We also have a responsibility to repay those .. funds back to the capital accounts from operations.”

David Timmons, Executive Director, Fort Worden Public Development Authority

Officials with the Fort Worden Public Development Authority have asked the city of Port Townsend, Jefferson County, and Washington State Parks to guarantee a nearly $1.9 million loan that would be used to get the organization out of its current financial meltdown.

The Fort Worden PDA has been on the verge of collapse since last year, when officials announced that “financial irregularities” had been discovered.

The PDA, which manages the 95-acre campus at the heart of Fort Worden under a lease from Washington State Parks, was hit by a tsunami of debt last year that threatened the agency’s existence.

Last October, the PDA announced it was more than $5.3 million in the red and started work on a restructuring plan while trying to renegotiate the public agency’s debt.

At the PDA board’s meeting in June, directors approved issuing three bonds — for $1.8 million, $2.3 million, and $2.1 million — to restructure earlier bonds issued by the PDA and to restore money that had been obtained for capital projects such as the “glamping” camping set-up at the fort but was diverted instead to pay for the day-to-day operations of the development authority last year. 

As part of its restructuring, the entire PDA board resigned at the end of June and a new board — consisting of Brad Mace, Celeste Tell, David King, Eva Webber, John Begley, Rodger Schmitt, and Victoria Brazitis, and Naushard Cader — was appointed at the start of last week’s board meeting.

PDA executive David Timmons gave a brief overview of the PDA’s financial troubles, and noted that money that should have been spent on construction projects was instead spent on the costs of day-to-day operations.

The transfers of money were unauthorized, Timmons said, and were made to cover operating losses and later, the impacts of the COVID-19 pandemic on business at the fort.

“We also have a responsibility to repay those .. funds back to the capital accounts from operations,” Timmons told the board.

Timmons noted he has been negotiating the refinancing of loans with Kitsap Bank.

Repaying the loan that financed the “glamping” camping project will result in a new loan with a 25- to 30-year term, he said, with no loan payments during the first two years “to help us get our feet back on the ground.”

Another existing loan, which is paying for energy upgrades at the fort, follows a similar setup.

A balance of $330,000 is owed on the energy efficiency project loan, and $600,000 is owed for the construction of the glamping project.

The bond would also help create an operating reserve of $600,000.

NEGOTIATIONS CONTINUE

Closing out the bond documents with Kitsap Bank is expected to take place in the second week of August, Timmons said.

“We’re in the process of negotiating those final terms,” he said.

Port Townsend Mayor Michelle Sandoval asked Timmons about the PDA’s desire for support from the city.

Sandoval said she had seen nothing in writing.

“I haven’t seen any sort of formal request,” she said.

Timmons said the request had been the subject of a meeting with Kitsap Bank and the city manager and finance director.

“That is our next step now,” Timmons said of the formal request.

Timmons said they were also trying to bring Jefferson County and Washington State Parks “to the table as well.”

Final terms of the loan that have been discussed with Kitsap Bank include the requirement that Kitsap Bank approve expenditures for the energy efficiency and “glamping” projects, as well as an annual audit of the PDA.

The PDA’s operations are currently being examined by the Washington State Auditor’s Office, and an upcoming “accountability audit” is expected to detail the scope of the development authority’s financial irregularities as well as provide new details on alleged fraud that occurred within the agency last year.

The accountability audit is expected to be released later this month, with financial audits to follow.

Timmons presented the scope of the accountability to the new board last week, and gave a general outline of the scope of the “financial irregularities” that PDA officials have repeatedly mentioned but have not detailed in public.

“The accountability audit will come out with in terms of, were we following proper recording procedures. Were we getting travel receipts; were we authorizing pay adjustments correctly. We were authorizing leave time requests and verifying those things. 

“That is what they are actually looking at now,” Timmons said.

Timmons again noted that it was the PDA that alerted the Washington State Auditor’s Office of its financial troubles, and said the authority’s contracted accountant had been meeting with a state auditor on a weekly basis.

“From my perspective ... the vast majority of whatever they are looking for and talking about and asking about is stuff that was self-reported by us based on our review of the financial situation,” Timmons said.

The PDA also presented last week its financial statements that must be submitted to the Washington State Auditor’s Office for the years of 2018 and 2019.

malfeasance NOTED

A note in the financial statements covers “malfeasance” and pointed to former Chief Financial Officer Diane Moody as being the cause.

According to the 2018 and 2019 statements: “In 2020 the district became aware that its CFO was violating finance-related legal and contractual provisions as follows:

• Failure to file annual financial reports

• Failure to comply with BARS

• Diversion of Capital Funds to Operations without proper authority

• Possible embezzlement.

The district terminated the CFO, and reported the “malfeasance” to the Washington State Auditor’s Office).”

The PDA also noted it had asked the auditor’s office to conduct a fraud audit and an accountability audit.

Timmons told the new PDA board at last week’s meeting the fraud that had been discovered was reported to law enforcement and the prosecutor’s office.

In his talks with the auditor’s office, Timmons said: “They are not finding any further evidence of fraud.”

Timmons also said the state auditor’s office was probably going to recommend referral of the fraud that had been found to law enforcement.