Fort Worden PDA comes up short of cash

Board votes to increase bank loan

Posted 5/24/23

Cash-strapped once again, the board for the Fort Worden Public Development Authority has unanimously approved the doubling of the organization’s $250,000 line of credit with Kitsap Bank.

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Fort Worden PDA comes up short of cash

Board votes to increase bank loan

Posted

Cash-strapped once again, the board for the Fort Worden Public Development Authority has unanimously approved the doubling of the organization’s $250,000 line of credit with Kitsap Bank.

The move came during a special meeting May 9, after David Timmons, executive director of the authority, told board directors the PDA was facing a “severe cash flow shortage.”

He said the situation has “plagued” the authority since the start of the year.

Factors in the latest financial troubles include the delay of $697,000 in state grant funding, as well the limited staffing at the PDA, Timmons said.

Also to blame: the cost of repairs after busted pipes caused flooding damage at the PDA’s premiere project, Maker’s Square.

TEMPORARY LOAN

Timmons told the board that increasing the line of credit to a $500,000 loan was a temporary measure and would be paid back as soon as grant funds were in hand.

“We submitted all the paperwork to the bank so everything has been queued up,” he told the board at its special meeting.

The loan was expected to close May 11.

“The documents are ready to be signed and executed,” Timmons said, and the only thing needed was the board’s approval of a resolution authorizing the change in the line of credit.

Getting the temporary boost was needed because incoming revenue has not kept pace with the expenditures of the PDA since the start of 2023.

The $697,000 in anticipated state money comes from the Washington State Department of Commerce.

Still, some long-awaiting funding has since arrived.

Timmons told the board that $200,000 the PDA had been expecting from Washington State Parks was received earlier this month.

But that funding, meant to offset the cost of maintaining the grounds at Fort Worden, will largely go to Fort Worden Hospitality, the organization that was set up to handle lodging and other guest services at the historic property after the PDA’s financial meltdown three years ago.

Fort Worden Hospitality will receive $159,190 of the $200,000 reimbursement, according to contract paperwork from the Washington State Parks & Recreation Commission.

Centrum will receive $6,116, while the PDA will get $1,632 in repayment for property maintenance. The PDA will also receive $33,061 for overhead.

The PDA was also expecting the expedited reimbursement of $162,000 from $750,000 in capital funds from Washington State Parks.

Timmons said it might be possible that the loan is paid off “as early as July.”

The cash-flow problem also prompted the early end of two employment contracts previously approved by the PDA board of directors. It’s also helped further strain tensions within the PDA’s leadership.

Timmons said the financial situation led him to terminate the organization’s contract with its lobbyist in Olympia. The contract for another employee, the PDA’s communications officer, was also cut short before her contract was expected to end in June.

Board Director Rodger Schmitt, however, asked that the employment agreement be honored.

“It seems like the right thing to do ... when we have employees who are not suffering at all,” Schmitt said.

Schmitt did not find support for his suggestion.

STEPPING BACK

Frustration over the direction of the PDA, by some, has been evident during recent meetings.

Schmitt resigned from his role as vice chair of the board in April, with the PDA noting his resignation was because “he felt his contributions and recommendations while participating in the planning meetings was not proving valuable to the other participants in the planning meetings, and thus it seemed appropriate for him to resign and allow for more productive planning meetings with a new vice chair,” according to a April 21 memo to the board. Schmitt decided to keep his seat on the board.

Also at the board’s meeting in April, Schmitt repeatedly expressed concerns that Timmons had recently approved contracts prior to the board’s approval.

Tension was again evident at the board’s two meetings earlier this month.

At the board meeting May 4, Timmons told the board the PDA continues to suffer from cash flow shortages, and the situation wold continue until a long term, sustainable funding model for the organization is implemented.

He asked the board to call for a special meeting the following week.

“We don’t have any operating cash reserves to help carry the day when things happen. Or when money doesn’t come in or is delayed,” Timmons said.

“We started the year with very little cash reserves and so as the expenses mounted during the last three months, it’s been catching up with us in terms of we don’t have enough current income to offset current expenses,” he told board directors.

Timmons said getting the shortfall should be the PDA’s biggest priority.

“This is probably one of the more difficult things that we have to face and deal with. Because the situation has grown and compounded far worse than what I had anticipated or understood it to be, from a month-to-month basis,” he said.

That was due, Timmons said, to a lack of information because the employees who handle accounting and billing had been absent from work.

He indicated that medical issues were involved, but said he could not get into details because of privacy issues.

“We knew that we were challenged. It’s just that we didn’t know. I didn’t realize how much of a challenge we were facing, because of the lack of communications I was able to have with the people in charge of this. Through no fault of their own.”

“It is what it is. I can’t say anything more than that,” Timmons added. “It is something we’re going to have to address. We’re going to have to make it as a priority.”

Board members agreed to meet May 9 to vote on expanding the line of credit.

UNEXPECTED COSTS

The PDA’s most recent financial woes extend beyond the receipt of expected grant funding, or timely payments from tenants on the campus (information provided to the board earlier this month showed nearly $78,000 in bills more than 90 days old).

Timmons also detailed the costs of damage caused by the weather in February 2022, when pipes froze in two unoccupied buildings on the campus, Building 308 and Building 324.

Water was discovered flowing out of the two structures in late February.

“The buildings froze,” he said.

Costs to repair the damage totaled more than $57,000.

The flooding, caused by backflow preventers that froze and then ruptured, damaged fire system panels and some of the electrical controllers for the lighting system.

Water also seeped through the floor into the insulation beneath, forcing the need for mold-abatement measures.

Delays in getting replacement parts followed.

“The fire panel that needed to be replaced, it took close to a year,” Timmons said, to get another after replacements became unavailable.

“I was told that 10,000 new panels that matched the panels had arrived in the United States were all defective and had to go back,” he said.

It also took about a year to get replacement parts for the backflow preventers.

Timmons said the pipes became frozen because the temperature controls in the buildings had been set on cooling mode and not on heating mode.

The PDA’s insurance company refused to cover the cost of repairs.

Timmons said the PDA’s claim was denied because their policy stated that if the buildings were unoccupied for more than a month, and the water wasn’t shut off to the properties, the policy would not cover any ensuing flood damage.

Timmons also said a separate claim was made against the PDA, on behalf of the Fort Worden Foundation, to get the damages covered by insurance, which essentially claimed that the PDA was negligent in not having the water disconnected during the period when the buildings were unoccupied.

That claim was denied as well.

In the meantime, the PDA’s insurance company refused to renew its insurance coverage with the PDA.

Clark Construction was hired to do repairs, and the costs totaled $57,334.

The damage was costly in other ways, as well.

Repairs were not completed until March, and Northwind Arts couldn’t occupy the building while the repair work was underway. That meant the loss of three months of rental fees for the building.

BOARD OKS NEW LOAN

Timmons teed up the need for a special meeting when the board met May 4.

He said the PDA’s financial situation was again becoming a critical issue due to a lack of cash reserves and the staffing of the authority.

Board members pressed for specifics.

“I have some concerns that this sounds like the second, sort of, financial crisis-type briefing we’ve had in the past two months. Is it the same issue that was brought up last time?” asked Board Director Victoria Brazitis. “Is it worse?”

“I wouldn’t call it worse,” Timmons replied. “It’s not getting better because of the delay in the funding that we are supposed to be getting and some other things that we thought were addressed did not get addressed.”

Schmitt pressed for more clarity.

“Can we talk about what it is you’re talking about? Or are we going to talk in tongues? What are you referring to?” Schmitt asked.

“I’m referring to the accounts payables that we have on our books. I’m referring to the grant anticipation; the grant documents that are due us from both state parks as well as also the Department of Commerce,” Timmons said.

Timmons also said the PDA was still awaiting payments from entities that rent facilities at the fort.

He also said the authority’s outward focus has taken a toll.

“We spent so much time taking care of others we’ve ... fallen behind on taking care of ourselves,” he said.

MOVING ON

Before the start of the meeting on May 9, Brazitis notified Timmons in an email that she was resigned from the board of directors.

“I joined in hopes of helping the PDA establish asset management systems and plans as it settled into normal operations,” Brazitis said in her resignation letter.

“As the PDA continues to struggle with cash flow and operational constraints, though, we haven’t been able to spend time on the items I joined to address.”

“PDA staff are working very, very hard under challenging circumstances,” Brazitis added. “I urge State Parks to fund fort maintenance appropriately and support a sustainable level of PDA operations. The PDA occupies an important role at the fort. It may need additional support or staff to manage the complexity of the fort’s innovative partnership model in the way the community expects.”

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  • BoatFixx

    Following the city of Port Townsend down the rabbit hole of mismanagement.

    Port Townsend is due to go broke in five short years

    https://www.porttownsendfreepress.com/2023/05/25/city-finances-falling-off-cliff-as-cherry-street-project-enters-seventh-year/?fbclid=IwAR0VtsjoXFrB2cLBwntyMcBfOK4gYnmCWccgUAAnmPUY449GUJbt4aAYcv0

    4 days ago Report this