by Jim Scarantino | Mar 16, 2025 | General
From being a proactive, bold step to address the affordable housing crisis… to “waiting for the stars to align,” the once-vaunted Evans Vista Project has been left in the hands of astrologers.
Millions of dollars have been spent to acquire property and prepare and approve a Final Master Plan for the development we have been told would add 300-400 housing units. But at City Manager John Mauro and Mayor David Faber’s March 5 State of the City address, there was not a single mention of Evans Vista. That is, not until some members of the audience asked about it.
When confronted, Faber tried to dodge any responsibility for the failure of the project.
Evans Vista was supposed to be the city’s grand assault on the affordable housing crisis. In 2021, the city with state funding purchased 14.4 acres at the city’s entrance by the first traffic circle. As reported here, what started as an attempt to create much needed low-cost housing morphed into a grandiose master plan approved by city council to develop a village of multi-story apartment buildings, townhomes, retail shops and other structures, complete with a daycare center, dog park, amphitheater and other amenities. Economists hired by the city to judge the feasibility of the plan told the council it was simply too expensive to build.
I am in the process of writing up an alternative approach in which the city would completely ditch their absurd fantasy and get real about what can be done with what is probably the most undesirable plot of land within city limits.
In the meantime, Mayor Faber has put out several falsehoods about why the project is all but dead. This article addresses his dissembling.
State of the City Address
The annual State of the City address was billed as a review of “2024 Successes… Challenges & Lessons Learned… Aspirations for 2025.” The presentation was delivered in the Port of Port Townsend’s Point Hudson Pavilion, with the first hour broadcast by KPTZ.
Despite an anticipated $6.37 million outlay as itemized in the city’s 2025 budget ($2.15 million spent to date), the stalled-out Evans Vista Project was not mentioned once in the 37 pages of State of the City materials.
One slide declared: “Housing is a basic need and it has risen to the top as one of the most pressing issues our community is facing.” [city’s emphasis] Yet not one photograph among the scores displayed showed either the current state of the Evans Vista property or any future vision for the 14.4 acres the city took off tax rolls to build its affordable village of the future.
City Manager Mauro led the presentation with a list of “major highlights” for 2024. Unsurprisingly the Evans Vista Project was not among the highlights. However it was also not included among the challenges facing the city, or among the “lessons learned.” It was not addressed at all until after Mauro’s presentation when Faber and Mauro fielded questions from the audience.
“Waiting For the Stars to Align”
Following Mauro’s prepared address, a couple of people asked about Evans Vista. Faber had to admit:
“We can’t actually get it built right now because we can’t afford it and developers won’t build it because you’d have to charge sky-high rents to make it actually pencil.” [Editor’s note: meaning, make it economically feasible]
Faber blamed lack of actual progress on the ground (as opposed to drawing pretty pictures) solely on interest rates. He said that when the city got started in 2021, the interest rate environment was very favorable. Indeed, it was about 0%. But now, as anyone who had passed Econ 101 would have expected, interest rates are much higher. Going back to the city council meeting when it voted to acquire Evans Vista and take on the project, not one second whatsoever was spent discussing the impact of interest rates on the project’s likelihood of success.
Did Faber and the rest of city council really believe that interest rates would stay at zero for years to come? Did they really base their decision to launch the city into what then-Mayor Michelle Sandoval predicted would be “an incredibly expensive” project based on such economic naivete?
Maybe. Let’s not forget this was the same city council, on which Mayor Faber and current Deputy Mayor Amy Howard served, that got the city deeply in debt to build the fiasco formerly known as the Cherry Street Project. This is also the city council that, with only one exception, voted to approve the mega-bucks Taj Mahal aquatic center to replace the Mountain View pool, another fantasy that never stood a chance of being built.
There was absolutely no consideration given by city council to economics when it jumped into the Evans Vista Project. None whatsoever beyond Sandoval’s dire prediction that it would be “incredibly expensive.”
Faber now says the city is “waiting” for interest rates to decline, and that they are “waiting for the stars to align.” He suggested the problem lies with the federal government, where things are, as he said, “spicy.”
Evans Vista has fallen far from what Faber lauded as a “proactive” effort by the city to create affordable housing. It has become a long-term, drawn out morass… at the mercy of the stars.
The Half-Million Dollar “Concept”
Another attendee asked about our recent report on city council spending half a million dollars soliciting and adopting a Final Master Plan that can’t be built. The questioner asked whether we had accurately reported what council paid for and approved.
Faber then lied.
He told the live and radio audiences that while he had not read our report, there was in it “something about a claim that the plan adopted by city council was a final plan. In fact, it was a conceptual plan.”
They paid $500,000 for a concept?
The record speaks for itself.
Table of budget and expenses for Evans Vista Project, from the city’s 2025 final budget. Right-hand column are expenditures to date.
As my recent article reported, in August 2022, Jefferson County gave the city $500,000 of federal COVID money to fund “the Evans Vista Master Plan.” The city then put out a request for architects. Interested architects were informed that:
“the project is to develop a master plan and land use entitlement applications [e.g. plats] to develop Evans Vista into an affordable workforce housing development.”
On November 7, 2022, the city approved a contract with Thomas Architecture Studios (TAS) to develop that master plan. On November 20, 2023, the action item under “New Business–D” on council’s agenda was “move to approve Exhibit A, the final site design for the Evans Vista Master Plan so the Project Team can apply for subdivision entitlements.” [emphasis mine]
Exhibit A showed the overall layout of the final site plan:
Evans Vista Master Plan adopted by city council
After the architect presented the site plan, the economists told city council that the design was too expensive to build. Construction costs would start at $111 to $126 million. Those were 2023 dollars. The cost today would be higher due to inflation.
Much higher rents would have to be charged than currently prevail in Port Townsend’s already unaffordable rental market. Interest rates would have to drop significantly and the economy would have to return to conditions resembling those in 2013. And construction costs would also have to be reduced significantly, which was not possible if the kinds of buildings in the Final Master Plan were used.
After hearing that the plan was economically unfeasible, city council nonetheless unanimously approved this Final Master Plan for Evans Vista.
My article also reported that the city has not moved forward with platting the project based on the Final Master Plan… because it is unfeasible and no builder will touch it. Instead, the city is pivoting and trying to interest developers in taking on smaller pieces, without being tied down in any way to the grandiose plan approved by city council. In other words, the $500,000 Final Master Plan adopted by council has in fact been demoted to a mere “concept” that is now being cast aside because it cannot be built.
Meth Meadows
What is the actual “State of the City” at Evans Vista? We have provided some photos.
The featured photo at top shows a sample of the garbage left behind nightly by transients taking up residence at what would be the entrance to the proposed development. The city has provided a dumpster to encourage transients to be tidy. I have observed people going in the dumpster and coming out with the trash that soon again surrounds their camps.
The photos below show the growing transient camp on the city’s property near the DSHS building.
This camp, according to law enforcement sources, has become a violent place. Heavy methamphetamine use makes matters worse. While taking these photos a man emerged quickly from one of the tents and came straight at me quite aggressively. I got in my truck and drove off, watching him glare at me from my rear-view mirror.
We might want to call Evans Vista “Meth Meadows” to reflect the reality on the ground for the foreseeable future. In 2022, I had named the wooded part of Evans Vista “Port Townsend’s Fentanyl Forest,” as that was the drug of choice for its residents. But the city cleared them out. Now a sprawling camp of addicts has taken over the meadows on the northern part of the property.
Few Hard Facts, an Exercise in Political Theater
A lot of time and expense went into the preparation of the State of the City address. None of Faber’s predecessors staged such political theater. Nor did Mauro’s predecessor expend resources and staff time in producing such a show.
We got a lot of glib phrases and self-congratulatory sentiments. We got adjectives. We did not get data.
One key metric not reported by Mauro and Faber is the only meaningful measurement of progress against the affordable housing crisis declared to be an emergency by local governments in 2017. Though the mayor and city manager did not report that statistic, we can confidently give the precise number of affordable housing units added in response to the city’s costly forays into the housing market, from the Cherry Street Project to the Evans Vista Project. That number is zero. And it will remain zero, as Mayor Faber rationalized in an act of surrender, until “the stars align.”
Or we can search a different universe of possibilities. That will be the topic of my next article on the Evans Vista Project.
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.
by Jim Scarantino | Dec 23, 2023 | General
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.
Yup, Port Townsend is in trouble.
by Jim Scarantino | Nov 10, 2023 | General
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:
Drowning in Red Ink: Mountain View Pool and the Proposed Aquatic Center.
Aquatic Center Feasibility Study: It Gets Worse.
The $108,941 Pool Could Default Its First Year.
Related articles:
Mountainview Pool–By the Numbers.
Aquatic Center Beats Out Streets and Core Services in Task Force Report.
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.
