Collaboration in Civic Spheres

State auditor: Port Townsend’s finances shaky

by October 25th, 2011

A financial audit on the city of Port Townsend released Monday by the office of Washington State Auditor Brian Sonntag warns elected officials and city staff that the municipality’s finances are badly eroding.

The city of 8,925 is a distinctive and historic Northwest locale about 40 miles northwest of Seattle, known for its Victorian architecture, vibrant arts community, maritime history and as a haven for vacationers and retirees.

Its annual expenditures from 2006 through 2010 have ranged from $6.4 million to $7.6 million. The audit states: “The city is at risk of not being able to meet its financial obligations,” emphasizing that:

  • The city’s cash balance declined from $258,408 in 2006 to $40,700 on August 31, 2011.
  • In three of the last five full fiscal years (2006-2010) the city has spent more than it has taken in, with deficits of $212,841 in 2006, $64,926 in 2008 and $193,888 in 2009.
  • The city’s long-term debt has grown from $14.4 million in 2006 to $21.1 million in 2010, and in 2010 the city agreed to guarantee $625,000 of the regional fire district’s debt.

The audit states that “the city’s tax revenues and financial position have worsened because of “the downturn in the economy, the temporary loss of ferry services in 2007, closure of the Hood Canal Bridge in 2009 and the ongoing stagnation of the real estate market.”

The city hasn’t cut costs enough, according to the audit. It should draft a formal written comprehensive plan to improve its financial standing and city officials should keep a closer eye on the city’s financial performance while ensuring the plan is followed, and successful.

The city replies in the audit report that its 2012 proposed budget, to be deliberated starting in late October, would cut general fund expenditures $906,000; and reduce utility expenses $800,000 by shifting engineering overhead to a capital account, “thereby stabilizing the rates and financing of the utility.” In addition, the city says a special purpose levy vote in November, if approved by local voters, would fund the city’s debt guarantee for the fire district and “remove any further diversion of income from the general fund.” Together, if adopted, these steps will allow the city to replenish its reserves, meet its obligations and “be on a solid road to recovery” in the next three to five years, the city states.

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One Response to “State auditor: Port Townsend’s finances shaky”

  1. Roger Pick says:

    I live in P.T., your Public Data Ferret report was sent by a friend. I found your site interesting and the reportt seemed to adhere well to the facts. I have an opinion on how the city has increased its indebtedness over the last few years; it is that I think they have taken a good course with the 2012 correction along with the the last few years of additional incurred debt. I feel this way for the following reasons: they enabled completion of essential infrasture projects by making good use of matching funds at a time when rates were low, when the need for the improvements was high, and when the jobs provided by the work were needed. The return on the work done will, over time, justify the expenditure now even though it did wipe out reserves for last year and left them quite low for this year. It seems to me the analysis of the city will be correct and the reserve will return to higher levels next year with the passage of the levy. To me the response of the city to the auditors findings seems to be well stated. I think time will show their past actions made sense along with the current move towards austerity. The city does have a real debt to the fire district; it can be paid out of existing funds or by the special levy– the special levy seems to be the best way to pay it because by so doing the funds that would have been used to pay the debt will remain for other uses. I believe that many voters will regret not passing the levy when they see services no longer available because the funds to sustain them have been taken up by the fire district debt payment. I think it unfortunate that recent articles in the local papers have not made it clear exactly what will be lost if the levy is not approved. The city has made that information available in reports but not many peoplemake the effort to dig through them. I believe that’s better done by local newspapers and they could have done a better job of presenting information to voters. I’ll be interested in reading future Public Data Ferret postings that reference our area, thanks for this one.