City Sets Sights on June Election for HMU Sale Option

The city has decided to forge ahead on its plan to sell its electrical utility.

In a 4-0 vote, with Councilman Gerard Boulanger recusing himself (Boulanger is an HMU customer), the called a June special election to authorize selling or disposing of the Hercules Municipal Utility.

“HMU has never made a profit, and its operations have and continue to be subsidized by the city,” reads a recent staff report submitted by City Attorney Patrick Tang and City Manager Steve Duran.

City staff estimates the election to sell the HMU will cost about $33,200. Funding would come from the city’s loosely restricted Fiscal Neutrality reserve, city records show.

After into the HMU over the past decade, Hercules is expected to spend another $330,000 to subsidize the utility this year and over $730,000 in 2013, city records show.

Even if the city washes its hands of the utility following the June election, it might continue to pay for it. The HMU has loaded Hercules with roughly $13 million in bond debt.

Around this time last year, city staff began with a critical eye, with former city manager Fred Deltorchio announcing to the public that the HMU had run in the red since its inception.

The HMU was established in January 2001 in an attempt to provide “safe and reliable electric services to resident and businesses in the city. It also services a wastewater plant located in Pinole," according to the staff report.

HMU's financial success was dependent upon aggressive retail and residential growth that would include over 1,800 new homes and the expansion of existing service to the business park.

“The projected growth in the service area did not materialize due to a number of factors, including a downturn in the economy, and the profitability of the HMU has been hampered by a lack of a sound business plan and best management practices,” according to the staff report.

Currently, the utility serves about 840 customers.