 - - - - 2,066,306 2,066,306 20 New Debt - - - - - - -
21 Non-Rate Rev & Fund Balance (1,688,395) (160,969) (160,969) (340,380) (330,849) (695,228) (1,688,395) 22 Total 7,571,792$ 721,886$ 721,885$ 1,526,473$ 1,483,732$ 3,117,817$ 7,571,792$

9.53% 9.53% 20.16% 19.60% 41.18%
Total Units of Service 701,443 701,443 906,707 881,385 9,280 Units CCF CCF Pounds Pounds ERUs/Annually
Cost Per Unit 1.03$ 1.03$ 1.68$ 1.68$ 335.97$ Units CCF CCF Pounds Pounds ERUs/Annually
B - 3
99 APPENDIX - B

CITY OF HERCULES, CA
Sewer Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B] [C] [D] [E] [F]
Volume Capacity Strength -
BOD Strength - SS Customer Total
1 Resid. Single Family 488,090$ 488,089$ 996,193$ 996,119$ 2,142,827$ 5,111,318$ 2 Multi-Family 154,359 154,359 315,048 315,024 890,325 1,829,115 3 Senior Housing 4,132 4,132 8,433 8,433 37,293 62,423 4 All Non-Residential Customers 75,305 75,304 206,799 164,156 47,372 568,936 5 Total 721,886$ 721,885$ 1,526,473$ 1,483,732$ 3,117,817$ 7,571,792$ Non-Residential Classes
Line No: Description
Residential Classes
B - 4
100

APPENDIX - B

CITY OF HERCULES, CA
Sewer Rate Calculation - Test Year FY 2026
[A] [B] [C]=[A]/[B] [D] [E]=[C]-[D] [F] [G] [H]=[F]/[G] [I] [J]=[H]-[I] Fixed Rate
Costs Annual ERUs
Proposed
Annual Fixed
Fee
Existing
Annual Fixed
Fee
Annual Fixed
Fee Difference
Volumetric
Rate Costs
Billable Annual
Volume (CCF)
Proposed
Volumetric
Rate
Existing
Volumetric
Rate
Volumetric
Rate
Difference
1 Resid. Single Family $ 5,111,318 6,378 $ 801.40 $ 625.80 $ 175.60 N/A N/A N/A N/A N/A 2 Multi-Family $ 1,829,115 2,650 $ 690.23 $ 625.80 $ 64.43 N/A N/A N/A N/A N/A 3 Senior Housing $ 62,423 111 $ 562.37 $ 427.16 $ 135.21 N/A N/A N/A N/A N/A 4 All Non-Residential Customers 47,372$ 141 $ 335.97 $ 120.00 $ 215.97 521,564$ 73,172 $ 7.13 $ 3.87 $ 3.26 Line No: Customer Class
Residential Classes
Non-Residential Classes
B - 5
101

APPENDIX - B

CITY OF HERCULES, CA
Sewer Revenue vs Cost of Service by Customer Class Check - Test Year FY 2026 [A] [B] [C]=[A]*[B] [D] [E] [F]=[D]*[E] [G]=[C]+[F] [H] [I]=[H]-[G] Annual ERUs
Proposed
Annual Fixed
Fee
Total Fixed
Fee Revenue
Billable
Annual
Volume (CCF)
Proposed
Volumetric
Rate
Total
Volumetric
Rate Revenues
Total
Calculated
Revenues Total COS
Difference
Calc vs COS
1 Resid. Single Family 6,378 801.40$ 5,111,318$ N/A N/A -$ 5,111,318$ 5,111,318$ -$ 2 Multi-Family 2,650 690.23$ 1,829,115$ N/A N/A -$ 1,829,115$ 1,829,115$ -$ 3 Senior Housing 111 562.37$ 62,423$ N/A N/A -$ 62,423$ 62,423$ -$ 4 All Non-Residential Customers 141 335.97$ 47,372$ 73,172 7.13$ 521,564$ 568,936$ 568,936$ -$ 5 Total 9,280 7,050,228$ 73,172 521,564$ 7,571,792$ 7,571,792$ -$ Line
No: Customer Class
Residential Classes
Non-Residential Classes
B - 6
102

27368 Via Industria, Suite 200
Temecula, CA 92590
800.755.6864 | Fax: 888.326.6864
www.willdan.com
103

NOTICE OF PUBLIC HEARING REGARDING

PROPOSED CHANGES TO ANNUAL SEWER RATES
Hearing Date & Time: July 22, 2025, 7:00 PM
Hearing Location: Hercules City Council Chambers
111 Civic Drive, Hercules, California 94547
Why are you receiving this notice?
The City of Hercules (City) is mailing this notice to you because you are a sewer customer, or record owner of property that receives sewer service. This notice is provided pursuant to Ca lifornia Constitution Article XIIID (also known as “Proposition 218”), which requires the City to notify property owners and customers of proposed changes to property - related fees such as those for sewer service. This notice describes proposed changes to the rates for this service and provides information about a public hearing to be held on July 22, 2025 , at 7:00 p.m., at the Hercules City Council Chambers, 111 Civic Drive, Hercules, CA 94547. If adopted, the proposed rates for sewer service will be in effect for the 2025-2026 Fiscal Year, which begins on July 1, 2025.

What do the sewer rates fund?
The City of Hercules provides wastewater collection and treatment services for residential, multi -family, and non - residential customers, and is committed to providing high quality, reliable service at the lowest possible rates. The service area includes 8,300 parcels served through 7,000 laterals, which encompasses a population of approximately 26,000 residents. The City’s wastewater colle ction system serves the area within the City limits and collects and conveys an average dry weather flow of approximately 1.7 million gallons per day (MGD) of wastewater. The City’s collection system consists of gravity sewer mains, force mains, manholes and lift stations, most of which were constructed after 1970.

Wastewater generated by the City is conveyed to and treated by the Pinole -Hercules Water Pollution Control Plant (WPCP), located southwest of the City limits in the City of Pinole. The treatment plant can handle a daily flow of 4.06 million gallons and averages a daily flow of 3.50 million gallons. The plant ’s activated sludge process removes approximately 97% of the waste from the water, which is then disinfected and discharged safely into the deep waters of San Pablo Bay. The system is built exclusively for sanitary waste and operates 24/7 to protect public health and the environment. While Hercules and Pinole share the WPCP, The City of Pinole handles the daily operations, and The City of Hercules reimburses Pinole for its respective share of WPCP operating and maintenance costs. All capital costs associated with the WPCP are split 50/50 between the City and The City of Pinole.

The Wastewater Department is funded by annual sewer fees charged to customers and must recover all its operating costs through these fees. This fee for wastewater service is reflected in your annual Contra Costa County property tax statement and pays for system operations and maintenance, personnel, electricity, fuel, chemicals, capital projects, debt repayment, administration, o ngoing repair and replacement of aging and worn system components throughout the wastewater system, as well as costs related to prudent long -term operational or financial ma nagement of the utili ty, such as maintaining adequate fund reserves and planning for contingencies. These charges are the primary source of revenue to operate and maintain the sewer collection and treatment systems and are used solely for this purpose.

The proposed annual rates are based on a comprehensive utility rate study and financial plan completed by an independent consultant. The rate structure was designed so that revenues derived from the proposed rates do not exceed the amount of revenue required for the City to provide the sewer collection and treatment services, nor will the revenue from the sewer rates be used for any purposes other than those for which they are imposed. The amount of the proposed rates imposed on any parcel or person as an incidence of their property ownership will not exceed the proportional cost of the service attributable to such parcel; and no rate will be imposed for service unless that service is actually used by, or immediately available to, the property owner or customer in question. The draft rate study prepared by the consultant is available for review with the City Clerk.

Why are the sewer rate changes needed?
The utility rate study and financial plan determined that the City’s current annual sewer rates are not sufficient to meet rising costs associated with system operations, inspections, and maintenance. These costs increase over time and include administrative support for operations, repair and replacement of aging system components, maintenance of designated reserves, and capital facilities projects to upgrade and modernize collection and treatment facilities. It is important to note that while these costs have increased each year, sewer rates have not increased since 2014. 104

These revenues will ensure continued quality unin terrupted sewer service , minimize occurrence of sanitary sewer overflows, and maintain the critical infrastructure that makes up a well-functioning wastewater system that is prepared for the future, and which ensures the health and safety of the community.

How the annual sewer rates are determined and how they work To develop sewer rates that generate sufficient revenue to meet the fiscal and policy objectives of the City, a determination of the annual revenue requirement from sewer rates was completed. As previously mentioned, the revenue requirement includes projected expenditures for operations, maintenance, inspections, repair and replacement of aging system components, equipment, debt repayment, and planned capital projects.

The revenue requirement also includes designated reserves. Maintaining appropriate reserve funds is critical to the ability of the City to serve its customers , manage cash flow fluctuations and respond to unforeseen events and costs. The reserves, like all elements of the sewer charges, may only be used to fund costs associated with the sewer system.

The revenue requirements were compared to the total sources of available funds under existing rates during each year of the forecast period to determine the adequacy of projected revenues to meet those requirements. Where a shortage of revenue was found, a series of revenue adjustments were calculated, which if implemented, will provide sufficient revenue to meet those needs.

The City has established sewer charges that are submitted to the Contra Costa County Auditor-Controller for inclusion on the annual secured property tax bill for property owners in the City. The rates charged for sewer service are approved by the City Council. These rates charged for sewer service are approved by the City Council and are not subject to administrative review or approval by any other local or state agency. The City has historically adjusted rates, as necessary, to provide for recovery of financial obligations including operating expenses, debt servic e, capital expenditures, and any other expenses and transfers.

Proposed annual sewer charges are based on costs included in the revenue requirements and applied to various types of customers and properties based on their proportionate share of costs. Annual sewer rates consist of 1) a separate flat rate for different types of residential customers that is applied per dwelling unit regardless of their water usage, 2) a fixed fee for commercial/non-residential customers that designates the minimum amount they will pay by account, regardless of usage, and 3) a commercial/non-residential volumetric rate component per 100 cubic feet, based on metered water usage, that recovers the costs of treatment and disposal of wastewater.

New annual sewer rates
In order to provide necessary funding for the sewer system, the City is proposing to implement new annual sewer rates as a series of annual adjustments starting on July 1, 2025, and each July 1 thereafter until July 2029. The following table summarizes the maximum proposed sewer rates.

Proposed Annual Sewer Rates
July 1, 2025 – July 1, 2029

2026 2027 2028 2029 2030
Minimum Fixed Charge:

Single-Family Residence [1] 625.80$ 801.40$ 857.50$ 908.95$ 949.85$ 983.09$ Multi-Family Residence (per Dwelling Unit) [1] 625.80$ 690.23$ 738.55$ 782.86$ 818.09$ 846.72$ Senior Living (per Dwelling Unit) [1] [2] 427.16$ 562.37$ 601.74$ 637.84$ 666.54$ 689.87$ Non-Residential Metered (per Business) 120.00$ 335.97$ 359.49$ 381.06$ 398.21$ 412.14$ Volumetric Rates Per 100 Cubic Feet - Non-Residential Metered:

All Flow 3.87$ 7.13$ 7.63$ 8.08$ 8.45$ 8.74$ Notes:

Projected for Fiscal Year Ending June 30,
[1] All residential customers only pay a flat fee per dwelling unit, regardless of usage. [2] Apartments are currently charged the existing "Senior Living" flat fee per dwelling unit only, regardless of usage. Under the proposed rates, starting in FYE 2026, apartments will pay the "Multi-Family Residence" flat fee per dwelling unit only, regardless of usage.

Description Existing
Rates
105

Impact on your sewer bill
Per the proposed rates, the annual sewer charge for fiscal year FY 2 5-26 for a single-family residential customer would increase from the current $625.80 per year (equivalent to $52.15 per month) to $801.40 per year (equivalent to $66.78 per month).

How do you file a protest or participate in the public hearing? The City will consider the new sewer rates at a Public Hearing on Tuesday, July 22, 2025, at 7:00 p.m. at the Hercules City Council Chambers, 111 Civic Drive, Hercules, CA 94547. You are invited to present oral or written testimony at the Public Hearing. Any owner or customer of record of a parcel subject to the proposed rates may submit a written protest against the proposed rate revisions. If written protests are filed for a majority of the affected parcels, the proposed rate revisions may not be adopted. If you do not object to the proposed rate revisions to fund the operation, maintenance, and capital improvements for City sewer services, you do not need to take any action.

Written protests must include the following: a statement indicating that the identified property owner or customer of record is in opposition to the proposed sewer rate changes; the street address or Assessor's Parcel Number (APN) for the parcel(s) with respect to which the protest is made; and the name and signature of the owner or customer.

Written protests must be mailed, or hand delivered, to the City Clerk at 111 Civic Drive, Hercules, CA 94547, and must be received by 4:00 p.m. on July 22, 2025, or hand delivered to the City Clerk at the Public Hearing on July 22, 2025 before the conclusion of the Public Hearing. Protests submitted via e-mail or other electronic means will not be accepted.

For any written protest, whether mailed or submitted in person to the City Clerk, please identify on the front of the envelope that the enclosed protest is for the Public Hearing on the Proposed Rate Changes – Sewer Rates.

The City Council will hear and consider written and oral protests and comments of all interested persons to the proposed rate changes at the Public Hearing. Oral com ments or protests at the Public Hearing will not qualify as formal protests unless accompanied by a written protest. While both property owners and customers of record may submit written protests, only one protest will be counted for each parcel. Upon the conclusion of the Public Hearing, if written protests, as outlined above, are not presented by a majority of property owners or customers of record, the City Council will be authorized to adopt the proposed rates. If adopted, the rates for sewer service will take effect beginning July 1, 2025.

In accordance with Government Code section 53759, t here is a 120 -day statute of limitations for challenging any new, increased, or extended fee or charge, commencing from the later of the effective date of the new rates or of the date of the final passage, adoption, or approval of the resolution adopting the new rates.

106
City of Hercules
Sewer Utility Rate Study
May 27, 2025
Willdan Financial Services
o Chris Fisher, Vice President
o Michael Cronan, Project Manager
107
2 Rate Study Goals & Objectives
o Evaluate current financial condition of sewer utility o Develop 5-year financial plan – provide funding for current and future operations, capital needs
o Debt repayment, compliance with bond covenants
o Maintain adequate reserves for operations, capital, and debt service o Provide recommendations to improve and maintain financial health and stability of sewer utility over next five years
o Develop equitable, cost-based rate structure
o Ensure proposition 218 compliance – COS and procedures 108
3 Factors Driving Financial Plan
o Rising operating costs (equipment, supplies, treatment, etc.) o Rising personnel costs (labor, benefits, pensions, etc.) o Financial plan includes addition of a Sewer & Stormwater Supervisor o Debt service coverage to maintain compliance with debt covenants o Increasing operating and capital costs at the Pinole-Hercules Water Pollution Control Plant
o Funding ongoing sewer collection capital projects
o Have not increased rates since 2014
109
City of Hercules
Sewer Utility Rate Study
Methodology & Projections
4 110
5 Customer
Accounts/Units Usage/Volumes
Customer Billing/Revenue Reconciliation
Revenue Sufficiency under
Existing Rates
Other Revenues Rate Design
Total Revenue Requirements
O&M Expenses Debt Service & Debt
Service Coverage ReservesCapital Expenditures
General Rate Study Methodology
111
6 -$4.00
-$2.00
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
2026 2027 2028 2029 2030
Millions
Revenues over Expenditures (excluding Capital Expenses) Revenues Expenditures Net Results
0 50
100
150
200
2026 2027 2028 2029 2030
Number of Days O&M in Operating Cash Reserves
Days Target
-

0.50 1.00

1.50 2.00
2026 2027 2028 2029 2030
Debt Service Coverage
Ratio Target (1.50x) Minimum (1.20x)
Status Quo Projections
112
7 Capital Improvement Program
2025 2026 2027 2028 2029 2030
Sewer System Improvements
Sycamore Ave (Lower Trunk Main) 0$ 0$ 0$ 0$ 0$ 0$ Sycamore Trunk Sewer Overflow Line Project 202,263 1,000,000 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Sewer Manholes in Business Park 0 0 0 0 0 0 Promenade Lift Station 0 185,000 1,170,450 0 0 0 Repair/ Replace Sewer Lines under SR-4 & Along Willow Ave 0 200,000 100,000 1,080,000 0 0 Total Sewer System Improvements 202,263$ 1,385,000$ 1,270,450$ 1,080,000$ -$ 0$ Hercules Share of Pinole WW Plant
As-Built WWTP Drawings 12,500$ 0$ 0$ 0$ 0$ 0$ Boiler Rehabilitation 22,500 0 0 0 0 0 Centrifuge Feed Pump Replacement 25,000 0 0 0 0 0 Digester Feed Pump Replacement 37,500 0 0 0 0 0 Energy Recovery Building and Admin Roof 40,000 0 0 0 0 0 Misc. Plant Improvements 37,500 0 0 0 0 0 SCADA System Upgrade 22,500 0 0 0 0 0 SS2002 Water Pollution Control Plant Lab Remodel 50,000 0 0 0 0 0 SS2101 Second Clarifier - Center Column Rehabilitation 212,500 0 0 0 0 0 SS2102 Air Release Valve Replacement 25,000 0 0 0 0 0 SS2203 Effluent Outfall Project Design 75,000 500,000 1,000,000 0 0 0 Effluent Pipe Coating - Rodeo Creek Crossing 15,000 0 0 0 0 0 Spare Influent Pump 50,000 0 0 0 0 0 Chlorine Contact Basin - Coating 0 100,000 0 0 0 0 E
nergy Recovery System Replacement 0 0 0 100,000 650,000 0 Aeration Basin - Coating 0 0 150,000 0 0 0 Water Pollution Control Plant Boiler Replacement 0 0 330,000 0 0 0 Water Pollution Control Plant Centrifuge Replacement 0 0 0 495,000 0 0 Total Hercules Share Of Pinole WW Plant Improvements 625,000$ 600,000$ 1,480,000$ 595,000$ 650,000$ -$ Total Sewer Projects 827,263$ 1,985,000$ 2,750,450$ 1,675,000$ 650,000$ -$ Projected for Fiscal Year Ending June 30, ($1,000s)Description 113
5-Year Financial Plan
8 o 5-year annual rate path
o 5-year annual bill path
o Comparison with neighboring utilities – annual bills
o Updated projections of financial metrics & operating results over 5-year financial plan - including rate adjustments 114
9 5-Year Annual Rate Path
2026 2027 2028 2029 2030
Minimum Fixed Charge:

Single-Family Residence [1] 625.80 $ 801.40 $ 857.50 $ 908.95 $ 949.85 $ 983.09 $ Multi-Family Residence (per Dwelling Unit) [1] 625.80 $ 690.23 $ 738.55 $ 782.86 $ 818.09 $ 846.72 $ Senior Living (per Dwelling Unit) [1] [2] 427.16 $ 562.37 $ 601.74 $ 637.84 $ 666.54 $ 689.87 $ Non-Residential Metered (per Business) 120.00 $ 335. 97 $ 359.49 $ 381.06 $ 398.21 $ 412.14 $ Volumetric Rates Per 100 Cubic Feet - Non-Residential Metered:

All Flow 3.87$ 7.13$ 7.63$ 8.08$ 8.45$ 8.74$ Notes:

Description Existing
Rates
[1] All residential customers only pay a flat fee per dwelling unit, regardless of usage. [2] Apartments are currently charged the existing "Senior Living" flat fee per dwelling unit only, regardless of usage. Under the proposed rates, starting in FYE 2026, apartments will pay the "Multi-Family Residence" flat fee per dwelling unit only, regardless o
f usage.

Projected for Fiscal Year Ending June 30,
115
10 5-Year Annual Bill Path
Existing 2025 2026 2027 2028 2029 2030
Annual Sewer Bill $625.80 $801.40 $857.50 $908.95 $949.85 $983.09 Difference ($) $175.60 $56.10 $51.45 $40.90 $33.24
Difference (%) 28.06% 7.00% 6.00% 4.50% 3.50%
$625.80
$801.40 $857.50 $908.95 $949.85 $983.09
$-
$200
$400
$600
$800
$1,000
$1,200
Annual Sewer Bill
116
11 $473.55
$625.80
$725.00
$801.40 $815.00 $854.00 $916.00
$1,027.41
$1,210.00
$1,368.00
$923.62
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Total Sewer Bill Average of Comparison Utilities
Annual Neighboring Utility Comparison
117
12 $0.00
$2.00
$4.00
$6.00
$8.00
$10.00
2026 2027 2028 2029 2030
Millions
Revenues over Expenditures (excluding Capital Expenses) Revenues Expenditures Net Results
0 50
100
150
200
2026 2027 2028 2029 2030
Number of Days O&M in Operating Cash Reserves
Days Target
-

0.50 1.00

1.50 2.00
2026 2027 2028 2029 2030
Debt Service Coverage
Ratio Target (1.50x) Minimum (1.20x)
Adjusted Financial Metrics
118
City of Hercules, CA
Sewer Utility Rate Study

NEXT STEPS
13 119
Next Steps
14 o May 27 – First City Council meeting regarding rate study  Present rate study results and recommendations
 Set Prop 218 public hearing date for July 22
 Approve mailing of public hearing notices
o June 6 – Deadline to mail out Proposition 218 Notices o July 22 – Conduct Public Hearing
 Receive testimony/comments
 Tabulate written protests
 Council discussion and consideration
 Adopt and implement updated rates - effective 7/1/2025 120
City of Hercules
Sewer Utility Rate Study

QUESTIONS
15 121
16 Municipal Advisor Disclosure
Willdan Financial Services (“Willdan”) is registered as a "municipal advisor" pursuant to Section 15B of the Securities Exchange Act and rules and regulations adopted by the United States Securities and Exchange Commission ("SEC") and the Municipal Securities Rulemaking Board ("MSRB"). The MSRB has made available on its website (www.msrb.org) a municipal advisory client brochure that describes the protections that may be provided by MSRB rules and how to file a complaint with the appropriate regulatory authority. As part of its SEC registration Willdan is required to disclose to the SEC information regarding criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation involving Willdan. Pursuant to MSRB Rule G-42, Willdan is required to disclose any legal or disciplinary event that is material to Client's evaluation of Willdan or the integrity of its management or advisory personnel. Willdan has determined that no such event exists. Copies of Willdan’s filings with the United States Securities and Exchange Commission can currently be found by accessing the SEC's EDGAR system Company Search Page which is currently available at: https://www.sec.gov/edgar/searchedgar/companysearch.html and searching for either Willdan Financial Services or for our CIK number which is 0001782739.

For the avoidance of doubt and without limiting the foregoing, in connection with any revenue projections, cash-flow analyses, feasibility studies and/or other analyses Willdan may provide the municipality with respect to financial, economic or other matters relating to a prospective, new or existing issuance of municipal securities of the municipality, (A) any such projections, studies and analyses shall be based upon assumptions, opinions or views (including, without limitation, any assumptions related to revenue growth) established by the municipality, in conjunction with such of its municipal, financial, legal and other advisers as it deems appropriate; and (B) under no circumstances shall Willdan be asked to provide, nor shall it provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, unless formally engaged to provide such information. 122

Hercules City CouncilMay 27, 2025

Hercules City Council
May 27, 2025