If you live in Hercules, or you're thinking about buying or selling here, the city just released its proposed budget for the coming year, and there's a ballot measure this November that could raise your sales tax to one of the highest in California. Here's what's actually going on, in plain English.
The Short Version
- The city's budget is balanced this year, but just barely, and only because of a healthy savings account (reserve fund).
- Without changes, the city expects to start losing money within 3 years.
- Voters will decide this November whether to raise the sales tax from 9.25% up to as high as 10.75%.
- The golf course everyone's heard about? Still not happening, the fund for it has zero dollars in it.
- Several big new housing and retail developments are moving forward, which matters a lot if you're buying, selling, or just curious what's coming to the neighborhood.
Where the City's Money Comes From
Think of the city budget like a household budget, just bigger. About $21.5 million comes in every year to run the city, and here's where it comes from:
- 28¢ of every dollar: Sales tax (what you pay at the register)
- 21¢: Utility tax (on your gas, electric, phone bills)
- 13¢: Vehicle license fees
- 11¢: Miscellaneous income
- 10¢: Program fees (things like recreation classes, permits)
- 10¢: Other taxes
- 8¢: Property tax
That last one, property tax, is unusually small for a California city. Most cities lean much harder on property taxes. Hercules doesn't get to keep as much of it, which is part of why they're looking at other ways to raise money (like the sales tax measure below).
Why is Hercules' property tax cut so small?
This isn't because homes in Hercules are cheap, and it isn't because residents are under-taxed. In fact, the city's own budget notes that Hercules residents pay a median effective property tax rate of 1.62%, a normal-to-high rate for California. The problem is how the pie gets sliced, not how big the pie is.
Here's the short version: California caps property tax at 1% of a home's assessed value (that's Proposition 13, from 1978), and that 1% gets divided up between multiple agencies, city, county, school district, fire district, etc. How it's divided was locked in based on a formula from back before Prop 13 passed, tied to what each agency was collecting at the time.
Hercules got a small slice in that original split, and it's stuck that way today. Of every $1 in property tax collected on a Hercules home:
- $0.34 goes to West Contra Costa Unified School District
- $0.16 goes to K-12 schools (a state education fund)
- $0.16 goes to Contra Costa County
- $0.09 goes to the Rodeo-Hercules Fire District
- $0.05: just a nickel, goes to the City of Hercules
The city literally receives only 5% of the base 1% property tax rate. Compare that to a city with a larger historical slice, even at the exact same home value and the exact same tax rate, that other city keeps far more money per house than Hercules does.
Why this matters for real estate conversations: rising home values in Hercules won't fix this the way it might elsewhere, because the city's cut is a fixed percentage carved up decades ago, not something that grows just because home prices grow. That's a big part of why the city is leaning on a sales tax increase instead of counting on property tax growth to solve its budget gap.
Where the Money Goes
Here's where every dollar of the city budget is spent:
- 48¢: Police. By far the biggest expense.
- 18¢: Administration (running the city itself)
- 13¢: Parks & Recreation
- 9¢: Insurance
- 5¢: Community Development (planning, permits, code enforcement)
- 4¢: Debt and miscellaneous
- 3¢: Public Works (roads, infrastructure)
The real cost driver isn't any one department, it's payroll. Salaries and benefits eat up about 60% of the entire city budget. That's the number that actually decides whether the city's finances get better or worse over time.
Is the City in Trouble?
Not in immediate danger, but there are warning signs:
- The city has a healthy "rainy day fund", about 25% of its budget saved up, which is considered strong.
- BUT city officials themselves project a budget shortfall starting in 2028-29 if nothing changes. Costs (especially pension and labor costs) are growing faster than revenue.
- The retirement fund for city employees is about 76% funded, okay, but below the 80-90% range that's considered financially strong.
- Over half of the city's sales tax revenue comes from just three businesses. If any of them left town, that would hurt.
Wait, Is My Sales Tax Going Up?
This isn't in the budget document itself, but it's the big local news right now: yes, it might.
In July 2026, the Hercules City Council voted to put a sales tax increase on the November 2026 ballot. Here's how it breaks down:
- Today: 9.25%
- If the city's measure passes: 10.25%
- If a separate regional transit tax ALSO passes on the same ballot: 10.75%
For comparison, neighboring Pinole is already at 10.25%. So Hercules wouldn't be wildly out of line with what's already right next door, but 10.75% would put it among the higher sales tax rates in the state.
Why is the city doing this? In their own words, revenues are "barely adequate" to sustain current service levels. Back during the 2008-09 recession, the city cut about 40% of its staff, and it never fully rebuilt those service levels since. This tax is their attempt to catch up.
Bottom line: Nothing has changed yet. This is a ballot measure. Voters decide in November 2026.
What About the Golf Course?
Still not happening, at least not with any money behind it. The "Hercules Golf Club" fund in the budget shows $0 in, $0 out, for this year and next. It exists on paper as a placeholder fund, but there's no funding, no revenue, and no activity tied to it.
The Real Story for Buyers and Sellers: New Development
This is the part that actually matters most if you're in the real estate world. Several big projects are moving forward that will change the housing supply and the look of the city:
- The Hercules Hub: This is the city's flagship project: a planned transit hub combining bus, train, and ferry service in one location, reportedly the first of its kind on the West Coast. The city has set aside $3 million as a local match to help fund it and is actively lobbying for federal grant money. If it happens, expect the area around it to become a real center of activity, similar to what transit-oriented development has done in other Bay Area cities.
- Bayline (Bayfront Blocks F & H): 83 units, mostly affordable housing, already approved.
- Bayfront Final Phases: 171 new townhomes approved (9 of them affordable), spread across several remaining Bayfront blocks.
- Sycamore Crossing: A 12-acre mixed retail, hotel, and residential project on Sycamore Avenue, expanding on the existing Aventine and Bayside communities.
- Hilltown (also called Hill Crest): A larger mixed-use residential development approved for up to 598 units. This is the biggest single pipeline of future housing in the city.
Between these projects, Hercules has a meaningful amount of new housing and mixed-use development in the pipeline over the next several years, worth watching if you're advising buyers on where the market is headed, or thinking about timing a sale around new inventory hitting the area.
The Takeaway
Hercules' budget is stable for right now, backed by a solid reserve fund, but the city is being upfront that it's not sustainable long-term without new revenue, hence the sales tax measure on the ballot this fall. Meanwhile, the golf course dream is dormant, but real, funded development is happening at the Hub, Bayfront, Sycamore Crossing, and Hilltown, and that's the part that will actually shape the neighborhood over the next several years.
This summary is based on the City of Hercules FY 2026-27 Proposed Budget and recent local news coverage. The sales tax measure has not yet been voted on as of this writing. Check with the Contra Costa County Elections Office or the City of Hercules for the latest status.