Fortuna City Manager Amy Nelson told the Fortuna City Council on April 21 that the city faces constrained revenue growth and rising costs, leaving a projected gap of about $235,000, or roughly 3 percent, in the general fund for fiscal year 2025–26.

"Fortuna is experiencing limited revenue growth and rising costs," Nelson said. "Expenses are outpacing revenue by 235,000 or 3%." She told the council estimated general fund expenses for FY 2025–26 are about $8.3 million and noted an estimated $31,500 decrease in sales tax revenue.

The shortfall, Nelson said, has limited the city's ability to invest in services such as public safety and to offer cost-of-living pay increases; the city has instead relied on one-time stipends and other temporary measures. She described recruitment and retention challenges across multiple job classes, including police officers, sergeants and licensed positions in building inspection and building official roles. "Recruitment and retention of talented public sector staff remains a critical need and a challenge for the city," Nelson said.

Public safety and employee representatives urged the council to act. Justin Primofori, president of the Fortuna Police Employees Association, said the association "are fully in support of exploring all of these different options" and described minimum staffing levels that require calling officers in on days off. "The only way to fix this… is salary increases," Primofori said.

Fortuna Police Chief Matt Eberhardt also backed the presentation and asked the council to follow staff recommendations. "I wholeheartedly agree with them," he said. "I'm happy that we're being transparent."

Several residents urged the council to favor revenue measures requiring only a simple majority vote. Resident Orville Garrison recommended pursuing measures that pass with 50 percent plus one vote rather than those requiring a two-thirds supermajority, saying he believed two-thirds would be unattainable in Fortuna.

Nelson outlined specific revenue options for the council to consider: a general sales tax (a proposed three-quarter-cent increase that she said could generate about $1.8 million and requires a simple majority), a dedicated sales tax (requiring a two-thirds vote, with earmarking potential), an increase to the transient occupancy tax (a 2 percentage-point increase estimated to generate about $140,000), and a local cannabis ordinance that Nelson said could yield approximately $15,000 per retail business (depending on how a local ordinance is structured). She also described trade-offs such as reallocating existing Measure E funds or cutting discretionary services like parks and recreation to free general fund dollars.

Council members and speakers discussed public polling and outreach before placing a measure on a ballot. Nelson recommended staff work with the finance director and employee groups (the Fortuna Police Employees Association and Fortuna Employees Association) to develop options and implementation plans and suggested appointing two council members to an ad hoc revenue-generation committee to help vet proposals.

Following discussion, the council voted unanimously to create an ad hoc revenue-generation committee and to appoint Mayor Mike Johnson and Mayor Pro Tem Trent to that committee; the motion passed with all five councilmembers present voting aye.

The council directed the ad hoc committee and staff to return with recommendations and implementation plans that could include projected revenue, estimated impacts to services if revenue is not secured, and options for addressing staff retention. Nelson said staff would also provide budget scenarios illustrating the service-level consequences of pay adjustments or staffing reductions.

The council and speakers emphasized that revenue decisions and any ballot measures should be informed by community polling and by outreach to affected stakeholders such as the Humboldt Lodging Alliance for transient-occupancy-tax changes.

The council's direction was procedural: staff and an ad hoc committee are to research, consult and return with options for further council action. Any tax or ordinance change would require subsequent council approvals and, where applicable, voter approval.