Hercules Council May Ask for Utility Tax Increase & Tax Cable TV

Less than a year after voters approved a half-cent sales tax increase, the Hercules City Council on Tuesday showed support for asking voters to raise another tax.

The council is faced with a $1.2 million budget deficit for the coming 2013-14 fiscal year, and indicated support during a special meeting Tuesday for putting a measure on the ballot to increase the city's utility users tax from 6 percent to 8 percent and include cable in the utilities that are taxed.

"I can't sit here as a councilman and see the reduction of our city," Council Member Dan Romero said.

The council will discuss any possible ballot measure at a future meeting, and if council members want to place it on a June ballot they would have to act by March.

The council will also discuss the idea of declaring another fiscal emergency, which would allow a tax increase to pass by a 50-percent-plus-one-vote margin instead of the usual two-thirds margin.

Last year, the city faced a similar budget deficit, but transferred more than a million dollars into the general fund as a one-time way to fill the gap.

"This time last year, the discussion was that we knew we wouldn't get it all in one bite," City Manager Steve Duran said of the city's deficit. "Even with a 1 percent sales tax [increase] we wouldn't have gotten all of it, and we went with a half-percent sales tax. We didn't eliminate a structural deficit last year."

The city also faces an increase in its expenses: CalPERS, medical insurance and legal expenses will all rise, Finance Director Nickie Mastay said. 

Hercules' current 6 percent utility users tax is lower than Pinole, El Cerrito, Richmond and San Pablo. Most other cities' taxes already include cable, Duran said.

Each of the council members said any potential utility users tax increase should sunset after a few years, but Vice Mayor Myrna de Vera was hesitant to ask for another tax hike.

"This year we have to face that we have a structural deficit, and I don't know if we can keep coming back to the community and asking them for more taxes," de Vera said. "I have a hard time paying my taxes, and I think I have a better income than a lot of people."

Among other ideas, she said the city should look into replacing some city staff with contractors as a way to save money.

In the past two years, Hercules has gone from 30 police officers and about 25 administrative city employees to 20 cops and nine administrative workers, Duran said. The city is hoping to renegotiate a contract with its solid waste contractor and last year, voters approved the sale of the Hercules Municipal Utility.

Mayor John Delgado hoped that with those other measures, increasing the utility users tax would fill the budget gap and provide for an increase in cops.

"To go back and ask for another tax we have to promise them something," he said. "Two percent [and] we fill the hole, there's no more layoffs–I don't think that's good enough."

During Tuesday's meeting, the city council also discussed the idea of allowing an LED sign in Hercules to try to earn revenue, but opted to send that item to the planning commission for more discussion and public input.

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