In the 1965 movie “Flight of the Phoenix,” the survivors of a plane crash in the Sahara make a new plane from the old one and fly it out of the desert. It was ten years ago this fall that I went to the new director of the Fort Worden Public Development Authority (PDA) and suggested that he needed a similar strategy for it to “fly” financially. Little did I realize then that it would take so long to crash and that the failure would begin so immediately.
Cleared For Takeoff
The PDA was an independent public agency set up by the City of Port Townsend with its own board of directors appointed by the city. Former city manager David Timmons put former planning director Dave Robison in charge of negotiating the transfer of Fort Worden from state government to the PDA. Robison, perhaps because he was eager to get the PDA director job, agreed to an onerous deal: that besides operating the core buildings, the PDA would also, in several years, take over the maintenance of dozens of old and unneeded buildings.
Using the “Flight of the Phoenix” analogy, I proposed to Robison that I would help him get a grant from state government to create a business and investment plan for financial sustainability. I believe that the PDA used about two-thirds of the grant for preparation of a site plan later used to justify glamping and Makers Square. The PDA had already begun to fail.
Not Enough Lift
Even with a greatly-reduced budget for the business and investment plan, I still took a deep dive into the numbers, analyzing where visitors came from, reconstructing the accounting statements to determine the relative profitability of different departments, and profiling competitors which went after the same group business.
I found big problems in the operations: that the accounting systems were almost useless for making management decisions about day-to-day operations and that the margins on those operations were grossly out of line with industry averages. The margins on the rooms, for example, which provide the bulk of operating cash flow for almost all hotel operations, were half the industry averages, and food and beverage operations were a negative 15 to 20 percent, and not near zero as they should have been. Overhead was twice the industry average.
Besides the management and accounting problems, I found two big problems with the property itself that meant that without substantial and carefully targeted investment, the PDA would never be able to improve the buildings, much less maintain dozens that were unnecessary.
First, there simply weren’t enough salable beds that with good margins would generate cash flow. The engine in the plane simply did not have enough cylinders. Barracks that could have been renovated to generate cash flow were given away to Peninsula College or left unused.
Second, there was nothing to do on rainy days at the Fort and there were no quality meeting rooms, which meant that the PDA could not sell off-season. I recommended good AV equipment, rainy-day amenities, and covered picnic shelters with fireplaces on the bluff where families could make memories together.
Flights of Fancy
Pétanque court installed on back lot.
My recommendations fell on deaf ears, for the new model for the Fort already seemed fixed: McMenamins hotels, which are targeted at adults who spend much of their stay eating and drinking. Close to a million dollars went into converting an old brig into a bar, and a new pétanque court went in on a back lot. The lowest cost for an individual booking soared to hundreds of dollars per night.
Using grants, donations, and a big loan from Kitsap Bank, the PDA put the big money into glamping and Makers Square, both fads of the time. Those projects not only distracted the board and staff from essential operational and accounting improvements, but used up the financial capacity for additional lodging, the financial necessity.
Interestingly, the PDA did hire consultants to prepare pro formas for glamping and Makers Square, but they were designers, not business people, and they made unrealistic or bad assumptions. For example, the pro forma for Makers Square projected that it would barely break even, but would justify itself by increasing room sales. The problem is that most of those sales would come in the peak season when those rooms were already sold. The cost overruns on glamping speak for themselves.
The $2 million glamping project featured these “luxury” tent sites projected to cost $125,000 each. Installations were never completed and though their expected life is ten years, only a few years post-installation the unused tents are already deteriorating.
Moral Hazards, But No Control Tower
The high and unpayable debt resulting from glamping and Makers Square highlights a moral hazard in state law: cities can set up PDAs that may benefit them, but they are not liable for the debt they may take on. This encourages them to take risks for which they do not bear the consequences.
Had the city been responsible for the PDA’s debts, it might have paid more attention to the original deal that made the PDA responsible for maintaining all those old buildings. It might have commissioned a detailed business and investment strategy before closing on a deal. It would have hired experienced professionals to review new debt. And it would have made sure that the PDA board was doing its job.
A board’s primary responsibility is to hire and fire the executive director, to make sure that director is doing their job. The PDA board had too many retired professionals unwilling to be independent and put in the necessary review time. One spent much of his time doing building inspections. I wrote another with an impressive background in finance and the travel industry about my concerns for the PDA’s viability. They did not respond.
In 2021 the board pushed out long-time director Robison, but not without considerable angst about its reputation. A 3/18/21 Port Townsend Leader article quoted an email from board treasurer Jeff Jackson saying, “I get we’re transitioning but not fast or clear enough and the three of us look partially ineffective.” That article quotes a press release from co-chairs Todd Hutton and Norm Tonina saying that Robison’s tenure was, “Ending on a high note.”
Rearranging the Flight Deck
Management blamed the PDA’s crash on Covid, but conditions were already precarious. The embezzlement and diversion of funds took time to clean up after, but there does not seem to have been a plan for how to repay the restructured debt. It is anybody’s guess why the PDA spun hospitality operations out into a separate entity when those operations didn’t make money in the first place.
Fort Worden will now go back to the state, which, with its budget challenges, probably won’t maintain buildings even at current minimal levels, much less improve them. Don’t expect a big turnaround in operations, for the state had no real business strategy when it previously operated the buildings. Fortunately, core users like Centrum provide a base of business, but all those long-term questions about how to compete and sell off-season room nights will still exist.
A Way Forward
For decades now there have been kumbaya retreats at Fort Worden about the meaning of “lifelong learning.” This misdirection resulted in a lack of focus on the improvement of day-to-day operations, which brought the Fort and the PDA to where they are today. There are ways of improving this property such that it would be financially self-supporting. However, the big challenge isn’t the business operation of the Fort — it is its governance.
Simply put, does the community care enough about the Fort Worden complex to put the right people in charge? The experience with the pool and the PDA show that city government is not up to this task, but another form of governance could work if there was enough of the community watching out for its future.
——————————————————-
PHOTOS: Stephen Schumacher
——————————————————-
Earlier Port Townsend Free Press reporting on the Fort Worden PDA:
Fort Worden PDA Out of Money, Must Privatize to Survive
Criminal Investigators Called into Fort Worden PDA Mess
Fort Worden’s Promised Financial Oversight Never Happened
Fort Worden Glamping A Soggy Mess
Fort Worden PDA Finances Plagued With Problems From Beginning
Fort Worden Hit By Cherry Street Project Disease
Rod Stevens is a Bainbridge Island-based real estate strategist specializing in urban and economic revitalization. He has four decades of making places and projects work. Over the last 15 years, he has worked on five projects in Port Townsend, including three for the city, one for the PDA, and one for Centrum. https://business-street.com/
Port Townsend is primarily a globalist real estate investment zone. Many of the people who used to care about the State Parks and local history are too occupied now with basic survival to bail out the corrupt political class and their cronies who drained the wealth and spirit from our communities.
Before the Port Townsend Free Press came to town, there was a decade or more with no venue for meaningful public discourse. There was no place to evaluate the diversity of opinions in the form of a back and forth discussion. I’m certain that I was not the only local person who knew that both the PDA and Cherry Street were doomed from Day 1 for the same reasons – the costs and challenges of renovating and maintaining old buildings were obviously underestimated. This type of knowledge is very common and almost always learned the hard way far from the halls of academia.
What were my options? A letter to the editor of a local newspaper? A three minute speech at a public meeting? Neither option was likely to change anything and both could have resulted in financial problems for me because it is not acceptable in Port Townsend to question a popular narrative.
The crumbling buildings at the Fort are a good reminder that communities and even powerful totalitarian governments die when there is no control mechanism on runaway popular narratives and impractical ideologies.
MJ, if you ever have information that contradicts the popular narrative, I would love to hear it: bthomas@cityofpt.us.
I worked at the Commons during the Fort’s “hayday” and had such hope without knowing the shaky ground beneath. This is tragic and shameful that no one was held accountable or took responsibility and little seems to have been learned from this. The Fort was praised for never firing a shot during the war and that this may be it’s final battle is tragic.
After seeing these epic failures, i’m beginning to think this is money laundering and no one is ever held responsible…so why even have people in charge if this is all you get… trash
Excellent article. The city may end up on the hook for the $6 million in loans from Kitsap Bank. When City Manager John Mauro was pushing around PDA acting executive director David Timmons, Mauro was cautioned by Timmons and the city’s legal counsel that exerting control over the PDA could end up making the city responsible for the PDA’s obligations. It appears that Mauro disregarded the advice and tightened city controls on the PDA. City Councilor Libby Wennstrom, the city council liaison, supported Mauro and rode the PDA even harder. The receiver for the PDA might want to look into this as it maximizes assets to pay the PDA’s creditors. I suspect the receiver’s attorneys may already be doing so. It will be the only way Kitsap Bank ever gets repaid. My article for the PTFP about Timmons’ departure discusses some of the authority Mauro sought over the PDA’s finances.
Is there a good legal definition of meddling to the point of having effective control?
In about 2019 I spoke with a senior Kitsap Bank employee instrumental in approving loans like this. It sounded like the bank owners were not involved in everyday management. I’m wondering if the “pretend and extend” here was a way of keeping bad news from the owners, for there was almost certainly no way of avoiding an almost complete write-off.
It is reported that capital improvement funds from Kitsap Bank were used by Executive Director Dave Robison for day-to-day expenses. His qualifications include being fired previously by the City for ethics violations. Similar to current qualification issues with city manager Mauro and ripple effects he causes.
Anyone of us getting a loan to build or improve has to show receipts for work done to draw funds. Where was that protection with the FWPDA loans? Are not mis-appropriating funds, WASTING THEM and then defaulting a crime? The State, City, and Kitsap bank are all better off if this just fades into the memory hole. So many details. So many questions. If Timmons, Sandoval, and King had their way and held title Kitsap bank would own much of Fort Worden. Timmons, an insider architect was chosen to go in and “fix” the wreckage. The people of the State of Washington deserve better. From all three entities that worked hand in hand and now are OK with not having an impartial audit or criminal investigation of everything from day one.
Responsibility is not an option, so various inept manifestations of the PT power core continue. The FWPDA affected all of the people of the State. The tiny tide pool polluted a larger one.
Like Carlin said. It’s a private club and you and me ain’t in it.
Edited excerpt from my parting email to the PT City Council. The totality of dysfunction is seen in the pool, Cherry Street, parking chaos, unqualified city manager. Same core players. No responsibility.
I came to PT after participating in the PDA structure at the Pike Place Public Market for 24 years. That out of touch insulated PDA damaged both farmers and artisans as Executive Directors and managers came and went, always needing to make a mark and writing glowing reports about their activities.
Currently the PT City Council has before you the wreckage of the FWPDA. I was very active in attempting to warn both locals and people of the State about PDA’s illusion of openness and public input. All of the people of the State supposedly own the park. Paid for with their tax money. Very few knew of the proposed deal with the FWPDA and State Parks. Few know now the proposed handing back of what was mis managed and gutted.
Originally the FWPDA wanted full title to all of Fort Worden. Centrum had bailed out after questionable managing and failure to follow the MOU with State Parks, even though State Parks had an in-house representative at the Fort.
This is not the official narrative.
The State was on board with the FWPDA takeover as Centrum, who had sub leased buildings to out of compliance tenants now called “partners” and kept profits, bailed out. The FWPDA was and is just a few key folks in the PT power core in reality. Sandoval signed the FWPDA into existence. Past appointed mayor David King now wanting to hand back wreckage was a key FWPDA “Lifelong Learning” architect as was City Manager David Timmons. What have we “learned” here today kids?” Likely very little. The full title deal was changed after much pressure to a 50-year lease on the upper campus to the FWPDA, with the State keeping the lower part of Fort Worden including the campgrounds. I was the bad cop saying what needed to be said. The good cops on our side made the deal. I never minded being the bad cop. Then and now.
The State and City Council/Faber have been complicit in ignoring audits before covid that showed a PDA that was off track. The city and State are complicit in allowing tenants to be in charge of the FWPDA along with others who helped market the “Lifelong Learning” model including Scott Wilson, then owner of the Leader, and past Appointed Mayor David King who is still shepherding this engineered disaster to its predictable, soulless, insolvent end. In the beginning it was very convenient to have a PR guy with a newspaper on the PDA board. And a tenant as chair. There were 2 pro PDA articles of interest that Wilson wrote. Dozens of public comments regarding warning of problems were later edited out of the Leader archives. I restored them because I kept copies of those and more, but don’t know if they remain.
I heard from a good and hardworking person that for at least the first five years of operation both staff and board members who spoke up were bullied and pushed out.
Thank you for the informative article and enlightening comments. It is good to see more posts here!