by Jim Scarantino | Mar 7, 2025 | General
How is Port Townsend doing financially? City Manager John Mauro tells us pretty much all is well.
Here he is in his City Manager’s preface to the city’s 2025 budget:
“If you take the time to review the previous years’ budgets – or even just the budget messages from me – you’ll see them evolve into something increasingly clear-eyed, strategic, and honest. This year we attempt to keep moving forward in a similar fashion, with a balanced, smart, and forward-thinking budget that reflects our community’s values and sets us up for enduring success.”
In an email exchange with the Leader, he deflected concern about the city’s budget actually being a deficit budget (keep reading). He insisted the city’s budget was instead “a structurally balanced budget.” That phrase does mean something. Indeed, a structurally balanced budget is a good thing. The Government Finance Officers Association provides this explanation:
Most state and local governments are subject to a requirement to pass a balanced budget. However, a budget that may fit the statutory definition of a “balanced budget” may not, in fact, be financially sustainable. For example, a budget that is balanced by such standards could include the use of non-recurring resources, such as asset sales or reserves, to fund ongoing expenditures, and thus not be in structural balance. A true structurally balanced budget is one that supports financial sustainability for multiple years into the future. A government needs to make sure that it is aware of the distinction between satisfying the statutory definition and achieving a true structurally balanced budget.
So is Port Townsend’s 2025 budget a structurally balanced budget? Should we not be concerned about the fact that the city’s budget is only balanced by spending reserves? Is the city being set up for success, as Mr. Mauro tells it, or something else?
The “Fiscal Cliff”
At the end of 2023, I wrote an article entitled, “Port Townsend is in Trouble.” It copied the graph featured at the top of this article directly from the report of the city’s Sustainability Task Force (on which I have also reported).
That graphic shows the city heading over a “fiscal cliff,” to use the words of the Sustainability Task Force, and certainly does not reflect a structurally balanced budget that delivers sustainability. To stave off that deep dive, the city has been doing some quite smart things, such as paying down debt and setting aside funds for future debt payments.
The 2025 budget shows just over $2 million being banked for paying debt coming due next year. Likewise, funding for streets is up significantly from taxing through the Transportation Benefit District, and the budget shows large expenditures on capital projects needing attention. Further, a rainy day fund had about $248,000 at the start of the year, not a huge amount, but at least something positive.
On the other hand, both the general capital and street capital funds show large deficits. Expenditures of almost $4 million on streets will leave less than $35,000 in that account by year end. Expenditures of almost $1.4 million from the general capital budget will pull that account into the red and leave under $200,000 by year’s end. That leaves very little for next year’s needs.
Despite some accounts doing well, there is a lot of red ink, spending in excess of income, throughout the city’s budget. The result is an overall deficit of $1,826,888.
Some kinds of municipal expenses can benefit from federal and state grants, and money from such sources is funding a good deal of Port Townsend’s infrastructure work. The general fund that pays for City Hall’s operations and staffing is another matter.
Burning General Fund Reserves
There is no more federal COVID money, aka American Rescue Plan Act funds, to supplement Port Townsend’s general fund. The city booked about $2.755 million in COVID funds in 2022. The city’s general fund peaked that year at almost $7 million (see the graph heading this article). The COVID money is now gone. These emergency funds were supposed to be spent on public health, infrastructure, supporting local businesses impacted by government-mandated shutdowns and supporting “essential” workers.
These federal funds bought two police vehicles ($356,000), contract legal services ($300,000), a roof repair for the pool ($91,500) and a Bobcat excavator and mini-excavator ($98,725). More questionable expenditures show in the city’s final reporting on how it used these one-time emergency funds: remodeling City Hall ($546,000), an “engagement survey” ($50,000), expanding payroll by adding a “Long Range Planner” ($240,000) and various outlays (about $500,000) in salaries and consultants for the failed golf-course revisioning as Central Park and the megabucks Taj Mahal aquatic center proposal.
With ARPA funds now showing a zero balance, 2025 will mark the third straight year of overspending out of the general fund. At the same time, the cost of City Hall salaries and operations has increased. Some line items have more than doubled.
By the end of this year, the general fund reserve will have been drawn down almost 43% from its 2022 level. From almost $7 million in 2022, general fund reserves will be reduced to less than $4 million by year’s end.
In 2025, the city is projected to pull about another $1 million from its general fund reserves to compensate for general fund deficit spending. There is no reason to believe that on the current trajectory this account won’t be pulled down further in coming years.
Spending on the Mayor and Council grew from $122,362 in 2022 to $291,434 last year, but has been cut back to $237,581 for 2025, still a 94% increase over 2022. The City Attorney account grew from $483,504 in 2022 to $826,288 last year, a 71% increase. Some money has been shaved off the City Attorney budget for 2025, coming in at $762,723, still a huge increase since 2022.
Many other City Hall line items have also grown significantly since 2022:
- Communications, from $0 to $187,736
- Human Resources, from $340,690 to $495,865
- Planning & Development, from $1,108,492 to $2,140,316 ($2,510,257 in 2024)
- Finance, more than doubling, from $465,764 to $1,055,130
- Police Administration, more than doubling, from $552,993 to $1,219,402
- Police Operations, from $2,791,357 to $3,753,359
Even in the face of persistent deficits, the city continues to expand payroll.
It will be hiring three seasonal workers in 2025 for streets, parks, storm and waste water, and water distribution tasks. It is also adding four full-time positions: water maintenance worker, park maintenance worker, community services director and arts and culture coordinator.
Washington’s rising minimum wage will drive up labor costs for seasonal works and entry level library workers. It pushes higher all the wages above it by increasing the base wages on which the rest of the pay scale is built, called “wage compression.” Further, as the Leader has been reporting, raises will be coming to City Hall that are not in the 2025 budget, adding to the red ink already requiring spending reserves to create a “balanced” budget.
Worrying Signs
To avoid falling off the fast-approaching fiscal cliff, substantial real growth in the city’s economy is required. That was the message from City Engineer Steve King back in 2023. He was refreshingly frank about the approaching crisis. “Our tax structure absolutely requires growth,” he said. To avoid crisis, a “radical” change is needed to achieve a high rate of growth not seen in recent memory.
So how is the city’s real economy doing in providing the growth required by our tax structure?
The retail sales tax brought in an estimated $3,397,900 in 2024. This is up from not only pandemic years, but also higher than 2018, when the city netted $2,529,757. That may look like a much better year, except one must adjust for inflation. The 2018 revenue, adjusted for inflation, would be worth just under $3.2 million today. That means the city’s retail and other sectors that pay the retail sales tax have barely expanded in seven years. That is stagnation.
Property values, though, are not stagnating. Owners can expect to be paying more, with some of that increase heading towards the city’s accounts. The city can also increase the tax by the permitted 1% annual bump (count on it).
But the stagnation in the underlying economy can’t be ignored. Revenue from the Business and Occupation and Real Estate Excise Taxes are actually predicted to decline in 2025.
Port Townsend’s tourism economy is not experiencing any real growth. Lodging tax revenue is a fairly good barometer of how robust the tourist economy is. 2024 saw $528,096 in lodging tax revenue. That is below pre-pandemic 2018 when lodging tax revenue was $551,080. Adjusting that figure for inflation, in today’s dollars the 2018 lodging tax revenue would be $638,597. This means that in real terms the city’s tourism industry has shrunk considerably. Troubles at Fort Worden, a major driver of local tourism, does not mean good news for the city’s future lodging tax revenues.
And the costs of running a city continue to rise. Inflation is hanging around, not dropping as much as had been anticipated a couple years ago.
Structurally Balanced? Nope.
The question is not whether the city’s 2025 budget manages to balance out on paper. The question is whether the city’s budget, judged by the standards articulated by the Government Finance Officers Association in defining a “structurally balanced” budget, “supports financial sustainability for multiple years.”
A budget that uses reserves to cover ongoing expenditures, by definition, does not meet that criteria. The city’s 2025 budget, as in the preceding two years, uses reserves to cover ongoing expenditures. It is, therefore, not “structurally balanced” as Mr. Mauro claims. It continues on course over the financial cliff predicted by the city’s Financial Sustainability Task Force.
Mauro, as in his recent comments to the Leader about the city’s deficits, assures taxpayers not to worry about the red ink. “It’s not a coincidence.” he wrote in an email to the Leader, “that we won a national [International City/County Management] award for the work done by community members, staff, and Council – and something that should provide some assurance to our community that the City, through City Council action on budgets and related policy, is making sound financial decisions over multiple years.”
That award (self-nominated, by the way) was for work showing the city falling off a fiscal cliff three years from now. It was not an award for continued payroll expansion and deficit spending that will confirm that grim prediction.
by Jim Scarantino | Mar 2, 2025 | General
The City of Port Townsend paid architects almost $500,000 to draw up a plan for Evans Vista that is too costly to build. The city purchased the 14.4 acre Evans Vista property in 2021 to address the city’s affordable housing crisis. The architect’s pictures, like the rendering above, are very nice. But the bottom line is that all that money produced a project that can’t be built.
Total costs would start at $111-126 million (2023 dollars) and go up from there. The economic analysis performed only after the drawings were done shows that the market value of the Evans Vista Project would be $55.1 million below the costs of development.
Despite being confronted with a pro forma showing the project was not economically feasible, the Port Townsend City Council on November 20, 2023, voted to approve the plan so that it could move forward. Since then, nothing much has happened on the ground. There is no contractor, no investor pouring tens of millions of dollars into building a costly, hip neighborhood by the pulp mill in the middle of large homeless camps.
As things stand, the Evans Project is a failure. Over $2.1 million has been spent thus far. The project was supposed to address the immediate and crushing shortage of affordable housing in our community. More than three years have passed and not a single unit of affordable housing has been added.
I asked the city when we could expect to see the first affordable housing available at Evans Vista. City Engineer Steve King provided this answer: “These projects by their very nature move slowly as we expected…” There are many excuses for the project moving slowly, everything from holding back until a sewer lift station is built to the more intractable problem of finding a private developer who will risk their money on a seriously losing proposition.
But this was not supposed to be a long, drawn-out morass. Nobody told city council up front this project would stall out. It was supposed to be a fix for the city’s crushing shortage of affordable housing… yesterday, today, tomorrow, not untold years in the future, if ever.
We’ve seen this before: the debacle of the Cherry Street Project, the “revisioning” of the golf course as a Central Park, and plans for a Taj Mahal aquatic center to replace the Mountain View pool. Millions of taxpayer dollars have been spent on lots of drawings, scores of meetings and listening sessions, and thick books of reports, with little else to show for it.
An “Incredibly Expensive” Idea
On December 6, 2021, city council voted to purchase the 14.4 acre Evans Vista property, located east of the highway before the first traffic circle upon entering town. $1.3 million from the Washington Department of Commerce paid for the land, on the condition that at least 25% of housing units in any future development would be “affordable.”
The Evans Vista property is outlined in red.
These acres had long been the place of last resort for addicts who lived in appalling conditions among the trees. I covered that story in my article on what was then being called Port Townsend’s fentanyl forest. During the term of the late former Mayor Brent Shirley an effort to add about 200 housing units in that area had made some progress until the developer determined the project was not feasible due to the location.
As explained by City Engineer Steve King, the new plan was to create at least 100 affordable housing units. He said that number of residences could be served by the water and sewer infrastructure already in place. The “due diligence” conducted before purchase looked for signs of Indian use (none found at the cost of $36,491) and reviewed zoning codes. No economic feasibility analysis of any kind was conducted.
City council and staff quickly leaped from focusing on affordable housing to imagining an entirely new neighborhood with a mix of affordable and market-rate housing, complete with a central plaza and various amenities. Then Mayor Michelle Sandoval predicted it would be an “incredibly expensive” project.
Cherry Street Project demolition
Current Mayor David Faber, Deputy Mayor at the time, said, “I am nervous” about “again'” getting “the city significantly involved in a project that doesn’t necessarily have a clear end project yet — given the status of the Cherry Street Project and so forth.” He did not want another “long-term, dragged-out morass.”
The Cherry Street Project, as most readers know, was the city’s failed effort at creating affordable housing by purchasing in 2017 and barging from Victoria, B.C. a 60-year old 4-unit apartment building and moving it to city-owned land on a hillside above the golf course. The cost of the project was never determined up front and continued to explode. The building sat empty, a vandalized eyesore. Eventually, the city gave up and tore the building down in late 2023. The land sits empty and has not been sold. Taxpayers are still paying off the debt incurred to rehabilitate the building and grounds.
Though he did not want another “long-term, dragged-out morass,” Faber stated quite clearly regarding the embarrassment of the failed Cherry Street Project, “I wouldn’t change a single thing about what we did.” Sadly, the Evans Vista Project has played out along similar lines that led to the failure of the Cherry Street Project.
Ignoring Hard Numbers
In early 2018 it became apparent that much more money would be needed for the Cherry Street Project. The initial hopes of quickly adding affordable housing in the Fall of 2017 for a couple hundred grand had evaporated. This would be a much more involved, more time-consuming and more expensive project, i.e., “a long-term, dragged-out morass.”
City council voted to approve a bond that saddled taxpayers with debt and interest of about $1.4 million. Before the vote, council was informed of a pessimistic pro forma, an economic projection and analysis, showing the project defaulting within two years. City council, which then included Faber and current Deputy Mayor Amy Howard, voted to issue the bond anyway. As council had been forewarned, the project cratered. Taxpayers got burned and years of effort were wasted without adding a single unit of affordable housing.
Fast forward to 2021, when the city acquired the Evans Vista property. The city obtained $3.1 million from the state to help with acquisition and infrastructure costs. In August 2022 the county gave $500,000 of Federal COVID money to fund “the Evans Vista Master Plan.” A couple months later the city issued a “request for qualifications” from architects who could prepare a master plan and applications for land use permits for “an affordable and mixed-use housing development.”
Time was of the essence:
“The development of a mix of 100-150 workforce housing units is meant to deliver urgently-needed supply and to activate the Evans Vista neighborhood as part of the area’s emerging commercial and business environment.” (Emphasis added.)
On November 7, 2022, city council approved a $500,000 contract with Thomas Architecture Studios (TAS) of Olympia. City Councilor Ben Thomas abstained on grounds he lacked enough information to vote on such a large contract.
A year later, November 20, 2023, city council approved the “final master plan design.” The project had grown to 319 units with multi-story apartments — walk-ups and “podiums” with parking under the building. There would be 16 townhomes, 8,500 square feet of retail space, a 2,000 square-foot daycare center and 3,000 square feet of other structures, such as pavilions and meeting spaces. Only nine acres of the 14.4 acres would be developed due to the steep slopes and preservation of a wetland area. The entirely new neighborhood would come with plazas, a dog park, an auditorium and stage, a “madrona picnic grove” and multiple “art plinths.”
City Manager John Mauro said he was “very excited” about the TAS design.
An air of unreality reigned. City Planning Director Emma Bolin penned a fanciful Google review from May 2030:
A Google Review from the Future
Evans Vista Neighborhood in the Year 2030
I moved to Evans Vista years ago and watched my new neighborhood blossom. It’s a homecoming. Many of my friends returned to Port Townsend due to the increased amount of affordable housing. The on-site daycare is a relief for working families. Affordable townhomes empowered struggling friends to become homeowners. This is a place where people succeed. The demand for the 321 available units led to a waiting list of current and former Port Townsendites, all yearning for a backyard where you can take tai chi lessons followed by garden-to-table kombucha workshops, and later a Chautauqua band finished out with late-night open-air movies….
Evans Vista personifies our local vibe. Diverse and affordable housing options cater to all. The abundance of open spaces, trails, community gardens, and gathering spaces promote individual and community health, fostering connections among residents. The mix of market-rate and affordable housing boast Port Townsend’s commitment to diversity and inclusivity….
Evans Vista is not merely a neighborhood; it’s a testament to what Port Townsend life should be. It’s a portal to the future where sustainable and inclusive havens thrive.
– Evans Vista Resident, May 1, 2030
The reality check that followed the nice pictures brought spirits down fast. You could see the faces of city councilors drop (especially Mayor Faber, who may have been seeing that Cherry Street Project repeat he dreaded). According to economic analysts with ECONorthwest, there was no likely scenario in which the master plan could work. “A combination of factors need to change for the entire site to be feasible.”
Slide from ECONorthwest presentation
Those factors would be a deep cut in construction costs, much higher rents throughout the city so that higher rents could be charged at Evans Vista, and a return to pre-pandemic interest rates and market conditions like those in 2013. Failing a dramatic change in all those factors, the project does not “pencil out.” It is unfeasible even without any “affordable” units and with all units rented at highest market rates.
City council did not tell the architect to come back with a design that stood a chance of being built sometime soon. Instead, the council gave its unanimous approval to a plan that can’t be built.
To date, $2,149,942 has been spent on the project (right-hand column in table below) with millions more in the budget (left hand column).
Table of budget and expenses for Evans Vista project, from the city’s 2025 final budget
Three Strikes
Since the city acquired the Evans Vista property, dozens of people who had once found affordable (free) housing under the trees have been evicted. It cost about $100,000 to clear out their camps and cart away their refuse, with city staff providing the labor. A large chain link fence and “no trespassing” signs threatening criminal prosecution surround much of the land.
The people who used to live there moved not very far away. Some were accepted into the Mill Road homeless camp, officially named the Caswell-Brown Village after two homeless individuals who died from substance abuse. Many others have pitched tents in the woods and meadows north of the DSHS building on a city right-of-way and private property behind the Les Schwab store. I have been told by people who do outreach to the homeless that about 50 people could be living in that area.
Homeless encampment on north side of Evans Vista
Homeless camp on north side of Evans Vista, behind Les Schwab
Mill Road (Caswell-Brown) homeless camp
Blue marking at bottom left indicates approximate area of Mill Road camp; blue line at bottom right shows boundary of area occupied by homeless camps near DSHS building; Evans Vista property delineated by dashed red line.
The large Mill Road camp lies on the south side of the Evans Vista property. Every day some of its residents cross the Evans Vista property to get into town. I have been told of, but not seen for myself, another sizable encampment very near Evans Vista along a power line right-of-way.
Several years ago I wrote about the frequent law enforcement call-outs to the Mill Road camp due to drug dealing, substance abuse, thefts and assaults. Law enforcement sources speaking off the record inform me that the camp is being better managed now, with fewer calls to law enforcement. Drug use inside the dwelling units, however, continues and there have been several overdoses and other complications from substance abuse.
The camps at the other end of the Evans Vista property, near the DSHS building, and in the surrounding woods have seen a sharp rise in methamphetamine abuse. Those camps have become increasingly violent — so violent, according to law enforcement sources, that people have fled and set up camps along nearby power lines.
Moreover, immediately to the east of Evans Vista and the homeless camps is the odiferous paper mill.
Evans Vista is not exactly prime real estate, yet the analysts used rental rates at the fairly new West Harbor Apartments as a lodestar. Rents at Evans Vista would have to be higher than what is charged at a fairly up-scale complex in a desirable location.
Even an all-market rate project with NO subsidized “affordable” units would be unfeasible, according to ECONorthwest’s analysts, unless the city’s rental rates across the board go higher. How ironic, that in order to provide a limited amount of affordable housing at Evans Vista, housing would have to become less affordable for everyone else.
Higher rents alone would not make the project feasible. Interest rates would also have to drop very significantly. But rates have declined less than the predictions ECONorthwest presented to council in 2023. Thus far in 2025, the Federal Reserve has not cut interest rates. According to the minutes of the most recent Fed meeting, any cuts are on hold indefinitely while inflation persists.
Slide from ECONorthwest presentation
Two of the three factors necessary for any chance of the TAS design being feasible are not attainable. As ECONorthwest also discussed, assuming the TAS design remains the basic plan, there is little that can be done meaningfully to reduce construction costs. That makes three strikes against the Evans Vista Project.
How Could This Happen… Again?
In a few years time, Port Townsend has seen four big-vision, costly public works efforts flop: The Cherry Street Project. The golf course “revisioning” as P.T.’s Central Park. The mega-bucks Taj Mahal aquatic center. And now Evans Vista.
These projects share several attributes. First and foremost is that none of them are core municipal services, such as providing infrastructure and law enforcement — the fundamental reasons why municipal corporations are formed. Millions of dollars have been wasted that could have gone towards fixing the city’s streets and deteriorating sewer and water systems went to consultants or staff hired principally to drive home the golf course and pool projects.
The amount wasted is not insignificant. Recently, the century-old pipeline that brings water to Port Townsend suffered two major breaks. As the Leader reported, the 2025 repair budget for this critical infrastructure — P.T. can’t exist without it — was only $63,672. A single January water line break cost $150,000 to repair.
In contrast, the city staffer brought on board with federal COVID dollars, whose primary job was strategizing and realizing the golf course revisioning and the aquatic center planning and design, was getting paid $130,000 annually, plus benefits. City Manager Mauro has said the city spent $500,000 on the “Healthier Together” pool design process. The architectural firm that drew up the grandiose and unaffordable $43-53 million pool design was paid about $200,000. The contract with TAS for Evans Vista was almost half a million dollars.
Ironically, the unfeasible Evans Vista Master Plan was one of the reasons the Washington City Manager’s Association gave Port Townsend City Manager John Mauro its 2024 award for Management Excellence. Off topic, but along similar lines, his work on the city’s financial sustainability was another reason for the award — yet the city is now in its third year straight of operating in the red and continues drawing down dwindling reserves.
And remember that, like the Cherry Street Project, the Evans Vista Project was intended to address and help alleviate the city’s dire, emergency-level affordable housing crisis. So many years like so many tax dollars have been lost, and the problem has only gotten worse.
Recently a plumber came to our home to fix a faucet. Poor us, we couldn’t get hot water the exact second we wanted it. He told us that he lives in “a shack in the woods” without indoor plumbing. He uses an outhouse. He says has not been able to find any other accommodation that he can afford.
In deciding to go big and build an entirely new neighborhood, in one of the least desirable areas of the city, then handing that vision off to an architectural firm without giving them a budget as to what could feasibly be built, the city set itself on the same path as with its other recent out-sized housing and amenities projects.
Infrastructure already existed to add 100 residences. But instead of building incrementally, picking the low-hanging fruit, the city and TAS put up a Christmas tree then asked “stakeholders” what presents they wanted around the tree. The project metastasized until affordable housing became a “condition” of funding that had to be met, instead of the primary objective.
A city that desperately needs affordable housing immediately paid a lot of money for a plan that is not only unfeasible on a large scale, but absurd in its details. Where needed housing units could have been added, TAS instead dedicated buildable land to an amphitheater.
Other buildable land would showcase “art plinths.” Port Townsend knows all about “art plinths.”
A Wise Pivot
Not all has been wasted. The civil engineering work performed for the TAS design would be useful to any developer. And we now know what we can’t possibly afford.
On November 4, 2024, city council authorized the city manager to execute a contract for about $160,000 to see if there might be a way to entice a developer and investors to bite off smaller pieces of the project. Further, the developer would not be tied to the unfeasible design from TAS. City Engineer King and Planning Director Bolin deserve credit for this pivot.
I suggest the redirection be more audacious and boldly innovative. We can’t keep following the same path to failure over and over again. We have an emergency, so let’s act accordingly. This will be the topic of my next article on the Evans Vista Project.
