Council Ponders Tax Rate Increases to Pad Budget

Hercules is considering using tax hikes as way to remedy its ailing budget.

The city council met in a study session Tuesday night, where it discussed the possibility of increasing a transaction and use tax, utility users tax and a less likely parcel tax.

“We are in a financial crisis. The facts are there, and we are suffering as a city,” said Mayor Dan Romero. “I don’t want to increase anybody’s tax, but basically its coming down to asking residents” for help “for basic services.”

Acting Assistant City Manager Liz Warmerdam presented on the city’s options for increasing taxes.

A transaction and use tax, which is a sales tax add-on, and/or utility users tax are the Hercules’ most viable options, Warmerdam said

By imposing a transaction and use tax, the city’s sales tax would basically rise from its current 8.25 percent. If the tax rate was raised one full percentage notch, the city would receive an additional $1 million yearly budget infusion, Warmerdam said.  Hercules currently operates with a $1 million budget deficit.

The city is also looking into trying to raise the utility users tax, which applies to local services from electric to cable. Income from the tax makes up 17 to 18 percent of the city’s general fund, Warmerdam said.

The rate is currently set at six percent. If it was raised to eight percent, the city would see an $800,000 annual revenue increase. With a 10 percent rate, the city would get $1 million on top of what it already receives, Warmerdam said.

Details on how much the city would try to impose were not clear, and implementing either of the taxes would involve a number of steps that could eventually lead to a vote by Herculeans in a nearing election.

All city council members were present at Tuesday’s meeting. They agreed to hear proposals from firms (at their next meeting) interested in helping the city craft its approach to increasing taxes.

The council’s next scheduled meeting is Tuesday, Feb. 14 at 7 p.m. at .