With $6.2 million in unpaid bank loans, efforts to dissolve the Fort Worden Public Development Authority (PDA) ended Oct. 4, when Jefferson County Superior Court Judge Brandon Mack issued an order appointing a general receiver over all PDA property and assets.

Mack’s ruling was in response to a complaint filed by Kitsap Bank against the PDA on Sept. 27. Attorneys for Kitsap Bank objected to the dissolution in the filing, saying PDA owed the bank $6.2 million for previous loans but had no plan to repay the debt.

“The Defendant has admitted its insolvency and inability to function as a going concern,” attorney Michael Gearin of K & L Gates LLP wrote in the complaint seeking receivership.

The PDA’ passed a resolution in August 2024 requesting the The Port Townsend City Council authorize its dissolution. The council scheduled a hearing and vote for Oct. 7 but removed it from its regular meeting agenda following the ruling.

A general receiver is appointed by the court and is authorized to take possession and control of a person or business’ assets with the authority to liquidate them. A receivership is similar to a private bankruptcy action, except the PDA and the Washington State Parks & Recreation Commission — the property owner — are public entities.

Bellevue-based Elliott Bay Asset Solutions has been named receiver.

In seeking the action, lawyers for the bank wrote, “Notwithstanding repeated requests from the Petitioner, the Defendant has failed to articulate the legally required statement of dissolution describing how it will preserve and allocate its assets to satisfy its outstanding creditor obligations, including its obligations to the Bank.”

The complaint alleges that the PDA has not “expressed any intention of making arrangements to satisfy obligations to the Bank or other creditors,” and has said it would hand over operations to the state parks commission immediately following dissolution.

“Appointment of a general receiver over the Defendant is necessary to protect the Bank’s collateral, prevent the Defendant from using an abrupt and unplanned dissolution as a means to impair and entirely avoid its obligations,” and that it conduct its exit “in compliance with the law and in the best interest of its creditors.”

The court agreed. “The authority has not communicated any plan for satisfaction of the Bonds owed to the Bank and has not presented a draft statement of dissolution to the Bank that describes how it will satisfy its financial obligations.”

While Kitsap Bank managers and Mack’s order say the PDA failed to meet its obligations relative to dissolution proceedings, PDA staff say Kitsap Bank managers failed to heed PDA staff warnings about insolvency and provided little in the way of support or ideas for a cooperative solution.

“I felt that the bank had not really been hearing what we had been saying,” wrote Celeste Tell, interim executive director of the PDA. She said bank management had taken a lackadaisical approach to the PDA’s financial problems and that PDA staff had worked hard to make the dissolution plan as open and transparent as possible.

“The dissolution on Oct. 7, 2024 is not immediate and abrupt,” Tell wrote. “A 60-day notice for a public hearing was provided to the public per the statute. We are collaborating closely and successfully with all other parties, and as noted above, have attempted to work collaboratively with the bank for over a year.”

According to the Port Townsend Municipal Code, “prior to the dissolution process, the Authority must file a dissolution statement” providing details on how the agency intends to satisfy its debts, obligations and liabilities. Beyond the municipal code, state law allows for the bank to seek a receiver over the PDA.

At press time it was unclear how Washington State Parks and Creation Commission, which oversees state parks, including Fort Worden, would respond. It planned a meeting for Oct. 8 following the city council vote.