The struggling city of Hercules, Calif., got two boosts from voters on Tuesday.
Voters overwhelmingly approved a half-cent sales tax increase for four years to add as much as $500,000 annually to the city’s budget.
A measure also passed that would allow the city to sell off its municipal utility, which has been operating with a deficit.
Money from the sale of the utility would go to help pay off its debts.
Hercules, which is located on the northeast shore of San Francisco Bay and has a population of 26,000, has been battered by self-inflicted financial problems, leaving it on the brink of bankruptcy.
Hercules’ budget has been slashed by 40% and staff has been cut by about the same amount over the last year, including more than half of the Finance Department staff.
The city is on its fourth finance director in less than three years.
Hercules is likely facing at least a $1.5 million deficit for next year and is trying to find ways to make payments on more than $315 million of redevelopment agency obligations.
Earlier this year, Hercules settled a lawsuit brought by Ambac Assurance Corp. over a default by the city’s redevelopment agency.
Last month, California Controller John Chiang said he found “glaring holes” in Hercules’ finances during two audits.
The controller ordered the review in August after finding major discrepancies in the city’s financial reporting, which included misstatements in its debt service fund.
Last year, a Contra Costa County grand jury said in a report that Hercules used bond funding to make up a $6.6 million deficit.
In 2010, the same grand jury described the appearance of impropriety and-or lack of transparency in the city’s housing and business loan program.
The allegations of fiscal improprieties led the Federal Bureau of Investigation to open a probe, which is ongoing.
