Strahan: We didn't want "precious" general fund money for Pearson

The city of Vancouver, the Fort Vancouver National Trust and the National Park Service had to issue separate announcements, rather than a joint statement, about Pearson Air Museum last month.

That’s a sign of drama right there, heightened by the fact the announcements came after months of confidential mediation.

During Monday’s citizen forum, people berated the Vancouver City Council for not wanting to take Pearson from the Park Service. (I admit this is the first time I’ve heard people get angry with government for not taking away someone’s property.)

Today, Elson Strahan, president of the Fort Vancouver National Trust, sent an email to city councilors in which he was as slick as his hair.

I’ve posted the email below, along with City Manager Eric Holmes’ response. The key point is the Trust never wanted money from the city’s general fund (which is used to pay for basic services.) The Trust wanted dedicated/restricted funds. Strahan names lodging tax revenues — but does not acknowledge that lodging tax revenues go exclusively (at least for now) to Hilton Vancouver Washington. So from the city’s perspective, money for the museum would have to come out of the general fund. Holmes said Monday that the city could use revenues from West Barracks and Officers Row, but currently that money pays for renovation and operations, and nobody on the council suggested that it be used for the museum.

From: Elson Strahan
Sent: Thursday, May 15, 2014 1:57 PM
To: ‘tim.leavitt@cityofvancouver.us’; ‘smith@cityofvancouver.us’; ‘jack.burkman@cityofvancouver.us’; ‘bart.hansen@cityofvancouver.us’; ‘bill.turlay@cityofvancouver.us’; ‘McEnerny-Ogle, Anne’; ‘alishia.topper@cityofvancouver.us’
Cc: Holmes, Eric; Jan Bader; Steve Horenstein
Subject: Financial Clarification Regarding the Pearson Air Museum
Importance: High

City Council Members,

I am writing to clarify a misperception that was apparently communicated in the memorandum from City Manager Holmes and Policy and Program Development Manager Bader regarding the Pearson Air Museum. That memorandum was specifically provided to you as a briefing paper to inform the Council’s policy decision with regard to its support of HR 716. Clearly, such a decision involves many factors that must be weighed, which you have done in making your determination not to support the continued progress of that bill. The purpose of this email is to clarify what the Trust was asking of the City with regard to financial support should the Museum property be transferred to the City.

The memorandum stated that a key result of the property transfer from the NPS to the City would be that it would “potentially reinstate an annual operating subsidy from the City of at least $100,000 annually.” As council members grappling with the many financial needs of our community, such a commitment would understandably weigh heavily in your deliberations, particularly since the impression was seemingly conveyed that this would be from the City’s general fund, and that it would be in perpetuity. Neither of these conclusions would be accurate, and it also would perhaps cause the council to feel that, if true, the Trust was making an unreasonable request of the City in light of the City’s many financial burdens.

By way of background, it is important to note that since the Trust assumed responsibilities under both the master lease for Officers Row and the West Barracks, as well as for the Pearson Air Museum at the City’s request, the City has supported historic site operations, including the Pearson Air Museum, from two primary sources of restricted funding – revenue from property management operations and lodging-tax revenue. Property revenue derived from leasing operations must be spent to support the historic site, and distributions from lodging-tax dollars must be spent to support tourism enhancement.

In the Trust’s June 7, 2012 letter to the City, which you also received as part of the memorandum, the Trust had offered to relieve the City of its financial obligations to the NPS in support of the Museum under the existing cooperating agreement, which NPS terminated in February 2013.

Accordingly, what the Trust was reported to be asking the City regarding financing, and our letter of financial support to the City, must have also been confusing. Hopefully, we can clear up any unintended misconceptions resulting from the staff memorandum.

In 2013, the net operating Income generated through the Trust’s master lease of Officers Row and the West Barracks was $917,000. An important note in this regard is that such net revenue was not realized prior to the Trust assuming the master lease. From this amount, the Trust made a lease payment to the City of $175,000, and retained $166,000 to reimburse the Trust for its operating expenses. Accordingly the net amount deposited in the property reserves was $576,000. We are pleased to say that such successful management by the Trust under the master lease has been increasingly demonstrated since the City executed the master lease with the Trust, which has all been utilized to support the historic site, as is required.

At the end of mediation discussions the Trust indicated that it needed financial support from the NPS and the City to reinstate sustainable operations, but that this was anticipated only to be for a period of three to five years, and the City offered $50,000 in financial support for this period, plus some moving assistance. As was indicated in the attached Trust’s letter to Rep. Herrera Beutler, we believed that if the Museum property was transferred to the City we could once again return to sustainability. We did anticipate that the City would be asked to keep this limited term financial commitment, plus in-kind support, and perhaps that is the source of the calculation made to arrive at the projected $100,000 annual commitment stated in the memorandum.

What would the source of this support be? While we are of course not involved in all of the City’s fund allocation decisions, we do operate under two fundamental understandings.

Historically, the $50,000 in program funding for the Museum was from lodging-tax dollars in keeping with the fund’s required tourism support. Accordingly, these funds can support tourism activities, but cannot be moved to the City’s general fund, and could remain a source of support to the Museum. Further, all income derived from property leasing must be retained for expenditure on the historic site. While the primary allocation of these funds has been, for example, to replaces the roofs on Officers Row last summer, the net leasing revenue paid to the City on an annual basis could also be a source of operational support.

This is a somewhat simplified but important explanation to make the point that the Trust was not asking for general fund support from the City, but support from designated/restricted funds in keeping with how those net revenues are to be expended. Could they be allocated differently to support the historic site? Absolutely. However, these are not City general funds and, as noted above. The Trust has provided an increasing revenue stream through property operations – of over $900,000 in 2013 alone – and the Trust’s proposal was for a short-term financial bridge from restricted funds, to which the City had already agreed before mediation was terminated.

Whether or not you choose to support HR 716 or not as a policy matter is, of course, your prerogative. However, we are concerned about feedback from some City Council Members, and the reference made in the attached letter-to-the-editor in today’s Columbian, that “under the Fort Vancouver Trust, the city of Vancouver provided $100,000 annually to subsidize operations, which would continue to be a taxpayer expense if the museum was removed from the National Park Service.” It is clear that Council Members and citizens may have the impression that the support provided for Trust operations was“taxpayers” dollars from the general city budget (although we are not clear why NPS funding for the Museum would not be tax dollars as implied in the letter). The funding was anticipated to be derived from either net Trust-earned property revenues or dedicated lodging-tax revenue.

We believe we have been good financial stewards of City-owned properties and have created substantial revenues to make these properties more than self-sufficient and certainly not dependent on City general funds. Further, while we did receive City contributions from restricted funding sources for Museum operations, we were at a point of being able to be self-sufficient when the NPS assumed control and were only requesting support that was previously provided, and offered as continued bridge-funding until we reinstated self-sufficient operations.

Accordingly, while the impression was clearly made that the Trust was seeking to compete for precious general operation funds from the City, this is simply not the case and we do not want to be thought of as being fiscally insensitive or irresponsible. The record clearly shows otherwise and we are proud of the hard work we do be a good partner with the City.

Trust Board Chair Steve Horenstein will be setting appointments with each of you to make sure that we have answered any questions and to clarify any misconceptions you may have in this regard.

Best Regards,

Elson

Elson Strahan, President & CEO

Fort Vancouver National Trust

———————————————————————————————

From: “Holmes, Eric” <Eric.Holmes@cityofvancouver.us>
Date: May 15, 2014 at 4:19:22 PM PDT
To: ‘Elson Strahan’ <elson.strahan@fortvan.org>, “Leavitt, Tim” <Tim.Leavitt@cityofvancouver.us>, “smith@cityofvancouver.us” <smith@cityofvancouver.us>, “Burkman, Jack” <Jack.Burkman@cityofvancouver.us>, “Hansen, Bart” <Bart.Hansen@cityofvancouver.us>, “Turlay, Bill” <Bill.Turlay@cityofvancouver.us>, “McEnerny-Ogle, Anne” <Anne.McEnerny-Ogle@cityofvancouver.us>, “Topper, Alishia” <Alishia.Topper@cityofvancouver.us>
Cc: “Bader, Jan” <Jan.Bader@cityofvancouver.us>, Steve Horenstein <steve@horensteinlawgroup.com>, “Delapena, Amanda” <Amanda.Delapena@cityofvancouver.us>, “Brown, Jill” <Jill.Brown@cityofvancouver.us>
Subject: RE: Financial Clarification Regarding the Pearson Air Museum

Elson –

Thanks for this follow up as well as your time on the phone this afternoon.

Mayor and Council – if you are willing, I would appreciate joining you in your individual meetings with Mr. Horenstein. Email is an imperfect communication tool, and being in the same room to reinforce a shared understanding may be helpful. As always, Amanda is available to assist in schedule, if needed.

Thank you –

Eric J. Holmes| City Manager

CITY OF VANCOUVER