Hercules Previews $45M Budget With Razor-Thin Surplus and a Deficit on the Horizon

The Hercules City Council opened its most consequential fiscal conversation of the year on June 9, laying bare a general fund that will close FY2026-27 with just $127,000 to spare — and a structural deficit projected to arrive by FY2028-29. Against that backdrop, council members directed roughly $350,000 in one-time spending on road safety, a monument sign, and community benefit funds, while also issuing deeply personal Juneteenth and Pride Month proclamations that connected local identity to national civil rights struggles.

• $45M budget hearing reveals $127K surplus and a structural deficit beginning in two years; council earmarks $350K for traffic calming, a monument sign, and community benefit spending
• Council members share personal ties to enslaved ancestors during an emotional Juneteenth proclamation accepted by Morehouse College graduate Frank Grimsley III
• Pride Month proclamation warns of nationwide rollbacks as longtime resident Brian Campbell Miller recalls that Pride began as a riot and a protest
• November 3 election formally called for two council seats; candidate filing opens July 13
• Police report zero complaints, zero violations in fourth annual military equipment audit under AB 481
• New state law compliance: council adopts remote-meeting disruption policy ahead of July 1 SB 707 deadline

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A $127K Margin and Two Years Until Red Ink

The Hercules City Council opened the first of two public hearings on the proposed FY2026-27 budget — a $45 million spending plan that City Manager Tang and Finance Director Edwin Gatto presented as balanced but fragile. The general fund, roughly $21 million, projects a surplus of just $127,000. A five-year forecast buried on page 97 of the budget document shows the city tipping into structural deficit by FY2028-29.

Why it matters: Hercules relies on an unusually volatile revenue mix and gets far less back from the county property tax pool than its neighbors. That leaves the city with almost no cushion and limited tools to absorb economic shocks or fund deferred infrastructure.

Where things stand: Labor costs consume nearly 60% of total expenditures, including a 3% cost-of-living adjustment and a 2% equity adjustment for police officers. Health insurance premiums are rising 3%. The city's pension funding ratio sits at approximately 76% — below the 80–90% range generally considered resilient — though a Section 115 trust provides some additional backstop. Investment income projections did improve, climbing from $991,000 to $1.2 million on higher interest rates.

Councilmember Dion Bailey delivered the evening's most detailed fiscal tutorial, walking through the city's three main revenue legs. "We basically have two large resources. It's utility user tax — that's what you pay on your cell phone bill, your PG&E bill. There's a tax on there, it's about 8%. And that brings in about $4 million a year," he said, adding that the city's total general fund budget of roughly $23–24 million is "very small."

He then turned to property tax — the number that most starkly illustrates Hercules' structural disadvantage. Mayor Christine Kelley echoed the concern: "For every dollar that we pay in property tax to the county, we get back five and a half cents on the dollar. 5.5. And I will say that other cities such as Richmond get 28, 29%, El Cerrito around 17, 18%, Pinole maybe 11, 12%."

Councilmember Bailey credited former State Senator Nancy Skinner with securing $8 million that gave the city financial breathing room on a CalHFA loan. "I think that without former Senator Skinner from our district, we would be having a very different conversation," he said. Finance Director Gatto explained the loan repayment plan: a $2.5 million partial payment using local assistance funds, with a five-year extension at 1.5% interest approved by CalHFA's board.

Three Earmarks, $350K Total

Councilmember Bailey proposed three spending items that received council consensus:

1. $250,000 for John Muir Parkway traffic calming — striping and paint improvements, potentially funded from SB 1 road maintenance dollars. "The previous city manager and I, when I was mayor, met with residents and he committed to improving some of the markings there," Bailey said.
2. $50,000 earmarked from Owl Ranch developer community benefit funds that had been absorbed into the general fund.
3. $100,000 from unallocated general fund reserves for a city monument sign, bringing the total monument sign budget to $190,000.

Vice Mayor Alex Walker-Griffin relayed two additional requests: the Rotary Club is seeking tennis court maintenance at Refugio and Foxborough parks (approximately $3,200 total), and the Chamber of Commerce wants the city to increase its membership contribution from $3,000 to $10,000. City Manager Tang agreed to research both and report back at the June 23 continuation hearing.

Councilmember Bailey cautioned against opening the door to outside requests during the budget process. "It's that it's clubs asking for us to do that. Because then what happens when the library committee wants to ask? That's the larger issue I have," he said.

Roads Deteriorating, Revenue Stagnant

Mayor Kelley flagged the city's deteriorating pavement condition index, currently at 56–58 and falling. "That's something that concerns us a great deal because we don't have a lot of money to put into our roads," she said, noting that $5.9 million annually would be needed just to raise the PCI to 61.

Councilmember Grimsley asked whether anticipated new business and housing developments were factored into revenue projections. Staff confirmed the forecasts are conservative.

Councilmember Dilli Bhattarai urged proactive action. "Definitely we need to start working right now versus waiting till the last minute, I hope," he said.

Decisions: The public hearing was continued to June 23, when the council is expected to adopt the final budget. No public testimony was received on the budget at this hearing.

What's next: Council will take up the budget for adoption at its June 23 meeting. The structural deficit on the five-year horizon will force a broader conversation about revenue diversification — or service cuts — well before FY2028-29 arrives.

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"Diversity, Equity and Inclusion Are Not Nasty Words"

Mayor Kelley read the Juneteenth proclamation recognizing June 19, 2026, in the City of Hercules, and Frank Grimsley III, a Hercules resident and Morehouse College graduate, accepted it with a speech that tied the two-year delay in enforcing the Emancipation Proclamation in Galveston, Texas, to present-day rollbacks.

"Diversity, equity and inclusion are not nasty words. In fact, they are the things that make this country great. They're the reason why I stand up for the Pledge of Allegiance," Grimsley said, connecting Juneteenth to current challenges including attacks on DEI programs, LGBTQ rights, and immigration policy.

Why it matters: What followed was one of the most personal exchanges in a Hercules council meeting this year, as multiple members described how close their own families are to the lived experience of slavery.

Councilmember Tiffany Grimsley, Frank Grimsley's aunt, told the council: "On my maternal side of my family, the grandparents of my grandparents were enslaved people. And so I grew up very close to my maternal grandparents. So the fact that I grew up with people who grew up knowing enslaved people or formerly enslaved people is very significant."

Vice Mayor Walker-Griffin shared that he was raised by grandparents from Jim Crow Mississippi who themselves were raised by formerly enslaved people. "Every advancement that has been made off the efforts of Black Americans have benefited everyone else in return. Immigration, 14th Amendment right. Your ability to be a citizen and vote — that came off the backs of those who were enslaved in this country and built this country for free," he said.

Councilmember Bailey noted that the Civil Rights Act and Voting Rights Act passed when his own parents were adults — a reminder of how recent these milestones truly are.

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Pride Month: "We Always Will Be Here"

Mayor Kelley read the Pride Month proclamation for June 2026, and Brian Campbell Miller, a 15-year Hercules resident, children's librarian, and former Community and Library Services commissioner, accepted it.

Campbell Miller recalled the controversy when the Pride flag was first flown at City Hall and placed the moment in historical context. "Pride was originally a riot. Pride was originally a protest, and it is about showing that LGBTQ people have always been here, and we always will. And we are your neighbors, we are your children, and we deserve the same rights and responsibilities," he said, referencing the Compton's Cafeteria riot in San Francisco and noting that LGBTQ people were once barred from teaching in California.

Vice Mayor Walker-Griffin cited a sobering statistic: "The average age of a Black trans woman is 27 years old. And most of us can imagine why that is. So thinking about that showcases how much work we have to do as a country and as a society." He also criticized Secretary Hegseth's efforts to rename the USS Harvey Milk, calling the LGBTQ community the most intersectional in the country.

Councilmember Grimsley affirmed her support while emphasizing complexity: "I don't think that any of us should be identified by one aspect or characteristic of our identity. Who we are as human beings is multifaceted — we are many things."

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Two Council Seats on the Ballot Nov. 3

The council unanimously adopted a resolution calling for the Nov. 3, 2026, general municipal election. Two city council seats are up for full four-year terms.

Why it matters: The nomination filing period runs July 13 through Aug. 7, 2026, with a five-day extension to Aug. 12 if an incumbent does not file. The winners will inherit the looming structural deficit and deferred infrastructure backlog.

Councilmember Bhattarai caught a typographical error in the staff report — the year read 2024 instead of 2026. Tie votes, consistent with past practice, would be resolved by lot.

Decisions: Passed 4-0 (Councilmember Bailey absent). Motion by Vice Mayor Walker-Griffin, seconded by Councilmember Bhattarai.

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Police Military Equipment Report: Zero Complaints, Zero Violations

Commander Kim of the Hercules Police Department presented the department's fourth annual military equipment report, required by AB 481. The department maintains equipment in six of 15 categories under the state law: three drones, one command vehicle, 33 AR-15 rifles, 30 flashbangs, 10 OC 40mm rounds, and two kinetic energy launchers. FY2025 acquisitions totaled $15,378, including 10,000 rounds of ammunition, 30 flashbangs, a 40mm launcher, and a DJI Avata 2 drone.

"I am pleased to report that we received zero community complaints regarding military equipment use. Zero policy violations. We are in full compliance with AB 481 and all personnel training requirements were followed and satisfied," Commander Kim said. Operational drone deployments occurred during six incidents, including searching for a homicide suspect and executing search warrants.

Vice Mayor Walker-Griffin raised operational security concerns about the level of public disclosure required under AB 481. Councilmember Grimsley asked about flashbang usage; Commander Kim explained they are used only during SRT entries under strict policies. Councilmember Bhattarai asked about maintenance costs (minimal, as the department has no armored vehicle) and auditing (internal, per AB 481 requirements).

Decisions: Report accepted and Policy 706 and Ordinance 547 renewed without modification, 4-0 (Councilmember Bailey absent). Motion by Councilmember Bhattarai.

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Minor Items

• SB 707 remote meeting policy adopted, 4-0. The council amended its rules of procedure to comply with SB 707, which takes effect July 1, 2026. If the Zoom platform is disrupted so the public cannot participate remotely, the council must recess for at least one hour while staff attempts to restore service. City Attorney Kristi Kroll explained the one-hour minimum gives the public time to travel to chambers. Motion by Vice Mayor Walker-Griffin, seconded by Councilmember Grimsley.
• Minutes approved as corrected, 4-0 (Councilmember Bailey absent). The word "revise" was changed to "clarify" regarding emblem conditions, and additional public comment names were added.
• Closed session on anticipated litigation (one case) produced no reportable action.
• Horizon 2050 General Plan survey open through June 19 at hercules2050.com; the first General Plan Advisory Committee meeting is June 24.
• Affordable housing developer open house set for June 20 for three developers who submitted proposals for the city's $5 million housing asset fund. Postcard notices were sent to more than 1,500 homes in Victoria by the Bay, Bayside, and Promenade.
• Refugio Lake dredging postponed to at least next year due to cost concerns; alternatives including relocating the natural waterway are being explored.
• New Superintendent Chris Morris saved approximately $80,000 by finding a company to remove derelict trailers from the police department site for free, avoiding an anticipated $81,000 cost.
• Foxborough playground completed as of June 1; basketball hoops installed; Refugio Valley park shade structure framework going up, with completion expected by month-end.
• Cultural festival drew 4,500–5,000 attendees, according to Director Roque.
• Library Pride celebration planned featuring the Oakland Gay Men's Chorus, and a Juneteenth celebration on June 13 with story times, a flag-raising ceremony, line dancing, and quilted tapestry history by Crystal Johnson.
• Public commenter Katherine Dupont of Green Access Power encouraged the city to explore resilience hubs, backup power, batteries, and microgrids through partnerships with nonprofits, schools, and regional agencies eligible for state and utility funding.