Business Agenda Item 4e
STAFF REPORT
Business Agenda Item
DATE: July 20, 2026
TO: Honorable Mayor and Council Members
FROM: Aaron Felmlee, Finance Director
THROUGH: Amy Nilsen, City Manager
SUBJECT: Authorize the City Manager to Execute a Contract for the Final Phase Fortuna Enhanced Infrastructure Finance District
STAFF RECOMMENDATION:
Receive the staff report, approve a supplemental budget allocation of $50,000, and authorize the City Manager to execute a contract with Kosmont Companies for the final phase of the Fortuna Enhanced Infrastructure Finance District (EIFD) and Fortuna Public Financing Authority (FPFA) formation process, contingent upon participation by the County of Humboldt.
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.
On August 18, 2025, Council approved Kosmont to produce a comprehensive fiscal analysis to assess the long-term impacts of implementation on City and County property and sales tax revenues.
This analysis helped 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.
Following receipt of the fiscal analysis (Attachment A), City staff met with County staff on several occasions to discuss County participation in the Enhanced Infrastructure Financing District (EIFD).
During the most recent meeting on April 22, 2026, County staff indicated they would likely request a share of future growth in the City’s Transient Occupancy Tax (TOT) revenues as a condition of participation.
To date, no other city participating in an EIFD has provided a share of increased TOT revenues to a county in exchange for its participation. Should the City pursue such an arrangement, the fiscal Business Agenda Item 4e
benefits identified for the City in the fiscal analysis would be reduced, while the fiscal benefits accruing to the County would increase. Due to this staff are not recommending pursuing this condition.
County staff also requested that currently entitled and permitted development projects be excluded from the EIFD boundaries. Excluding these projects would delay the generation of incremental tax revenues available to the EIFD, thereby extending the timeframe required to accumulate sufficient revenues to support bond issuance. Based on preliminary analysis, this delay could extend beyond ten years. Due to this staff are not recommending pursuing this condition.
County staff have indicated that their next step is to present an item to the Board of Supervisors regarding potential participation in the Fortuna EIFD. If the Board demonstrates a willingness to participate in the EIFD without requesting a share of future City Transient Occupancy Tax (TOT) growth, the subsequent steps would include adoption of resolutions of intention by both the City and County and formation of the Fortuna Public Financing Authority (FPFA).
Completion of these actions would require continued assistance from Kosmont and its specialized expertise in EIFD formation and implementation.
To ensure the City is positioned to move forward expeditiously should the County elect to participate, staff recommends approval of a supplemental budget appropriation of $50,000 to fund the final phase of the EIFD formation process. Expenditure of these funds would be contingent upon the County's full participation in the Fortuna EIFD.
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 Business Agenda Item 4e
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 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 assist in the final formation of the Fortuna EIFD is estimated at $50,000. The funds for this agreement would come from General Fund reserves. The City’s General Fund reserves are estimated to end FY 26-27 at around $4.65 million, which is $1.1 million below the required minimum as set with the City’s reserve policy.
ALTERNATIVE TO STAFF RECOMMENDATIONS:
The City Council could elect not to pursue the formation of an EIFD and instead accumulate the necessary funding through other revenue sources. One option would be to dedicate the approximately $350,000 in annual revenue received from the Road Maintenance and Rehabilitation Account, which is funded through fuel taxes. Currently, these funds are used for contracted street maintenance projects and represent the majority of the City’s dedicated street maintenance funding.
Redirecting this revenue toward Mill Site infrastructure projects would significantly reduce contracted street maintenance project activities in the other areas of the City.
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 $50,000 and authorize the City Manager to execute a contract with Kosmont to assist in the final formation of the Fortuna Enhanced Infrastructure Finance District (EIFD) contingent upon participation by the County of Humboldt. Roll Call vote.
ATTACHMENTS:
• Attachment A – Fiscal Impact Analysis
• Attachment B – Supplemental Budget Request