Business Item 4b
STAFF REPORT
City Council Business Item
DATE: August 18, 2025
TO: Honorable Mayor and Council Members
FROM: Aaron Felmlee, Finance Director
THROUGH: Amy Nilsen, City Manager
SUBJECT: Fortuna Enhanced Infrastructure Finance District STAFF RECOMMENDATION:
That the City Council receive the staff report, approve a supplemental budget allocation of $12,500, and authorize the City Manager to execute a contract with Kosmont Companies to conduct a Fiscal Impact Analysis in support of the proposed Fortuna Enhanced Infrastructure Finance District (EIFD).
EXECUTIVE SUMMARY:
On August 19, 2024, the City Council authorized the Interim City Manager to explore the establishment of a Fortuna Enhanced Infrastructure Finance District (EIFD). Subsequent research revealed that engaging a consultant was essential to assess the feasibility of forming an EIFD. The consultant’s scope of work includes evaluating boundary options and strategic considerations, as well as conducting a preliminary funding and financing analysis. On October 21, 2024, the City Council further authorized the Interim City Manager to execute a contract with Kosmont Companies to carry out this feasibility analysis.
On May 5, 2025, Kosmont Companies presented the findings of the Enhanced Infrastructure Finance District (EIFD) feasibility analysis to the City Council, including potential implementation options. In response, the Council expressed interest in exploring whether Humboldt County would be open to an EIFD partnership with the City. Subsequently, representatives from Kosmont, City staff, and County officials held several meetings to discuss the potential for collaboration and outline the next steps required to establish a joint EIFD.
The next phase in evaluating the Fortuna Enhanced EIFD involves a comprehensive fiscal analysis to assess the long-term impacts of implementation on City and County property and sales tax revenues. This analysis will help determine the potential benefits to the primary taxing entities— namely, the City of Fortuna and Humboldt County—resulting from their participation in the financing district.
Kosmont Companies will conduct the analysis, estimating key fiscal metrics including projected revenues (e.g., property tax, direct and indirect sales tax, transient occupancy tax) and expenditures (e.g., public safety and community service costs). The resulting net fiscal impact—defined as revenues minus expenditures—will provide critical insight into the financial viability and mutual benefit of EIFD implementation. Initial discussions with the County have indicated general support for proceeding with this analysis.
Business Item 4b
In addition, City staff have maintained ongoing coordination with CalTrans, which has expressed willingness to partner with the City in identifying matching grant funds to support infrastructure improvements at Kenmar Road and 12th Street.
Staff recommends allocating a supplemental budget request of $12,500 to fund the next phase in the exploratory process for establishing the Fortuna EIFD—a comprehensive fiscal analysis to assess potential impacts and benefits.
ADDITIONAL BACKGROUND:
An EIFD is a special financing district, a governmental entity comprised of both public and private partners, and distinct from the entity that establishes it. EIFDs can aid communities in funding a wide and diverse variety of public capital improvement projects and other projects of communitywide significance outlined in state law, by capturing and leveraging property tax increment (PTI) generated within the EIFD area. The EIFD does not impose a new tax.
Improvements gained through EIFD funding support future development and result in increased property values. This generates increased property tax revenues from the “base year” which can then be leveraged for additional improvements.
Affected taxing entities are not required to contribute their PTI for the EIFD. Participation in the EIFD is voluntary. Each tax-sharing entity that elects to join the EIFD has the option to allocate up to 100% of its portion of tax increment to the district. The most financial benefit for the City would involve a partnership with one or more other taxing entities, such as the County of Humboldt, where dollars are pooled to fund projects within the City. Under the EIFD law, school districts are precluded from participation.
City of Fortuna Infrastructure and Mill District
The City of Fortuna has a number of necessary public capital improvement projects, such as improvements to the US 101 interchanges at 12th Street and Kenmar Road. US 101 bisects the City, cutting off the Riverwalk area from downtown and other areas of the City. The existing configuration at both interchanges is confusing, complex, and inefficient and results in excessive vehicle queuing and poor levels of service.
In addition, there are limited to no pedestrian and bicycle facilities allowing for safe multi-modal transport, no sense of community/place, and poor visual presentation. The City has significant residential and commercial development potential, but the current configuration limits economic and residential development opportunities. Improvements to these interchanges will allow for the growth of the City, reconnect the City to the Eel River, and allow for safe pathways for bicyclists and pedestrians. In addition, due to existing and expanding traffic volumes, these intersections will become a failure in 20 years, almost universally falling below identified General Plan performance targets.
The cost of interchange improvements is beyond what can be funded by development fees, and the City and region have limited funding available to continue to advance the projects described in this staff report. Again, these infrastructure projects are pivotal to facilitating the mill site buildout.
Through the years, staff have applied for many federal transportation grants that could fund all or a majority of these projects but have so far been unsuccessful in those applications.
The Mill District, particularly the Fortuna Mill Commerce Center as envisioned in the Mill Site Specific Plan, will be a hub for diverse use in the region. The area will be a well-designed center of Business Item 4b
commerce with flex space, transportation, general commercial, advanced manufacturing, medical, government, office, multi-family residential, and compatible industrial uses. For the Mill District to be fully actualized, the city’s infrastructure will need to be addressed. The EIFD is one potential funding source that may help address the infrastructure needs in Fortuna.
FINANCIAL IMPACT:
The professional services agreement with Kosmont to perform the Financing District Fiscal Impact Analysis is $12,500. The funds for this agreement would come from General Fund reserves. The City’s General Fund reserves sit at around $6.5 million which is $1.25 million above the required minimum as set with the City’s reserve policy. Staff have set-aside $1.0 million for the general plan update leaving $250,000 in available fund balance.
RECOMMENDED COUNCIL ACTION:
1. Receive staff report and review Council questions with staff
2. Open Public Comments
3. Close Public Comments
4. Approve the supplemental budget request in the amount of $12,500 and authorize the City Manager to execute a contract with Kosmont for the Financing District Fiscal Impact Analysis.
ATTACHMENTS:
• Attachment A – Proposal for Financing District Fiscal Impact Analysis, July 2025