Unsustainable.  Without massive city subsidies, the Mountain View pool would be closed. No one knows how much larger the subsidies must be to sustain a much larger new aquatic center. All we have are predictions based on projections which are based on assumptions.

In every scenario, large subsidies continue for decades to come. The weight of these subsidies are contributing to pulling Port Townsend’s finances over a fiscal cliff, starting now, as it eats into reserves and cuts back on core city services.

 

We previously reported on how few people use the pool and how very, very few of them live in the county outside city limits. See “Mountain View Pool–By The Numbers.” This report will focus on numbers preceded by dollar signs.

Somebody Call a Lifeguard

The YMCA manages the pool under contract with the City of Port Townsend, which in turn leases the facility from the Port Townsend School District. The annual report for 2022 submitted by the Y shows a natatorium (swimming pool) awash in red ink. Any other operation would have drowned by now. But huge city subsidies keep this one breathing.

The city budgets $400,000 annually to subsidize the pool. It makes a large payment directly to the Y, which is then used to cover shortfalls and give the Y a nice profit for its services. It also picks up the tab for repairs. For instance, city council recently voted for a cheapie ($75,000) slap-dash sort of roof repair that will be good for only a few years, instead of properly repairing the roof with a multi-decade shield against weather.

The pool’s enormous losses are starkly revealed by backing out the city’s subsidy paid directly to the Y in the amount of $276,000. We can then see actual earnings from sales of passes, daily admissions and merchandise. These are the pool’s earnings.

The 2022 report from the Y also includes a couple of months’ results from the end of 2021 following reopening of the pool at the end of the pandemic lockdowns. Those results, covering operations from October 24 to December 31, 2021, show $51,308 paid to the Y. For the last quarter of 2021 the pool earned only $14,837. Against this paltry amount, the pool’s expenditures totaled $55,868. Minus the city’s subsidy, the pool lost about $41,000 in this period.

2022 saw the the pool’s financial health worsening. The pool’s expenses of $326,404 exceeded its $93,172 in earnings by $233,231.

The following table in the Y’s 2022 report shows a positive net operating figure. That positive figure is created by including the city’s subsidy, which is not earnings. It is an unearned infusion of cash. If the city’s subsidy of $276,000 is backed out, the pool’s earnings versus expenses is negative — the $233,231 loss highlighted above.

The Y spent less than $20,000 on maintenance. It purchased very little new equipment and supplies ($6,345). But $53,781 went to the Y for “YMCA Association Administrative Allocation.” This is not a payment for salaries. It is not an investment in the pool. It is in the nature of an additional fee extracted by the YMCA for its involvement in operating the pool. This is effectively the Y’s profit.

The YMCA Association Administrative Allocation for the last quarter of 2021 was almost $15,000. For the first half the Y took about $14,000, a number which may not reflect payments made in July for the first 6 months’ full “YMCA Association Administrative Allocation.”

The 2023 numbers reported by the Y, even with the slight uptick in usage, show more red ink. Expenses totaled $166,537 against earnings of  $72,451, for a loss of $94,086. Only $4,619 was spent on maintenance. (It is possible annual passes are renewed/purchased in the first half of the year, creating a bump in first half revenue not repeated in the second half. As we reported in our earlier article, use of the pool peaks in the first half, then declines substantially the remainder of year.)

The Y’s Profits Eclipse Investments in Maintenance and Repairs

The Y takes more in profit — its Association Administrative Allocation — than it spends on maintenance and cleaning of the pool. Not only has it spent very little on maintenance and repairs, its facilities and custodial payroll for the first half of 2023 was less than $7,000. It spent less than $1,600 on janitorial supplies. In 2022 it spent less than $7,000 for an entire year on its facilities and custodial payroll.

Anyone who has owned an old pool knows that failing to address issues as they arise guarantees bigger problems and larger bills down the road.  These financial reports suggest that the Y has decided to “let things go.” We can only speculate what could have been accomplished by investing in repairs and maintenance the $82,000 extracted by the Y as its profit during these periods of time.

Bigger Pool, Subsidies Forever

No one knows how large the subsidies will have to be to sustain a larger, new aquatic center. The city’s Financial Sustainability Task Force, on page 32 of its final recommendations, estimates annual costs of operation at $890,000, more than three times what it costs to operate the existing pool — not including the Y’s “Association Administrative Allocation.” Under state governing Metropolitan Park Districts, the junior taxing district being considered as the vehicle to raise property taxes for the pool, the city will be required to continue its annual $400,000 subsidy.

Will a shiny new aquatic center ever attract enough users to cover its expenses? Nobody expects that to happen, even the new pool’s most ardent advocates. Projections shared at the public meetings by Opsis Architecture of Portland, Oregon, the consultant working for the aquatic center’s task force, projects annual losses at $350,000 to $400,000. These figures, we have learned, come from a “feasibility study” prepared by Ballard King & Associates of Highland Park, Colorado. Opsis is being paid $175,000. (I cannot report at this time whether the fees paid to Ballard King are included in the OPSIS contract or are covered in an additional consulting contract with additional expenditures.)

I hope to write separately on the Ballard King report. I’m not sure they have been to Jefferson County. There are some glaring errors and omissions in their work, some of which are embarrassing and should give pause to any decision maker who would rely on this document to justify tying taxpayers to a project that will cost $38-$53 million, not including overruns and contract adjustments.

Ballard King’s financial projections for all the versions of the pool that have been discussed at the public gatherings presided over by OPSIS show deficits in the hundreds of thousands of dollars as far as the eye can see. These projected deficits, Opsis has pointed out at the public meetings, are about the same as the (broke) city of Port Townsend is spending now. To make the future financial picture for hugely more expensive, more complicated, and much larger aquatic facilities look not much worse than what the city is bearing now, Ballard King went out on a shaky limb.

Ballard King’s calculations rely on fantastically increased revenues.

Remember, currently the Mountain View pool has been earning less than $100,000 a year. To keep the required losses close to the current losses and the current level of subsidy, revenue must not only double or triple, but come at a level seventeen times higher. To lose only $352,572 a year, the “full build out” $53 million version would have to earn $1,763,761 annually. The “base and gym” model, to which it seems the city and task force are leaning, would have to earn 12 times more ($1,214,795) than the existing pool to keep losses at $403,015. Even the “base” model, coming in at a paltry $38 million, would have to see revenues increase eight-fold to $834,466 in order to keep losses at $434,091.

“If you build it they will come,” was a memorable line from a screen play by an author with a fertile imagination. It is hardly a prudent foundation on which to launch a $38 to $53 million construction project with tripled annual operating costs.

An “Aggressive Estimate” of Future Revenues

Ballard King admits that its projections are based on a “reasonably aggressive estimate of revenues generated from admission fees and passes.”  How reasonable?

A lot more people would have to pay to use the pool and they would have to pay a lot more. Ballard King acknowledges that Jefferson County is poor and old, much more so than state and national levels. (How much were they paid to reach that conclusion?) As we have shown, only 174 Port Townsend residents and 34 county residents (outside city limits) used the pool on an average monthly basis in 2022. Ballard King’s calculations require that out of our poor and old population, about 1,106 people would have to use the pool on a monthly basis to make the “base” model projections work. Those numbers include 264 households, meaning the required individual usage would be even higher.

For the favored “base and gym” version, usage would have to soar to 1,413 users, which includes 524 households. To keep losses on the “full build out” version to the level of current subsidies, 1,974 user units (including 718 households) would have to decide to use the pool…

…and pay…

…and pay…

…and pay some more.

How Much Will It Cost to Use the New Aquatic/Fitness Center?

A lot.

Proponents of a new PT aquatic/center like to point to the Shore Aquatic Center in Port Angeles as an example of what may be possible here. Okay, let’s do that.

The Shore Aquatic Center charges $389 for an adult annual membership, $229 for youth and seniors, and $540 for families. What would PT’s new facility have to charge to keep losses around $400,000 annually?

Let’s start with the apparent favorite, the “base and gym” version. For an annual pass, an adult would have to pay $630, youth $265, seniors $420, and families $945 — close to double Shore Aquatic’s fees in most categories.

For a 10-day pass adults would have to pay $68, youth $50, and seniors $59. Families could not buy a 10-day pass, meaning each family member would have to pay separately, making a family visit quite costly. The Shore Aquatic Center, in contrast, charges $67 for a 12-day adult pass and $44 for youth and seniors. Families (with up to 10 members) can buy a 12-day pass for $133.

Ballard King’s report contains no discussion of whether the old and poor people of Jefferson County would resist paying such high prices.

How poor is Jefferson County? Household income in the designated “primary service area” of Port Townsend, Kala Point, Cape George, Marrowstone, Port Hadlock, Chimacum and Irondale is $20,000 per household below the comparable state level.

 

How old are we? “Much higher” than state and national levels and getting older, according to Ballard King. By 2027 the percentage of the population above 65 years is projected to increase from 58% to 75%.

For Consultants’ Projections to Pencil Out, Existing Local Businesses Must Suffer

Where will all these new users come from?

Start with pulling people from existing gyms and studios.

“Within Port Townsend itself as well as the immediate surrounding area, there is a number of private fitness clubs and smaller boutique type providers. The private sector is the greatest provider of fitness space in the market,” writes Ballard King on page 43 of its report.

Ballard King openly admits what Opsis has danced around. Opsis has been asked repeatedly whether a new taxpayer-funded aquatic facility with an exercise component would compete with existing local exercise and recreation options. They have said more than “no.” To the contrary, Opsis has said that local gyms and fitness studios would benefit because they would gain more business. If this seems hard to swallow, it should be. This is like a Walmart developer assuring small retailers they will benefit by having a Supercenter open in their community.

Ballard King, on the other hand, recognizes that any version of an aquatic/fitness center will compete with existing local businesses. On pages 44-45 they admit the obvious: the existence of private providers in the area is “a challenge” to a future aquatic/fitness center.

In other words, a public facility that needs to pull 12-17 times the revenue of the existing pool would do better without our existing fitness providers continuing in operation. Local athletic centers and fitness studios might be put out of business in order to make this ambitious new aquatic center pencil out at “only” a $400,000 loss.

What About Likely Cost Overruns?

Has there been a public works project that has come in on time and on budget? Ballard King’s projections do not disclose any contingency for cost overruns. How much more could the pool finally cost? How would added construction costs be covered? Will greater public subsidies to cover cost overruns require more tax hikes?

Of course, the consultants offer no guarantees that their projections will prove correct, or even within some guaranteed margin of error. If their “reasonably aggressive” scenarios prove unreasonable and overly aggressive for Jefferson County, it is taxpayers who will pay for their errors.

But these are highly respected and highly paid consultants, you might say. Can’t we take their projections to the bank? At the same time we should ask, is there an incentive for consultants to come back with answers their clients want? As I will hopefully show in a follow-up report, Ballard King makes huge leaps from census data to the conclusion that the county’s old and poor population will gladly pay more and drive miles to experience a new Port Townsend aquatic center.

But for now, Ballard King’s own extrapolations from data should give reason to be skeptical about all their prognostications.

Consider the set of projections from the Colorado consultants. From afar, they looked at census data, recreational industry national studies and other exogenous data then applied it to Jefferson County. One example of this sort of desktop analysis resulted in the following table.

Their detached statistical analysis tells them that in 2022, Port Townsend and its nearby areas likely had 173 adult cheerleaders and 1,350 adult basketball players. Does anyone here know these 173 cheerleaders? Where do the 1,350 adult basketball players shoot hoops? How about those 176 adult wrestlers: where are they grappling on mats? Those 313 adult gymnasts: where can we watch them on the high bars?

They also concluded the area likely had 3,010 adults participating in swimming. Those are mere statistical projections. Real-world head counts from the manager of the Mountain View pool found only 174 adults in the Port Townsend area engaged in swimming on a monthly basis in all of 2022.

It is clear that these out-of-state consultants did their work from afar and did not actually spend much time talking to people here or observing how we live and recreate. Their study completely overlooks biking as recreation, labels the Kala Point pool as Mountain View pool on a map, and ignores the existence of the Cape George pool.

But, hey, they think there are 173 active adult cheerleaders and 1,305 adults in some sort of basketball league no one else knows about.

If you believe these numbers, then, by all means, believe that their construction and operating cost projections are rock solid and will come in on target. But before you commit, did you catch their CYA disclaimer in the fine print at the bottom of that table?  “These figures do not necessarily translate into attendance figures for various activities or programs at a new center.”  

Do tell.

The Y’s Cut… and Loose Ends

The best-case scenarios for containing losses close to where they are now kick in only in the second year of full operation. Unstated are the presumably much larger losses in the first year of operations.

Also not factored into Ballard King’s analysis is the fact that in addition to paying significantly higher charges to use the pool, everyone in the “primary service area” would be also be paying higher taxes to build and subsidize operation of the pool. That family that would have to pay $900 for an annual pass, could be paying an additional $400 in higher property taxes under a metropolitan recreational district tax, a sum of $1,300 each year (and increasing as assessments rise).

I discovered a glaring inconsistency between Opsis and Ballard King in their projections. Ballard King’s report does not assume there will be any payments to the YMCA for managing the facility. Yet, the slides projected by Opsis at the town halls show the same projected expenditures and losses, stating they are assuming that the Y will manage the pool and will be paid for its services. The Y, as seen above, is currently taking about $52,000 annually for its “Association Administrative Allocation.” This figure would likely be significantly higher for a larger, expanded aquatic/fitness center operation. If the new pool is targeting revenues 8 to 12 times higher than Mountain View pool, how much more will the Y be paid, and how much larger will be the deficits requiring taxpayer subsidies?

In conclusion, haven’t we seen this movie before? Where else in recent memory have we seen consultants painting rosy pictures based on specious projections for costly projects that result in gouging taxpayers for years on end?

 

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Top image of swimming pool with red ink adapted from a photo by
Lewis Geyer/Digital First Media/Boulder Daily Camera via Getty Images.