STAFF REPORT
City Council Business Item
DATE: May 19, 2025
TO: Honorable Mayor and City Council Members
FROM: Amy Nilsen, City Manager
SUBJECT: Revenue Generation Ad Hoc Committee Update
STAFF RECOMMENDATION:
1. Receive the staff report from the Revenue Generation Ad Hoc Committee; and
2. Approve $37,500 to be included in the Fiscal Year (FY) 2025-26 budget for public opinion research to gauge the feasibility of and inform a potential sales tax measure in November 2026 with EMC Research/Team Civ X and authorize the City Manager to execute a professional services agreement for these services.
DISCUSSION:
On April 21st the City Council heard a presentation on the City’s budget outlook and this included:
limited investment in vital services, particularly City wages, a review of wages across local jurisdictions; climbing city-wide turnover percentage; potential revenue generation options; and creation of a Revenue Generation Ad Hoc Committee.
The City Council created the Revenue Generation Ad Hoc Committee comprised of Mayor Johnson, Mayor Pro-Tem Trent, City Manager, Finance Director, and representatives from the Fortuna Police Employees Association, Fortuna Employees Association and Unrepresented employees.
The April 21st staff report contained information on the City’s budget and how limited investment in vital services has impacted wages across the City organization compared with other local cities.
Fortuna’s salaries when compared with Eureka and Arcata were 27% to 25% lower for a Police Officer, 28% to 20% lower for a Police Sergeant, 37% to 30% for a Building Official, 24% to 12% lower for a Utility Worker II, and 18% to 11% lower for a Treatment Plant Operator II. The City of Rio Dell’s salaries are currently within competitive range with Fortuna. Competitive range is around 10 percent.
The April 21st staff report also discussed that recruitment and retention of talented public sector staff remains a critical need and challenge for the City. Vacancies for many positions in the public sector (police, licensed professionals) remain a challenge to fill. In addition to a growing wage gap across the City and its neighboring jurisdictions, the City is also seeing a steady increase in turnover. The City of Fortuna employs approximately one hundred (100) staff. Eighty-one (81) are full-time and nineteen (19) are part-time. Turnover for full-time positions is estimated to reach just slightly over 30% or 25 staff for FY 2024-25. When part-time staff are included in this calculation the City will see 50% turnover in the current fiscal year. Turnover has been increasing over the last several fiscal years.
Business Item 4a
Business Item 4a
General Fund and Reduced City Services
On Wednesday, April 30th the Ad Hoc Committee met to review one of the options presented in the April 21st staff report, “General Fund and Reduced City Services” to determine what percentage and what City services would need to be reduced to invest in vital city services.
If the General Fund were to provide a 20 percent pay increase, to come within the competitive range of other cities, that would include approximately $810,000 in salary and $190,000 in benefit costs for a total of $1,000,000. The City does not currently have a $1,000,000 in available funding to provide this level of investment in vital services. Therefore, a decrease to General Fund services would be needed to make $1,000,000 in funding available. The pie chart below represents one option for General Fund service reductions.
In order to avoid decreasing public safety services, a significant decrease in Parks and Recreation services would be necessary. This includes no recreation programs, selling the River Lodge, no paid museum services, cutting the Parks and Maintenance staff by 50% and reducing the already meager street maintenance budget by $200,000. By reducing the General Fund contribution to these services it would mean the following layoffs:
3.75 Full Time Equivalent (FTE) Recreation Leaders
.58 FTE Recreation Program Coordinator
1.0 FTE Recreation Program Supervisor
1.0 FTE Administrative Assistant II
1.0 FTE River Lodge Conference Center Manager
1.0 FTE Conference Center Coordinator
Business Item 4a
.87 FTE Conference Center Worker (PT)
.58 FTE Museum Curator
3.0 FTE Parks Maintenance Worker
2.5 FTE Street Maintenance Worker
15.28 FTE TOTAL
15.28 FTE would need to be laid off, or 18.9% of the City’s existing workforce. Layoffs to this degree in Parks and Recreation would impact services. There would no longer be evening and weekend skate services, no youth break camps, maintenance of park grounds would be reduced, and reduced availability on weekends to assist with events, more specifically no garbage pickup or restroom cleanup. The remaining staff, the Parks and Recreation Director, which is funded by Measure E, would only have the ability to maintain minimal recreation opportunities such as reserving fields and facilities.
Layoffs to this degree in Street Maintenance would also impact services. The loss of two and a half Street Maintenance Workers would mean severely limited street maintenance services.
The Ad Hoc Committee requested that staff look at another scenario where all departments were asked to cut their budget by 20% in order to support investment in vital services. The below pie chart represents another option for General Fund service reductions.
In this second service reduction scenario, the Police Department would reduce staff by three (3) Police Officers. The loss of three Police Officers would reduce shift coverage, increase officer safety risks, drive up overtime demands, and add to already high workloads, further straining morale and increasing the risk of burnout. In addition, officers would no longer respond to medical aid calls.
Medical aid calls are not a legal requirement of the Police Department and other local police services do not respond to medical aid calls.
Business Item 4a
This second scenario also includes an 83% reduction to recreation programs, no paid museum services, cutting the Parks Maintenance staff by 25% and reducing the already meager street maintenance budget by $100,000. By reducing the General Fund contribution to these services it would mean the following layoffs:
3.0 FTE Police Officers
3.75 FTE Recreation Leaders
0.50 FTE Recreation Program Supervisor
1.0 FTE Administrative Assistant II
.58 FTE Museum Curator
1.5 FTE Parks Maintenance Worker
1.25 FTE Street Maintenance Worker
11.58 FTE TOTAL
11.58 FTE would need to be laid off, or 14.3% of the City’s existing workforce. Other departments are not included in this scenario due to their already limited staffing. Cutting the Finance Department or the Community Development Department would essentially leave them incapacitated and unable to perform their essential functions such as audit requirements and building inspection services.
Investing in vital services by reducing other General Fund Services is not practical for the long-term viability and operation of the City. Therefore, the Ad Hoc Committee is still interested in pursuing a sales tax measure in November 2026, and further discussed options for a general or dedicated sales tax measure.
Sales Tax Measure and Public Opinion Research
One pathway to a November 2026 sales tax measure is through public opinion research. The Ad Hoc discussed potential sales tax measure questions and reviewed proposals from research firms for public opinion research. First, there are several questions to consider whether the City pursues a general tax (50% +1 simple majority) or a special tax (66% majority); sunset date versus no sunset date; does the City address the expiration date of Measure E in 2033 in a second ballot measure; and is the community willing to support investment in vital services.
Public opinion research is pivotal and tests a potential sales tax measure for level of community support, for understanding residents’ attitudes and preferences, informing policy decisions, such as whether to pursue a sales measure and if so, what type, and fostering a more democratic and responsive City. Public opinion research also helps elected officials understand the needs and concerns of their constituents, allowing for more effective governance. Additionally, research on public opinion can reveal shifts in public sentiment over time, influencing how policies are debated and implemented. In essence, public opinion research is a crucial tool for understanding the needs and priorities of the City’s residents, informing policy decisions, and promoting a more democratic and responsive City.
Staff requested proposals from three public opinion research firms and received two proposals from EMC Research/Team Civ X and Godbe Research. Both proposals were reviewed by the Ad Hoc Committee. It is recommended that EMC Research/Team Civ X be selected to conduct Phase I, Polling and Measuring Feasibility. If the polling data shows a ballot measure is feasible, Phase II Feasibility Analysis of Ballot Measure Options at an additional cost if the Council chooses to engage in services further. The total cost for Phase I is $37,500 and it is recommended this cost be included in the FY 2025-26 budget. The funding for this project will come from the General Fund Reserves.
Business Item 4a
FISCAL IMPACT:
The cost for Phase I, Polling and Measuring Feasibility is $37,500 and will be funded through General Fund Reserves in FY 2025-26. This is an investment in determining the viability of a sales tax measure, and without additional revenue in the future, the City will continue to lose the ability to fund infrastructure projects and pay competitive wages. If revenue does not increase soon, the City will need to work toward balancing future budgets by reducing services and staffing. As shown in the staff report, there are several services that would be significantly reduced and/or eliminated.
RECOMMENDED COUNCIL ACTION:
1. Receive staff presentation and review Council questions with staff;
2. Receive public comment; and
3. Approve $37,500 to be included in the FY 2025-26 budget for public opinion research to gauge the feasibility of and inform a potential sales tax measure in November 2026 with EMC Research/Team Civ X and authorize the City Manager to execute a professional services agreement for these services. Voice Vote.