Consent Agenda Item 3f
STAFF REPORT
Consent Agenda Item
DATE: June 1, 2026
TO: Honorable Mayor and Council Members
FROM: Siana Emmons, Human Resources Director
THROUGH: Amy Nilsen, City Manager
SUBJECT: Approve Side Letters to the Memoranda of Understanding Between the City of Fortuna and the Fortuna Police Employees Association, Fortuna Employees Association and Approve Resolution 2026-23, for the Unrepresented Group for Fiscal Year 2025-2027; and Authorize the City Manager to Execute STAFF RECOMMENDATION:
Approve the side letters to the Memoranda of Understanding between the City of Fortuna and the Fortuna Police Employees Association, Fortuna Employees Association and approve Resolution 2026-23 for the Unrepresented Group for Fiscal Year (FY) 2025-2027; and Authorize the City Manager to Execute.
EXECUTIVE SUMMARY:
Effective July 1, 2026, the City will transition to updated medical plan options designed to provide greater long-term stability while maintaining strong and comprehensive coverage.
These changes will result in increased premiums for both employees and the City. The cost increases reflect broader healthcare trends, including rising hospital and provider costs, increased utilization of specialty medications, including GLP-1 drug and the growing demand for care related to chronic and complex conditions
Healthcare and prescription drug costs continue to increase at a rate that outpaces general inflation.
Despite these changes, employees will continue to have access to a quality Exclusive Provider Organization (EPO) plan through the calendar year.
On April 20, 2026, staff met with Council in closed session to discuss the increases and potential options to help mitigate some of the financial impact being passed on to employees. In recognition of the financial impact, Council directed staff to provide a temporary premium offset to eligible employees for a period of six (6) months beginning July 1, 2026, and ending December 31, 2026.
To memorialize agreement, staff is presenting two side letters, one for the FPEA and one for the FEA, as well as Resolution 2026-23, which will supersede the previously adopted resolution for the unrepresented employee group. In addition, there are minor amendments in Resolution 2026- 23, which include updating the Department Head and Division Head lists to reflect current allocated positions. In addition, as noted in the Staff Report for the Full Time Salary Schedule for Consent Agenda Item 3f
Fiscal Year (FY) 2026-27, as an unrepresented management classification, the Police Lieutenant position is recommended for a 10% adjustment to preserve an appropriate compensation relationship between supervisory and subordinate classifications. The previously approved annual stipend amount of $9,800 will no longer be paid in conjunction with this change and is not included in the Resolution 2026-23.
BACKGROUND
The recent increase in health plan costs is the result of measurable changes in claims activity and broader healthcare market pressures and not a single event or isolated issue. These changes are directly impacting program costs and, in turn, employee premiums.
During the 2025 plan year, claims activity shifted significantly. The data shows that the number of high-cost claimants increased by nearly 80%, while the cost of those claims increased by approximately 90%. At the same time, total medical claims increased by approximately 42%, and pharmacy costs increased by approximately 36%. These changes reflect increases in both the frequency and severity of claims, meaning more individuals are utilizing care, and the cost of that care has also increased.
Importantly, these trends are not unique to this program. The broader healthcare market is experiencing sustained cost pressure driven by rising provider costs, increased utilization, and growth in specialty medications. Nationally, healthcare costs are increasing much faster than general inflation, and prescription drug spending continues to be one of the fastest-growing components of healthcare.
Despite these increases, the program remains competitively positioned. Even with these changes, the program continues to perform at or below comparable public agency benchmarks, and the fully insured market has shown limited appetite to quote programs of this size and structure.
The program is being actively managed with a focus on long-term stability, cost control, and maintaining competitive positioning in a challenging market, while continuing to provide FINANCIAL IMPACT:
The total cost to the City for this limited duration offset is $32,000 and a breakdown of the City’s portion is included in the table below. This has been included in the FY 26-27 Proposed Budget as presented to the City Council that is scheduled to be adopted on June 15, 2026.
Consent Agenda Item 3f
RECOMMENDED COUNCIL ACTION:
Approve the side letters to the Memoranda of Understanding between the City of Fortuna and the Fortuna Police Employees Association, the City of Fortuna and the Fortuna Employees Association and Resolution 2026-23, for the Unrepresented Group for FY 2025-2027; and Authorize the City Manager to Execute. Consent Agenda vote.
ALTERNATIVE TO STAFF RECOMMENDATIONS:
The City Council could choose not to approve side letters and Resolution, which would impose additional financial strain on employees, potentially driving some to seek employment with neighboring agencies offering higher wages. This could also result in high turnover rate that the City would be challenged to navigate during a hiring freeze to General Fund positions. This is not recommended as this would create labor relations impacts, decline in morale and engagement and overall workforce instability for the City.
ATTACHMENTS:
• Draft Side Letter to the Fortuna Police Employees Association Memorandum of Understanding for FY 2025-27
• Draft Side Letter to the Fortuna Employees Association Memorandum of Understanding for FY 2025-27
• Resolution 2026-23 – A Resolution of the City Council of the City of Fortuna Establishing and Authorizing Supplemental Compensation and Benefits for Management and Confidential (“Unrepresented”) Employees
Current EPO 250 Fiscal Year 25-26 Monthly Cost
Opt-Out Single Two Party Family
Total Cost $ 840.75 $ 1,121.00 $ 2,348.00 $ 3,353.00
City Portion 840.75 952.86 1,995.80 2,850.06
Employee Portion 168.14 352.20 502.94
Estimated Increase to Plan for Fiscal Year 26-27 28.46% Estimated EPO 500 Fiscal Year 26-27 Monthly Cost
Opt-Out Single Two Party Family
Total Cost 1,080.00 1,440.00 3,016.00 4,307.00
City Portion 1,080.00 1,224.00 2,563.60 3,660.95
Employee Portion 216.00 452.40 646.05
TEMPORARY CITY OFFSET 47.86 100.20 143.11
City of Fortuna Health Insurance Analysis