Memo
TO: Amy Nilsen, City Manager
City of Fortuna
FR: Gregg Foster, Executive Director
DATE: July 17, 2026
Thank you for the opportunity to review the three proposals submitted for the management and operation of the City of Fortuna’s River Lodge. The City is seeking an organization capable of operating and maintaining the facility while reducing or eliminating the financial burden on the City.
Our review was limited to the financial components of the proposals. We did not evaluate the proposed programming, community benefits, organizational mission, or other nonfinancial aspects of the proposals.
The following organizations submitted proposals:
1. Fortuna Union High School District (FUHSD)
2. Fortuna Chamber of Commerce (FCC)
3. CAL FIRE/California Department of General Services (CF/DGS) Our analysis focused on three principal factors:
1. The financial capacity of each proposer.
2. The clarity and reasonableness of the proposed multi-year financial plan.
3. The anticipated financial impact on the City of Fortuna.
Based on these factors, it is our opinion that the proposal submitted by the Fortuna Union High School District is the strongest of the three from a financial perspective. The following summarizes the basis for that conclusion.
Financial Capacity of the Proposer
The FUHSD proposal provided the most complete and persuasive discussion of financial capacity. The District operates with an annual budget exceeding $20 million and can assign existing personnel and other organizational resources to support River Lodge operations. The proposal also states that, should facility revenues fall below projections, the District could use other available revenue sources to support the continued operation and maintenance of the facility. This financial capacity provides the District with a 325 2nd Street, Suite 203
Eureka, CA 95501
707-445-9651
meaningful ability to absorb operating shortfalls, unexpected repairs, or other costs that may arise during the lease term.
The FCC proposal anticipates a potential one-time contribution of $100,000 from the Fortuna Lodging Alliance. According to the proposal, those funds would be used for “events and opportunities to promote overnight stays in the City of Fortuna.” However, it is our understanding that the proposed contribution has not yet been approved by the Fortuna Lodging Alliance. The FCC financial statements indicate limited cash reserves and a relatively modest operating budget. Consequently, we are concerned that the organization may not have sufficient financial capacity to cover operating deficits, unanticipated maintenance costs, or other expenses if facility revenues do not meet projections.
The CF/DGS proposal did not directly address the financial capacity required to operate River Lodge. It referenced the overall financial resources of the State of California and stated that River Lodge operations and management would be incorporated into future budgets. While the State clearly has substantial financial resources, the proposal did not identify a specific allocation, operating budget, or financial commitment for the facility.
Clarity and Reasonableness of Multi-Year Financial Projections The FUHSD proposal was the only submission that included a three-year operating and cash-flow projection. This provided a clearer picture of anticipated revenues, expenses, operating support, and longterm financial performance. The District’s proposal includes a $40,000 initial investment for one-time technology improvements and approximately $9,608 in operating support for the first year. The secondyear projection is essentially break-even, requiring only a minimal contribution from the District. By the third year, the proposal projects approximately $8,100 in net operating revenue. The proposal further states that any net operating revenue would be reinvested in facility maintenance and improvements.
While the projected margins are relatively small and may leave limited room for unexpected costs, the projections present a plausible path toward financially sustainable operations.
Neither the FCC nor the CF/DGS proposal included a multi-year operating budget or cash-flow projection. This omission makes it difficult to evaluate whether projected revenues would be sufficient to cover staffing, utilities, insurance, routine maintenance, equipment replacement, capital improvements, and other operating costs over time. The absence of detailed projections also limits the City’s ability to identify potential financial risks or determine whether either proposer would require future financial support from the City.
Impact on the City’s Budget
The proposals use substantially different financial and operational approaches, making direct comparison difficult. Nevertheless, each proposal appears to have a different potential effect on the City’s budget.
FUHSD proposes a flat annual lease payment of $25,000. Its three-year financial plan also includes more than $16,000 per year for groundskeeping, landscaping, and facility maintenance. In addition, the District proposes allocating $25,000 to a dedicated asset-management preservation fund. The proposal indicates that this funding would be part of the District’s broader practice of allocating approximately 3% of its annual budget for the preservation and maintenance of its facilities. These commitments suggest that the District intends to assume responsibility for a meaningful portion of the facility’s routine operating and maintenance costs. However, the City should clarify whether the proposed $25,000 preservation allocation would be specifically reserved for River Lodge or included within a District-wide facilities fund.
The FCC proposes a graduated lease-payment schedule of $1 in the first year, $24,000 in the second year, and $36,000 in the third year. The proposal does not include a defined budget for building maintenance, grounds maintenance, equipment replacement, or capital improvements. Unless these responsibilities are specifically assigned to the Chamber through the lease agreement, it appears that some or all of these costs could remain the responsibility of the City. The lack of a detailed operating budget also makes it difficult to determine whether the proposed lease payments are financially achievable or whether the Chamber could sustain operations without additional City support.
CF/DGS proposes an annual lease payment of approximately $50,000, the highest lease payment among the three proposals. The proposal also states that CAL FIRE would provide up to 12 workdays per year for grounds maintenance. However, the proposal does not include a detailed operating or maintenance budget. As a result, it is unclear which costs CF/DGS would assume and which costs would remain with the City. The City would need to obtain additional information regarding responsibility for utilities, repairs, maintenance, capital improvements, equipment replacement, and other ongoing facility costs before determining the proposal’s full financial impact.
Conclusion
From a financial perspective, the FUHSD proposal is the strongest and most complete of the three proposals. The District demonstrates the greatest financial capacity, provides the only multi-year operating and cash-flow projection, and identifies specific commitments for facility operations, maintenance, and capital preservation.
The CF/DGS proposal offers the highest annual lease payment and the financial backing of the State of California. However, the absence of a detailed operating budget and clear allocation of financial responsibilities makes it difficult to determine the proposal’s full financial benefit to the City.
The FCC proposal provides a graduated lease-payment structure and anticipates potential support from the Fortuna Lodging Alliance. However, the proposed outside funding has not been approved, the Chamber appears to have limited financial reserves, and the proposal does not adequately address ongoing maintenance, capital needs, or the financial consequences of an operating shortfall.