Insufficient revenues. Increasing expenditures. Stagnant economy. Port Townsend is heading over its financial cliff fast.
Don a green eye shade and take a flinty-eyed look at the city budget just approved for 2024. There’s red ink everywhere. The vapid verbiage of John Mauro’s City Manager’s Report can’t cancel it. It is only erased by burning reserves unlikely to be replenished in the foreseeable future. At a time when significant growth is needed, city projections for next year see a contraction in business activity and tax revenue.
What is celebrated as growth over the years since the city emerged from pandemic restrictions owes much to recent high inflation. It is not real growth.
Since those restrictions ended, the city has lost 10% of its commercial utility accounts. Businesses are closing up and leaving town. I recently counted 18 shuttered businesses from upper Sims Way, down Water Street and along lower Washington Street.
The Public Works Director has stated that strong, steady growth and a “radical change” are needed. Instead we are seeing denial, business as usual and City Hall chasing grandiose projects it cannot afford, like an expensive new aquatic center.
The words “save money” and “austerity” are foreign to City Hall’s vocabulary. Instead, the city seeks to expand outlays and staffing. That means a more rapid depletion of reserves and an accelerated march over that financial cliff the city acknowledges is its future.
The Fiscal Cliff
The City’s Financial Sustainability Task Force predicts that city finances will launch over a “fiscal cliff” in a few short years. We reported on the city’s grim financial future here and here. The graphic from the Task Force’s final report shows the city eating reserves at a quickening rate beginning in 2025 and descending into municipal failure in 2028.
The city’s 2024 budget — just approved on December 4, 2023 — shows that the cliff is closer than the Financial Sustainability Task Force predicted. After less than two years of employment, the city’s finance director bid farewell with the last budget she would submit to city council.
The city has seen a number of resignations of other key personnel — including the city clerk, HR director, and other financial staff — a subject worthy of another report. In terms of fiscal impact, departures of critical employees translates into losses as money and time must be expended in recruiting and hiring replacements. Inefficiencies abound until replacement hires get up to speed and fit in.
The work of the outgoing finance director shows that the city currently lacks income sufficient to pay all its bills. To make the budget balance, it must take money out of reserves. A lot of money. The Financial Sustainability graphic projected very little change from 2023 to 2024. But the reality reflected in the approved 2024 budget shows the city has already begun its dive off that fiscal cliff.
Look at all the red ink in the following table from the city’s budget for the coming year.
The city had to reduce its General Fund reserve by 35% to produce a budget on paper that appears balanced. Its General Fund reserve is now just barely $4 million. That is down from $6.9 million at the start of 2023. That huge drop of more than a third of its reserves is due to the fact that the city overshot its projected 2023 expenses by almost $2.4 million. And more of its General Fund reserve will need to be withdrawn in the coming year.
Nearly $2.4 million, more than one third of the city’s reserves, were drained to meet expenses in 2023.
Where did all the money go?
Consultants got a huge chunk. And expenses related to the golf course “envisioning” and indulging expensive fantasies for a new aquatic center contributed heavily to a $4.7 million supplemental budget passed earlier in 2023.
The city has also been spending down its $2.755 million in federal Covid gift money (American Rescue Plan Act – “ARPA”). According to federal law, these funds were to be spent on water, sewer and other infrastructure, revenue replacement for the hit municipal finances took from Covid lock-down, assistance to small businesses, households and industries negatively impacted by Covid-related losses, or premium pay for essential workers. All of that money will be spent by the end of 2024; none will be left for 2025.
Judge for yourself whether these federal funds were spent properly. The largest single use of federal Covid funds — $741,500 — will, by the end of 2024, be spent on enhancing City Hall and council chambers, paying for such items as a new door, chairs and tables, carpet, and remodeling staff offices. (See page 12 of the 2024 budget report.) In his year-end message for 2023, City Manager Mauro elevated remodeling Council chambers to the level of a “core” municipal service.
The next largest use of Covid funds — $505,958 — went not to fixing sewers, water lines and other infrastructure, but to re-imagining the golf course and the pool. On top of that, another $255,000 went to parks.
Not a dime of these Federal funds was spent on fixing sewers and water lines or other infrastructure, with the possible exception of $59,000 for a mini-excavator.
The city expanded its payroll by adding a “Long Range Planner” for $240,000. Another $50,000 was spent on something called an “Engagement Survey.”
Rapid Growth and Expansion As More Red Ink Flows
Critical infrastructure — streets, water and sewers — show deficits in their capital and operating accounts. At the same time City Hall expenditures have been growing dramatically in other areas.
Comparing the city payroll in 2021 to the 2024 budget shows huge growth. Government, of course, is expanding after pulling back during the pandemic. But this robust ballooning comes in the face of that impending dive off the precipice just up ahead. City staffing is, thus, returning to and exceeding previously unsustainable levels.
Expenditures for the mayor and council have more than doubled.
The city attorney has seen a 32% increase.
Communications, a new PR department, has been created.
Human resources has grown by 260%.
Planning and Development Services has grown 250%.
Police administration — not to be confused with patrol officers — has more than doubled.
Police operations has also grown — by 45%.
The City Clerk has enjoyed a budgetary increase of 53%.
The city hopes to add six more employees in 2024.
The city manager budget has remained relatively constant, but Mauro has been hiring and expanding other departments that serve him, putting those numbers onto other budget lines. Positions like the new Communications & Marketing Manager make his office look good.
Let’s not forget that in November 2022 Mauro got a $12,500 retention bonus, a 10% raise and a car allowance large enough to cover driving 10,000 miles annually. His severance pay was doubled from 6 months to one year’s salary, and then he went on a 5 week vacation. This came at a time when he was boasting of implementing “lean thinking” at City Hall.
Feeble Economy, Diminished Revenues
The city’s utility account suggests a significant loss of businesses and commercial activity since 2021, with commercial accounts shrinking from 454 to 408.
To make matters worse, the city is forecasting a downturn in revenues for 2024 — even though it continues to increase its expenditures.
Business & Occupation tax receipts, a reflection of economic activity, have on average since 2021, been flat at $927,000, and are predicted to decrease in 2024. The Real Estate Excise Tax, which is generated by real estate sales, has declined steadily from 2022 and continues its downward trajectory in 2024.
The Lodging Tax, a proxy measurement for tourist activity, shows revenues pulling back to 2021 levels.
Sales tax receipts account for 40% of the city’s general fund tax revenues. They bounced back following the lifting of Covid restrictions but have stalled out.
Adjusted (decreased) for inflation, the picture grows more somber. The annual rate of All Items Consumer Price Index inflation in 2021 was 7%, in 2022 reached 9.1%, and in 2023 is estimated to be 3.1%. The columns in the graph immediately below would be, cumulatively, that much lower when inflated revenues are adjusted to show real dollar values.
Note that sales tax receipts are projected to decline for 2024, not a good omen when there’s already red ink in the budget.
Next Up: 2025
Where are desperately needed, steadily increasing revenues going to come from?
The lodging and sales tax graphs show that the tourist economy is effectively maxed out. THING, the music and arts festival which has been a big boost to the city’s tourist economy, will not be returning. Fort Worden, once a dynamic job creator, continues to struggle. An inadequate stock of hotel rooms — both in numbers and quality — is a serious bottleneck preventing expansion of the tourist economy and disqualifying PT as a convention or business meeting destination.
New businesses are not sprouting up in PT, nor are established businesses relocating here. As mentioned earlier, I recently counted 18 shuttered or darkened storefronts and offices from upper Sims Way through downtown on Water and Washington Streets.
There are always tax and utility rate increases to feed city coffers. But making Port Townsend an even more expensive place to live and do business is the opposite of what is needed.
The Tri-Area, by comparison, seems to be doing better economically. The office parks and retail centers appear to be fully occupied. A new Dollar Store is going into Port Hadlock and Henery’s has acquired and invested heavily in the old Hadlock Hardware. Carl’s Building Supply is expanding and adding a showroom. These are signs of confidence in what is emerging as a competitive, lower-cost economic hub slated to enjoy significant population growth in future decades. It was recently disclosed at a County Commission meeting that Jefferson County outside Port Townsend city limits already generates over 70% of the county’s total sales taxes.
Port Townsend depends heavily on retail sales. But it continues to lose out to Kitsap and Clallam Counties where many residents travel regularly to do much of their shopping. PT currently has a 9.4% sales tax. City leaders are pushing to raise it to 9.6% to fund a new aquatic center. Clallam County, in contrast, has an 8.6% rate in its unincorporated areas, and Sequim, where the big box stores patronized by PT households are located, has an 8.9% rate.
The Aquatic Center Fantasy
Cash-strapped Port Townsend already allocates $386,000 to subsidize the Mountain View pool. In an effort to persuade the rest of the county to accept higher sales taxes to pay for construction of a new $37-$48 million aquatic center, PT is promising to up its contribution to $430,000 annually for the next 30 years, and threatening to withhold its largesse unless the new pool is built at Mountain View Commons.
Baloney.
Port Townsend does not have the money to back up its words. When it falls off that fiscal cliff in a few years, will the city terminate police officers, engineers, sewage plant workers or city hall administrative staff in order to throw $430,000 at pool operations? And how can the current city council bind the hands of future city councils struggling to provide core municipal services? This city council cannot make the pool subsidy an untouchable sacred cow for the next three decades.
Spending on amenities, particularly recreation, is the first thing axed by struggling municipalities. Pools are money drains. When municipal budgets are pinched, recreation expenditures get cut. Every community that has a public pool faces this dilemma, and many have closed their aquatic facilities because they had no other choice.
Without the luxury of fat reserves and a booming economy, Port Townsend also will have no choice but to jettison its discretionary commitment to a recreational amenity. State law requires that municipalities fund core services; it does not mandate funding pools.
Water, Sewers and Streets
The city needs to spend $56 million keep its sewer system functioning by lining all asbestos, concrete and vitrified clay pipes. That is a conservative estimate. Plus, the sewage treatment plant is at capacity and showing its age. To accommodate future growth, it must be modernized and expanded. That cost has not been nailed down.
The city needs to spend, according to a 2019 analysis, $119 million to repair and sustain its sole water line from the Quilcene River. So far, the city has banked about $8 million towards this goal.
The Lords Lake dam above Quilcene that retains city drinking water requires seismic upgrades that could cost $4-5 million.
The city needs at least $30 million to get a grip on its rapidly failing city streets. Voters approved a .3% sales tax for streets, but that may not be enough. Completely and properly fixing the city’s streets is estimated to require the next thirty years and more money.
Leadership Deficit
Not only on financial ledgers does Port Townsend show a deficit. It suffers from a paucity of competent, responsible leadership. Those who exhibit and strive for financial sensibility are in a small minority on City Council. The city is mostly governed by seriously unserious people.
In their own words:
From City Manager John Mauro’s 2024 Budget Message:
Drawing together a responsible, disciplined, and strategic budget is somewhat like assembling a three-dimensional puzzle. There are many pieces, and each piece doesn’t really make sense on its own. It takes time to understand the shape and scale of the pieces and how they relate to each other. Once the pieces start clicking together, it takes the form of something more cohesive, stable, and sensible. It becomes something that keeps our community running and guides us.
We’ve put our heads together to puzzle over the 2024 budget, working out a series of inter-related puzzles at the same time – all while the pieces themselves actually morph and change. For instance, we’ve been working toward a more comprehensive vision for our streets and transportation that serves all of us. We’ve been working to increase the availability of attainable workforce housing. We’ve been envisioning the future of the golf course, and a regional aquatic center. And much more. While each of these things is, itself, substantive and complex, focusing only on one of them at a time misses a more honest discussion of tradeoffs and balance, as well as the strategic power of the whole.
All those words and not one mention of the fact the city is being forced to burn reserves again.
And then there’s this, when explaining “sensible streamlining”:
[W]e are sensibly streamlining policies to best optimize necessary checks and balances with desired efficiency and productivity.
What, if anything, did he just say?
There was hardly any discussion by city council when adopting the 2024 budget at their December 4, 2023 meeting. For clearer insights into the irresponsibility and lack of common sense of those in charge of the city’s troubled affairs, we can go to their more in-depth, more detailed and more thorough discussion of building a new pool.
The price tag, as we’ve reported here repeatedly, is huge, $37-$48 million. That $11 million spread represents the foreseeable cost overruns. We have reported on the worrisome problems with the aquatic center’s feasibility study that bode ill for the project’s long-term financial success. An expensive municipal pool can empty public coffers in a hurry and saddle taxpayers with a hungry beast that must be fed for decades to come.
How seriously have members of the ruling clique on City Council addressed this huge challenge?
Here’s City Councilor Aislinn Palmer, in her comments at the November 21, 2024 meeting where Council voted to express support for the aquatic center proposal:
The operating costs just don’t add up for me. But I think we just have to build it. We’re at the point where we have to build something, and some of that will just have to get figured out as that’s just how you get things done anywhere. (@2:19:43 of the video recording)
Councilor Libby Wennstrom got City Council chuckling. Here’s her response to concerns that problems with the aquatic center’s finances could spell trouble:
If we’re over our head in ten years, at least we’ll have a pool to dip in. (@2:31:55 of video recording)
Recently City Council devoted an entire meeting to working with a group therapist. They were told to write down things they felt they did correctly, then share how reflecting on a memory of a past success made them feel. Taxpayers were billed $1,300 for the ninety-minute session.
What a mess. The $108 million Port Townsend Aquatic Center as proposed to City Council would default in its first year. To calm skeptical taxpayers, numbers are being juggled, massaged and manipulated. Millions of dollars magically disappear from cost entries in order to turn red ink black. Looking closely, one can see there is no money to pay for administration and management during and after construction, thus making the project appear less costly to taxpayers.
But under the pixie dust, above the smoke and mirrors, behind the curtain, the hard, cold reality remains unchanged: economically distressed Jefferson County simply cannot afford something so costly.
Red Ink Turned to Black Ink (Not Quite)
At the same time they were seeking City Council’s endorsement for their proposal, promoters of the aquatic project did not disclose that their calculations showed the aquatic center could default in its first year of operation.
On October 16, 2023, City Council was asked to endorse the proposal from the aquatic center Steering Committee for a $37.1 million aquatic center and county-wide sales tax to pay for it. $22.1 million would be borrowed through a bond supported by sales tax receipts. $5 million, council was told, would be raised by the Jeffco Aquatic Coalition, $5 million from state grants and $5 million from federal grants.
The impressive 30,000 square foot facility being proposed would greet visitors with a high-ceiling, gleaming atrium with expansive glass walls, leading to the natatorium.
There swimmers could choose from the cool water 25-yard, 6-lane competition pool (where their form and speed could be judged by those in bleachers built to hold 100 spectators), or they could dip in the warm water of the 3,000 square foot recreation pool, where they could also walk against the artificial current of a “lazy river” feature. Afterwards, they could kick back in the $106,000 whirlpool/spa.
On other occasions, they could rent out the “birthday room” or knock around a ball on the new pickleball courts outside. There would be very nice universal locker rooms, showers, offices, storage space and parking for about 130 vehicles.
Of course, neither the city nor the county has the money on hand to build this facility. Money must be borrowed — $22.1 million, according to the “final” report.
In our previous reporting, we examined the pro forma upon which the Steering Committee was operating. A pro forma is a projection of annual debt service payments (principal and interest) versus expected revenues from the new county-wide sales tax the committee is proposing. Its purpose is to determine if the bond can be repaid.
The city’s own analysis showed that the project would default its first year. Sales tax revenues would not be adequate to pay the project’s debt. The specter of default loomed even though the pro forma assumed a pollyannish interest rate of 4.5% — something we won’t likely see again for years.
The Steering Committee, City Manager and its Parks and Recreation Strategy Director knew this when they sought City Council’s endorsement of their proposal on October 16. I noticed that in the 316 pages of the Report and its appendices in council’s “packet,” there was no pro forma to show if the project could shoulder the debt load they were proposing. In all those pages not even a cumulative interest amount was stated. That is an important number.
In calculating the actual cost of the project, there’s more to it than just the construction costs. The cost of borrowing money must also be considered. That simple calculation was omitted from the material presented to City Council.
So I asked for it. Carrie Hite (Director of Parks & Recreation Strategy) sent the pro forma to me, accompanied by an email in which she wrote: “You ask some great questions and the pool’s financial viability is something we continue to explore.”
This was October 18, two days after the “Final Report” had been submitted to City Council with a request for their endorsement. I then wrote the article reporting that the city’s own internal analysis showed the aquatic center unable to pay its debts and going into default its very first year.
After that report, city staff and the Steering Committee got to work to come up with a more attractive financial picture.
They made stuff up.
What they did was run several new pro formas at 5.5% interest, since their unrealistic 4.5% rate was so obviously invalid. 5.5% is still a very favorable interest rate for a project like this. As of this writing, investment grade 30-year municipal bonds might merit that rate.
But the bond for the aquatic center could very well not enjoy that coveted rating and would have to offer a higher interest rate. How much higher is difficult to say as each bond would be priced according to its individual risk characteristics, and would not enjoy the benefit of a bond agency’s screening and rating.
Consider this: the bond would be floated by a brand-new Public Facilities District (PFD), with no track record, no assets, no money in the bank, nothing in the way of collateral.
The cost of the proposed aquatic center is so large and squeezed so tightly into the limitations of the county’s tax base there are no reserves. If there is a year when the economy hiccups, if costs shoot up unexpectedly, if something big breaks, if the aquatic center does not see the very optimistic 800% increase in use required the first year of operation — there is no cushion, no way to pay bills and no way to meet debt obligations.
This would be a risky bond for investors.
It would be a revenue bond, which would carry a higher interest rate than a general obligation, levy-guaranteed bond paid with property taxes. As the Municipal Research and Service Center explains, “Revenue bonds are not backed by the full faith and credit of the city, and therefore investors consider them somewhat less secure than general obligation bonds. As a result, the interest rate that bond buyers demand may be higher than those on general obligation bonds.”
It will also likely have to be guaranteed by the city or county. It is highly unlikely that anyone will hand over $22.1 million to an untested group of people with no security for the loan other than a guess at future sales tax receipts. Without the city or county putting their assets behind it, this bond could well be rated as below investment grade. That means creditors would demand to be paid a higher interest rate in exchange for accepting more risk.
Enough for a lightning primer in public finance. Let’s look at how $2.1 million has to disappear to turn red ink black.
In response to another request, Carrie Hite provided the latest pro formas they have been considering. You can open the PDF here.
The first 6 years of red ink from the Aquatic Center’s latest pro forma. Note “$20M Bond” is a typo in the city’s pro forma, which should read “$22.1M Bond, 30 YR, 5.5%”.
Now you see it, now you don’t.
There is no way the proposal submitted to City Council can work. Not at 4.5% interest over 25 years, as we have reported. And definitely not at 5.5% interest, when the deficit would swell to more than $246,000 in the first year!
The Steering Committee looked at stretching out the term of the bond to 30 years in the hope periodic payments would be affordable. That won’t work, either. The first year shortfall would still be more than $120,000, as shown in the image above.
So what they did was reduce the amount of money to be borrowed by $2.1 million, stretch out the term of the loan to 30 years and cross their fingers as they sat back and waited for Excel to do its thing. Voila! There’s enough money to make it work — just barely.
They’ve also played with cutting the amount financed to $17 million so the numbers look better.
But this project will still cost $37.1 million to build. It has not been redesigned. Nothing’s been cut. Where will that $2.1 million or $5.1 million in savings come from?
Manna from Heaven
In the “Final Report” (now you understand why we have put that between quotation marks) the Steering Committee told City Council they hoped to raise $15 million, with $5 million each coming from gifts, state grants and federal grants. Maybe now they will tell officials and taxpayers they are going to raise even more in order to have to borrow less. So where are those extra millions going to come from?
Regarding those state and federal grants, the minutes of Steering Committee meetings, found at the end of the appendices to the Final Report, are vague at best on this subject. “Maybe,” “could,” and “perhaps” are used a lot. The only state grants discussed are for work outside of the pool, like for a gym. But there is no gym in the proposed design. There is no state grant for building a pool mentioned in the minutes.
The federal grants discussed would only be for seismic resiliency, that is, covering the additional cost of building stronger for earthquakes. But minutes also reveal that the cost of adding seismic resiliency has been shown to exceed the extra money grants contributed in previous projects.
So much for the certainty of state and federal grants.
So maybe wealthy, generous people will give not only $5 million, but go as high as $7.1 million, maybe $10.1 million.
You Go First
The Jeffco Aquatic Coalition has shown no evidence it has raised $10,000, let alone $10.1 million for the aquatic center. According to minutes of the steering committee, they want a tax measure on the ballot before they start their capital campaign. So far, not enough money to buy some faucets has been raised from private giving or state and federal grants.
There is definitely a rush to get this on an April 2024 ballot.
They want taxpayers to go first. Raise taxes, start making most things more expensive in Jefferson County — from Amazon purchases to socks to home construction and improvement — and then they will start trying to get the rest of the money.
So what happens if taxpayers across the county agree to pay higher taxes, the taxes kick in, but the rest of the money needed doesn’t come through?
Seriously, what happens?
Umm, Didn’t You Forget Something?
The budget in the Final Report maxes out all possible sales tax revenue. The numbers are so tight there is no debt or operating reserve. As we have reported, we are being told that the operating costs for the proposed PT Aquatic Center will be about 40% lower than the comparable experience of the Shore Aquatic Center in Port Angeles, which sees about $2 million a year in operating expenses.
Hite suggested in The Leader that the difference in operating costs can be explained by the Shore Aquatic Center having four “tanks” or pools — a competition pool with diving area, a spa/whirlpool, a wellness pool and an activity pool with a “lazy river.” Port Townsend’s aquatic center would have only two, she said.
Actually, PT would have three pools: competitive, warm water with the “lazy river” and whirlpool. Both facilities have almost exactly the same square footage. The PT Aquatic Center would have a sauna, as does the Shore facility. One could predict that the design of the PT facility would be more expensive, with its higher roof line and graded slope, than that of the Shore center.
Regardless, having an additional small pool, the wellness pool, is only a difference in construction costs, not operating costs, and certainly does not explain how the PT Aquatic Center could operate on $742,000 less than the Shore center. Most operating costs are labor. As discussed below, the fact that there is no provision for administration and supervision of the PT Aquatic Center may go a long way to explaining why its projected operating costs are so low. If operating costs inch up just a bit, the PT Aquatic Center ship capsizes.
A closer inspection of the feasibility study provides some answers. We can see what’s been carved out so the PT facility will have lower operating costs than its counterpart not far away.
For one thing, the Shore facility has an executive director. He interacts with the board, manages the tax revenues and grants, oversees state-mandated audits and reporting, responds to public records requests, etc. He oversaw the $20 million upgrade and expansion in 2020. He supervises the facilities manager, head lifeguard, maintenance crew — everything from physical plant to hiring and firing to dealing with the public and government agencies. He has support staff to help him in this essential work.
The budget for the proposed “base” PT aquatics center, on the other hand, not only does not provide for an executive director, bookkeeper and other support staff, it does not even provide funding for a facility manager. (See p. 55 of Ballard*King feasibility study).
Shore’s 2023 financial reports shows $158,500 in salaries for administrative staff. The PT Aquatic Center budget is zero.
Shore spends $112,000 on its Front Desk supervisor and crew; the PT Aquatic Center is budgeted for only $66,378, with no supervisor.
Shore’s budget also includes salaries totaling $118,700 for janitorial and maintenance versus the PT Aquatic Center’s budget of only $71,868.
Shore sees janitorial and maintenance expenses for its new facility at the annual rate of $33,200; the PT Aquatic Center budgets only $18,000.
Shore has learned its insurance costs $93,900 annually; the PT Aquatic Center budget is only $20,000.
Shore spends $71,100 on childcare; the PT Aquatic Center budgets nothing for childcare.
Shore has learned from experience to budget $190,000 for materials needed to maintain and repair its 3-year old facility; the PT Aquatic Center budget is only $18,000.
The unexplained discrepancies go on and on until the PT Aquatic Center is budgeted to operate at about $742,000 less annually than the comparable Shore Aquatic Center.
How can such a large facility be run without anyone in charge?
Answer: local government would provide management and administration and bear the cost.
That is an explicitly stated assumption in the Ballard*King budget. (See p. 46). Accordingly, no costs associated with administration are entered into the aquatic center budget; these costs would be off the books in a local government budget. But neither the city nor county governments are going to manage the aquatic center. The city that is heading over a “fiscal cliff” certainly doesn’t have the money.
It is being suggested that the YMCA will manage the facility. But there is no money anywhere in the budget to pay the YMCA.
And who, pray tell, is going to build the new aquatic center?
Not the city. Not the county. It will be a brand new agency called a Public Facilities District (PFD).
This new agency will have to complete the design, engage architects, engineers, put together bid packages, solicit and analyze bids, negotiate contracts, hire and pay construction costs, inspect and approve work and change orders, seek and manage grants, meet state auditing and reporting requirements, comply with public records and open meetings law, serve the appointed board of the PFD, etc. They will need an office, telephones, copiers and lighting so they can see while they work.
The Port Hadlock sewer project needs a crew of about a dozen people to oversee construction.
There is no money in the budget for anyone to get the new aquatic center built and opened!
Even after construction, the PFD will have legal obligations and work that must be done as a governmental entity. But there’s no money to fund a PFD. None.
As If More Consultants Were Needed — Actually, They Are
The Final Report recognizes the work of seven consultants, including a “public engagement consultant.” Missing from the list is a much more critical consultant: the bond, or financial consultant. It is a wise and common practice for public agencies that will be seeking bond financing to engage the services of a bond consultant, such as Northwest Municipal Advisors, who have worked with local governments and public entities in Jefferson County.
They create pro formas using realistic market rates because they work in the bond market every day. They understand that bond financing is very different from, say, mortgage financing. An amortization schedule for a municipal bond will be quite different than the simple pro formas being considered by the Steering Committee. When it comes time, the bond consultant would be the debtor’s negotiator with lenders.
The bond consultant may arrange the short-term bond anticipation note — the equivalent of a line of credit to be used to keep the project going before the funds from the long-term revenue bond are available. That also has been overlooked in the Steering Committee’s calculations.
The interest that would start being due at the beginning of the project will likely be capitalized and rolled into the principal of the long-term revenue bond, raising the dollar value of the amount financed — another omission from the Steering Committee’s calculations, but something a bond consultant would catch.
Then there will be the bond underwriter who raises the capital for the bond.
State law and IRS regulations require engagement of bond counsel. They provide a professional opinion that everything is legal (to oversimplify matters) and that the bond would qualify as tax-exempt.
All of these people have to get paid. Their compensation will come out of a percentage of bond proceeds, which is accomplished by increasing the principal amount of the bond. Thus, a $22.1 million bond would be increased to, say, $22.5 million or maybe more to cover these fees. Taxpayers effectively borrow money to pay these people, as well as borrowing money to pay capitalized interest. That raises the periodic payments and increases the cumulative interest paid over the term of the bond.
None of this is factored into the calculations underlying the “Final Report” and Recommendation — most likely because the Steering Committee spent money on a “public engagement consultant” instead of a bond consultant. The operating and financing costs are thus seriously understated, as PR to sell this to the public was prioritized over crucial bond expertise
The work is hugely incomplete. There are holes in the budget, with necessary items not budgeted, and hopes and prayers plugging the gaping holes. Taxpayers are being rushed into taking the first leap into the murky waters with city councilors being herded into endorsements without getting a complete picture of how bad this thing is.
Cherry Street Project on Steroids
This really is a mess. It is much, much worse than what we saw with the Cherry Street Project. There are so many parallels with what went wrong with what was also a well-intentioned, but fatally flawed undertaking.
Faulty financials:
The Cherry Street Project was created with “bogus” numbers. The feasibility study for the aquatic center, on which everything must stand, is, frankly, garbage. The community is supposed to bet $108 million on the judgment of a consultant who thinks that Mountain View Pool is in Kala Point and Port Ludlow’s pools are on Bainbridge Island. That consultant, as we just discussed, wrote a budget for the aquatic center that has no one in charge.
Like the “bogus” numbers underlying the Cherry Street Project, the bogus numbers underlying the aquatic center are being ignored in a rush to get this on an April ballot.
No unbiased, non-vested confirmation of feasibility:
The Cherry Street Project was pitched and defended by consultants hoping to land a nice contract to execute the project. The same thing is happening here.
Only those who stand to gain a piece of the action — be it Opsis, the architect, or the YMCA — are presenting this project to the public and decision makers. There has been no independent double-checking of the (shoddy) work of the consultants — except by the volunteer citizen journalists of Port Townsend Free Press.
Rush to approve despite warning signs:
There is a rush to just get the money from taxpayers and figure it all out later. We saw this with the Cherry Street Project when hard, cold numbers spoke failure, but city councilors charged ahead out of a sense of haste and not wanting to get bogged down with details or appear to be a dissenter and nit-picker.
If Cherry Street taught a lesson it is this: it is a lot easier to avoid sliding into a project than it is to get out of one.
We were a voice crying in the wilderness when no one wanted to hear of any problems with the Cherry Street Project. Our analysis — which was always based on the very documents and data available to city council and city staff — proved correct. It was a tragedy that the Cherry Street Project ended in such a costly failure and that it dragged out so long.
City officials say they learned their lesson from that fiasco — but have they really?
Seven years later, chalking up a loss of $2 million, the City of Port Townsend has accepted a bid to tear down the never-rehabbed, asbestos-ridden Cherry Street “demonstration project”. That loss pales in comparison to the $100+ million gamble of the proposed aquatic center.
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For reports on the many other red flags and alarms in the critical feasibility study upon which this shaky edifice is built see:
Eye popping numbers. Red ink from the start. The city’s financial analysis shows that the proposed aquatic center would not be able to pay its debt service for its first four years. That analysis is built upon a fantasy of low interest rates and a Jefferson County that would grow at a steady, uniformly repeated annual increase, uninterrupted and with no downturns, for the next quarter century. Even with these favorable assumptions, default looms.
And where did we get that huge number in the headline? $108,941,000? Are we not being told that the new PT aquatic center would cost “only” $37.1 million?
Read on. Let’s start with the city’s own financial analysis.
Mortgaging the Future
That modest $37.1 million construction project for a new aquatic center will be mostly financed, requiring at least a $22.1 million bond. A bond is the way a government borrows money from investors and financial institutions. Like a mortgage it has a term — the number of years in which it must be paid back — an interest rate, and set periodic payments.
Before a bond is “floated,” that is, sold to investors, an analysis is conducted to determine if the bond will work: will the debtor be able to pay and will creditors get their money on time in the amounts promised? That analysis is called a “pro forma.”
City staff has prepared this analysis on the proposed new pool’s debt. It was provided to us by Carrie Hite, Parks and Recreation Strategy Director. She provided this information without hesitation in response to our request. She has been open and forthcoming throughout this process, it should be noted.
The pro forma — the debt service vs. tax revenue projections — shows this for the critical first eight years:
These figures reflect the annual debt service on a 25-year bond for $22.1 million at 4.5% interest. The “County Wide PFD Sales Tax” shows the estimated revenues from a proposed 0.2% county-wide sales tax that is being considered as the vehicle to pay for a proposed $37.1 million pool. The difference — $15 million — would, it is hoped, come from $5 million each in gifts, federal grants and state grants. “PFD” stands for “Public Facilities District,” a new governmental taxing authority that would own and have control over the pool and which would receive its funding from a new county-wide sales tax.
Sure, this seems slow going. But hang in there. It will soon be clear how the finances for the proposed aquatic center don’t inspire confidence.
Regarding that pro forma — you can put anything into it to make it work, but you should try to be at least a little bit realistic for it to be of any use. This pro forma adds the exact same amount to each subsequent year’s sales tax revenues: $27,865. It is not unfair to say that is an arbitrary number. In the real world, that amount of sales tax revenue would require $13,932,500 in growth in the county’s retail, service and construction sectors every year for the next quarter century, without exception. The sales tax would be 0.2% or 1/500th. Simple math: $27,865, the number added to each year’s projected sales tax revenue total, times 500 equals $13,932,500, the amount the county’s taxable economic activity would have to grow each year.
Is it realistic to assume this steady, constant growth rate, no slowing economy, no bumps, no recession for 25 years? That is what is being done here.
Notice the negative numbers. Right out of the box, in year one, the PFD cannot make its loan payments. It falls $90,401 short. That is considered default. The state of default would continue until year five when, based on those hoped-for constantly rising sale tax revenues, the PFD would finally be able to pay its debt, on account of that arbitrary growth rate we just discussed. But by then, a $194,439 deficit has accumulated. That deficit continues until year eight.
Revenue from user fees at the new pool are not included and do not belong on this pro forma. For one thing, they are wholly speculative. Nobody knows with any certainty how much people will pay to use the new aquatic center.
The consultant’s financial model (that we have critically examined here, here and here) requires the new aquatic center’s revenues to increase by 800% over the Mountain View pool’s revenues starting the first year. But even those hoped-for soaring revenues won’t be enough to cover operating expenses and thus could not contribute anything to meeting debt service obligations. Further, the pool won’t have any revenue its first two years, when the project is being finalized, bid, and constructed.
This pro forma properly analyzes whether a PFD could meet its loan payments from sales tax revenues. It can’t, at least not until five years out. By then — indeed, by the first year — bond investors will be demanding the money they are owed that the PFD can’t repay. Default looms right up front as soon as the project gets going.
This is not the picture of a sensible public undertaking. It brings to mind the Cherry Street Project pro forma which showed that project going into default early on. What should have been a deal-breaker was disregarded by City Council back in 2018.
Will the current City Council — and a Board of County Commissioners, which will have final say on creating the PFD and pursuing a bond measure — fail to heed this recent object lesson in fiscal irresponsibility? Will they charge ahead and ignore the red ink on the wall?
So Much Worse in the Real World
This pro forma used an interest rate we are not likely to see again for years. It arbitrarily employs a 4.5% rate. As of this writing, investment grade municipal bond rates are bouncing between 5.5 and 6%. Some have reached 6.3%.
A bond for a brand-new, untested public facilities district running a pool complex, funded by a variable tax rate, may or may not earn an investment grade rating. It could be viewed as more risky than bonds secured by property taxes or utility rates, charges that must be paid to keep a municipality going. A financially failing pool is expendable in the larger scheme of things. Any lower rating than investment grade means the PFD would have to offer a higher interest rate to attract bond buyers.
If the PFD has to pay higher interest, as anyone who has bought a car or home would understand, its monthly payments will be higher.
Prudence requires considering the worst case, which would be a bond rated below investment grade. But let’s grant investment grade status for this exercise, yet (in compromise) apply one of the highest rates seen the past week. That was 6.3% for a big-city hospital bond, something a lot more solid than a pool bond. (Similarly, Overlake Hospital in Bellevue had to offer 5.85% on its bond that recently went to market.) We will use 6.3% interest over 25 years, the same term being considered now. What does that do to the financial picture?
The red ink gets much worse. Monthly payments would be $146,471 for an annual amount of $1,757,652 compared to the unrealistically low $1,483,659 in the table above. The red ink the first year at a realistic interest rate would amount to $364,401. The cumulative deficit would explode and stretch out until year 14!
Bondholders want to be paid every year. They won’t wait five years for promised payments, and they certainly won’t wait more than a decade.
The $108,941,000 Pool
The 316-page Final Report, Recommendation and Appendices released by the steering committee pushing the aquatic center proposal nowhere states any cumulative total cost for the project. The cumulative interest is never calculated. Nor are operating costs and subsidies ever totaled.
Using the unrealistic 4.5% interest incorporated in the working hypothesis, the total interest over 25 years would come to about $15 million.
Using a more realistic and current interest rate, the total interest paid by taxpayers would be $21,841,000. That is money that would be sent out of this county to institutional investors and wealthy individuals desiring tax-free municipal bond income.
The proposed PT aquatic center would be an almost mirror image of the William A. Shore Aquatic Center in Port Angeles, which reopened in 2020 after a remodeling and expansion. The Shore center has demonstrated it costs about $2 million annually to run such a facility. Over the 25-year term of the PT pool bond — until it is paid off — operating costs, not adjusted upward for annual inflation, would be $50 million.
Let’s add all those certain costs together in order to see the size of the commitment this county would have to make to this pool get the bond paid off and keep the pool’s doors open:
$37,100,000 construction cost +
$21,841,000 in interest payments +
$50,000,000 in operating costs
______________________
$108,941,000 total.
That is a huge number for this small, poorer-than-average county with a housing crisis and negligible income and job growth. No wonder the financial analysis shows this project going into default and failing financially in its first years. The picture gets even worse when real-world financial considerations — not rosy hypothetical assumptions — are applied.
“Speculative”
The steering committee’s fundraising consultant says the last piece in the financial picture is “speculative.”
ECONorthwest of Portland, Oregon, was hired to determine if the county’s economy is strong enough to support this huge project. They determined that the city’s economy could not generate the sales tax revenue to make it come close to working. So the entire county would have to be taxed to find enough money. The ECONorthwest report can be found starting at page 116 of the Final Report, Recommendation and Appendices.
“Capture areas” outside city limits would have to be tapped for tax dollars. The description “capture areas” comes from Jim Kalvelage, the founding principal of Opsis Architecture, the lead consultant on the project. He used that phrase in presentations explaining where the money for the pool would come from since the city’s own resources are inadequate. His included areas such as Chimacum, Port Hadlock, Marrowstone Island, Irondale, Kala Point, Cape George, Gardiner and Discovery Bay. For purposes of the city getting the money it needs, these are the “capture areas.”
At the time, Kalvelage was talking about hitting those areas with a property tax to pay for the pool. Now he and the steering committee are talking about a county-wide sales tax to pay for the pool. In the steering committee notes, they have also discussed going for both a sales tax and property tax. Washington state law allows a PFD to seek a property tax.
The promoters realized that “capture areas” isn’t exactly an endearing phrase for selling this project to county taxpayers, so it has been cynically converted to “service areas.” Kalvelage and the steering committee know the pool will serve very, very few people outside the city, maybe as few as 34 on a monthly average according to YMCA’s 2022 report on the Mountain View pool.
ECONorthwest concluded that, yes, the proposed pool is too big and expensive for the city to afford and a county-wide sales tax would be necessary. But it also concluded that even a county-wide sales tax would not suffice to pay for this size aquatic center. That is because Jefferson County’s service, retail and construction sectors are not robust enough to generate the necessary sales tax revenue.
A lodging tax would also be required to close the gap, according to ECONorthwest.
The kicker is that a PFD lodging tax can only target those lodging businesses with more than 40 units. In Jefferson County there are just three: Kalaloch Lodge far to the west on the Pacific Coast, and Harborside Inn and Manresa Castle in Port Townsend. Manresa has but 41 units, so it could avoid the tax by mothballing one of them.
ECONorthwest hypothesized an annual lodging tax payment of $500,000 from these three businesses to plug the hole in the pool’s financial picture. But it cautions that large number is “speculative.”
Indeed, it is. To generate $500,000 out of a 2% lodging tax, those three facilities would have to enjoy $25 million in revenue every year from renting rooms and cabins.
That’s $25 million from just three relatively modest lodging businesses. We are not talking Las Vegas-sized hotels here.
Prudent people cautioned by their own consultant that their plans are “speculative” would return to the drawing board. Whether our city council members and county commissioners have the sense to do so remains to be seen.
Lowballing costs. The feasibility study for the proposed Port Townsend aquatic center appears to grossly underestimate likely operating costs. Annual deficits may be far worse than being reported to the public. Even greater subsidies — and higher taxes — may be required.
The flawed feasibility study prepared for the city and the PT aquatic center task force relies exclusively on hypothetical numbers.
No on-the-ground research in and around Port Townsend was conducted.
In every scenario, a future PT aquatic center (architect’s conception featured above) would run deficits of around $400,000. And that’s being treated as good news.
We have a comparable facility nearby that could serve as a yardstick in accurately estimating costs for a future PT aquatic center. The William A. Shore Aquatic Center in Port Angeles has real-world data collected from real-world experience of its operations over time.
The consultants chose not to consider the Shore center’s real-world experience on the Olympic Peninsula. We will do it for them — and for the benefit of taxpayers who are being asked to foot the bill.
The William A. Shore Aquatic Center
The Shore aquatic center was built in 1961, two years before the construction of Port Townsend’s Mountain View pool. It has undergone many upgrades and renovations and is now a modern, attractive 30,000 square foot natatorium. It had been owned by the city of Port Angeles until 2009 when voters approved creation of the Shore Metropolitan Park District, which now owns and operates the facility.
The expansion of the facility to twice its original size was completed in 2020. In addition to the original competition pool and diving tank, it now offers a spa, a wellness pool, and an activity pool that includes a “lazy river” and vortex ring. All pools are heated. Other additions include a multipurpose space, universal changing hall and locker rooms, and support spaces for staff and patrons. The enlarged building has a dedicated space for the Splash, Play and Active Recreation for Kids after-school program for children, and an outdoor playground with multiple features above a synthetic turf.
In 2017 voters increased the park district’s debt capacity from $6.5 to $10 million. The $20 million renovation was funded with bonds, state and federal grants and cash reserves.
Here is a video tour of the completed facility:
PT Aquatic Center Feasibility Mixed Up
With Upper Macungie, Pennsylvania
The feasibility study for a new PT aquatic center was prepared by the consulting firm Ballard*King & Associates from Highland Park, Colorado. I have written two articles (here and here) examining flaws and red flags in their report. One of the red flags was that these consultants compared PT’s cost of living and housing expenses to those in Pennsylvania. This, combined with other absurd extrapolations (such as concluding we likely had 1,305 adults playing basketball), led me to wonder if they had mixed up their report for PT with work for another community.
It appears that hunch was correct. The Ballard*King report is now posted on the city’s website. There is no title page. It is entitled “Upper Macungie Report 3.22.23” according to the tab that appears on the search bar when the link is clicked.
Upper Macungie is a rapidly growing township in Lehigh County, Pennsylvania. That township had been doing work on a community center. It appears that the report for Port Townsend was cut-and-pasted, commingled and confused with work for a very different community on the other side of the continent.
Here is that curious page from the study comparing PT’s cost of living to its counterpart in… Pennsylvania:
Now add to these reasons to question the validity of the Ballard*King report indications that their operating expense projections appear to be way off. Shore’s real-world experience shows that running an aquatic center costs a lot more than these consultants are revealing.
We have obtained Shore’s recent financial data from Steve Burke, who has been with the Shore Metro Park District since before the facility underwent its expansion and remodeling. You may study that information at this link: 2018-2023 Shore Aquatic Center Financials.
Lowballing the Likely Costs
of a PT Aquatic/Fitness Center
Three versions of a possible new PT aquatic/fitness center have been under consideration. Ballard*King purported to project operating costs for each of them. The three versions are described in their report as follows:
The future PT aquatic center “base” model would be similar in size and offerings to Shore Aquatic Center in Port Angeles. Ballard*King estimated the annual operating costs for Port Townsend’s base model at $1,268,557. This doesn’t square with real-world expenses projected by the already-running equivalent nearby facility. Shore anticipates significantly higher operating costs in 2023.
According to its latest financial data, Shore expects expenditures this year to be close to two million dollars — $1,932,770.
The Ballard*King estimated annual operating cost of $1,268,557 is for a period of time in the future, no sooner than 2026, the year upon which they base their hourly wage predictions. If that figure were adjusted to 2023 dollars, it would be even lower, by a factor that backs out the cumulative effects of inflation.
The current annualized rate of inflation is 3.2%, according to the Bureau of Labor Statistics. If we applied this rate of inflation to adjust the Ballard*King operating prediction figure to 2023 dollars, it would be about $1,191,106 or $741,664 lower than the Shore center’s experience this year. (You can verify this and the following present value calculations using this handy present value calculator.)
How could a similar facility hope to operate in Port Townsend for almost 40% less?
The projected base model is the least expensive version of a proposed new PT aquatic center. At their most recent meeting on August 25, 2023, the steering committee focused on the larger and costlier base-plus-gym and the full build out versions.
The base-plus-gym is projected to cost $37.1 million to build, nearly twice the Shore center’s $20 million expansion and upgrades. Port Townsend, with half of Port Angeles’ population, could thus be building a pool twice as expensive as the one that serves the much larger city. The full build out is projected to cost $45.9 million.
From somewhere, the steering committee believes it will obtain $15 million in grants, gifts or other support for each version, leaving $22.1 million for local taxpayers to shoulder for the base-plus-gym version, and $33.9 million for the full build out.
Ballard*King’s hypothetical annual operating costs for the two larger versions appear to be seriously off when compared to the Shore center’s experience just 45 miles away.
The base-plus-gym version would require, according to Ballard*King, operating expenditures in 2026 dollars of $1,617,810. That is $1,519,036 in current 2023 dollars, compared to the Shore center’s 2023 expenditures of $1,932,770.
How could a larger facility requiring more upkeep and staff incur such significantly lower operating expenses?
The projected operating costs for the massive full build out version — more than a third larger than Shore, with a gymnasium, weight/cardio space and a larger staff — are somehow almost exactly the same in 2023 dollars as the much smaller and simpler Shore aquatic center at $1,957,076 versus $1,932,770.
How could that be possible? Doesn’t Pencil Out
At the most recent town hall presentation, July 13, 2023 at Fort Worden, the public was shown the slide copied above acknowledging that this project can’t “pencil out.” All three versions are projected to run deficits of $352,000 to $434,000, requiring an annual subsidy paid by city taxpayers on top of any property and/or sales taxes they would be paying just for the pool.
Those subsidy estimates may be another instance of lowballing what this project is likely to cost taxpayers.
At a July 2, 2023 workshop — as opposed to a public town hall meeting — the steering committee was provided a much grimmer projection, showing a subsidy of $1.6 million, four times what was presented at the public meetings. Unlike the slides shown the public, this one included the annual financing cost for a new aquatic center:
We’ve Seen This Before:
The Cherry Street Project
“I wouldn’t change a single thing about what we did,” Mayor David Faber has said about the failed Cherry Street Project. The city is now seeking bids to demolish that “affordable” housing project that has taxpayers on the hook for $1.4 million in bond principal and interest. Over $100,000 more in other outlays has been poured into the century-old derelict building barged here from Victoria, B.C. in 2017.
As we’ve reported, city council had in hand the equivalent of a feasibility study — a pro forma — that showed the project would default within two years of securing financing. The project’s cost estimates had been derided as “bogus” by the president of Homeward Bound, the organization that was going to complete the project. Costs were lowballed in repeated efforts to hook the city and taxpayers, and then extract more from them as the project demanded more and more investment… until the costs of finishing it became utterly prohibitive and the project was abandoned.
In its push for a new pool, the city is again being offered a questionable feasibility study. The consultant leading the effort, Opsis Architecture of Portland, Oregon, stands to secure a lucrative contract if the project moves forward.
Every member of the steering committee wants to see a new pool built. There is no one outside the loop providing critical, objective analysis. There is no “red team/blue team” constructive give-and-take to drag into the open all the possible weaknesses and flaws in the work being done by Opsis and Ballard*King. The city and the aquatic center steering committee are going with only one estimate, the estimate that suits their agenda.
The flawed feasibility study comparing Port Townsend’s cost of living to Pennsylvania and reaching absurd extrapolations from statistical data, while also missing the Cape George pool and placing Port Ludlow’s pools in Kitsap County — that study has been in the steering committee’s hands for months. Apparently no one read beyond the numbers they selected to pitch to the public to see how the study may be seriously flawed. They have no reason to critique the feasibility study on which they are building their case for higher taxes.
No one on the steering committee apparently was troubled by the fact that the feasibility study relies only on hypothetical numbers and did not bother to consider the real-world costs of the nearby Shore aquatic center. The Olympic YMCA holds a seat on the steering committee. They could provide real-world data from the Sequim YMCA to show how much it costs to run a larger facility. That does not seem to have been done.
Taxpayers are being asked to buy into a massively expensive-to-build, expensive-to-operate amenity solely on the basis of hypothetical numbers.
Ballard*King has already given itself an out. They do not guarantee that they got any of their cost estimates right. Proceed at your own risk, they say.
Ballard*King disclaimer of responsibility for any inaccuracies or omissions in their cost projections
Taxpayers won’t have such an easy out. Once they bite, there’s no getting off the hook.
Self-sufficient, profitable, a benefit to the community. That can be the future of the Port Townsend golf course, says the city’s consultant in a May 24, 2023 report that has started receiving serious consideration only within the past week or so.
The city’s consultant says the golf course can be turned around, double its revenue in four years and actually produce income for the city. Why in all the furor at city council meetings over the golf course’s future have we not heard about this consultant’s optimism and pragmatic plan of action?
David Hein, a golf course professional with more than 40 years experience managing golf course operations, maintenance, and business operations, was hired by the city as part of its “Envisioning the Port Townsend Golf Course” project, which needed “an updated evaluation … to accurately assess and understand the current status” of the golf course, including “a thorough review of the existing conditions and factors that have impacted the financial performance of the golf course over the past 5 years under the current Lessor/Lessee agreement.”
He concluded:
“Port Townsend has a very manageable asset in the golf course that could one day in the near future be a self-sufficient and valuable asset to the community. With the correct lease and management structure in place along with an operating plan and appropriate oversight, the Port Townsend Golf Course can support the golf and recreation needs of the immediate community as well as those visiting Port Townsend.”
He departs from an early assessment of the golf course by the National Golf Foundation. He does not see a need to invest the nearly $1.3 million in capital improvements the NGF recommended. He identifies as the first priority evaluating, repairing and improving the greens and irrigation system, with a starting budget of $150,000. That may seem like a lot for a cash-strapped city that is heading over a financial cliff.
But Hein’s estimate of a budget to repair and improve the greens — the critical feature of any golf course — is less than it is spending on “public engagement.” Carrie Hite, the contract employee given the title of Parks and Recreation Strategy Director is being paid $130,000 to lead the push to remake the golf course and put a tax measure on the ballot to fund a new aquatic center. She is being paid more than the city pays engineers and police officers. Groundswell Landscape Architecture, the firm participating in public engagement and drafting proposals for a golf course remake has a contract costing the city at least $125,000. Their combined $255,000, which has produced not one golf course improvement, is significantly more than Hein’s first step in getting the golf course to where it is self-sufficient and shares profits with the city.
The rest of his priority items — landscaping, equipment repair and acquisition, and clubhouse improvements — would require expenditures of $165,000, for a total of $315,000.
Hein’s total projected expenditures come in well below the $4.4 million required for the so-called “hybrid plan” presented to city council by the Groundswell Landscape Architecture — a huge sum the city does not have.
Hein recommends raising greens fees and expanding food and beverage operations. He sees ways to generate additional income from facilities, while also accommodating community interest in using the course for activities other than golf. Some holes might need to be relocated, buildings need to be cleaned out, management has to up its game. He does not see any financial viability for golfing if the course is reduced to an executive or par 3 course.
“I don’t foresee,” Hein writes, “a scenario where the golf course is materially reduced in size and scope that would accommodate all of the needs of the community and still attract golfers that would pay the required green fees to cover minimal capital improvements and the maintenance expense of the property.”
To reach his conclusions he examined the grounds and its buildings, even basements, which he believes can be converted into income-generating meeting and event spaces. He interviewed current management and golfers, and also contacted comparable 9-hole courses in Washington and obtained financial information from them for points of comparison.
Golf course supporters are encouraged by Hein’s report and have been crafting proposals to the city to implement his ideas so that the city need not subsidize operations and maintenance, as it does now, and will receive a percentage of gross receipts.
Hein’s 23-page report can be read in full at this link.
The city council is scheduled to tour the golf course and Mountain View commons on Monday, August 28, 2023 at 6pm with discussion to follow.
New businesses are not sprouting up in PT, nor are established businesses relocating here. As mentioned earlier, I recently counted 18 shuttered or darkened storefronts and offices from upper Sims Way through downtown on Water and Washington Streets.
