Last week, board members voted to change the Vashon Park District’s general financial management policy in order to fulfill ongoing commitments, namely to support recreation programming and to complete deferred maintenance projects.

The district’s financial management policy guides its decision-making regarding program offerings and general expenses while establishing reserves as part of creating a balanced yearly budget. At the Oct. 23 board meeting, Ott-Rocheford explained how the district’s previous financial management policy would shape its budget — and affect priorities — for 2019 and beyond if not amended, as it was at odds with the district’s aspirations for the future.

According to Ott-Rocheford, under the previous policy, as written by former commissioner Scott Harvey, the district would have to continue budgeting in a way that eventually over-allocated funds to its reserve accounts. She identified one of its greatest constraints as a requirement that the money allotted to the district’s operating budget be the average of levy dollars from the last three years — no greater than that amount could then be set aside for the district’s operating expenses.

“It totally ties your hands,” said Ott-Rocheford at a recent meeting. “You cannot do recreation programming. You cannot do your capital projects, and you cannot increase your operation’s needs.”

The new policy eliminates that stipulation, allowing the district more flexibility to allocate its levy dollars for operating expenses, provided it fully funds the operating and capital reserves.

Harvey’s goal, Ott-Rocheford said, was to use excess dollars to stimulate the reserves because, as she noted, there were no reserves to start with upon his initial appointment to the board during a time of financial crisis at the district. But going forward, she said that the previous policy’s limitations would hinder the district’s ability to meet and expand its programming needs, as well as prevent it from addressing a myriad of deferred maintenance projects, which board members have charted for completion through 2024 in an ambitious strategic plan. The latest iteration of the plan was adopted at the Nov. 13 meeting.

“At what point do you decide that your reserves are enough? Are you using your capital reserve in the context of addressing your capital needs? It just didn’t make sense,” she said.

Ott-Rocheford noted that the goal behind initiating the strategic plan and funding the deferred maintenance as part of that plan, was to do so using levy dollars. The district, she said, won’t be able to rely on grants to cover a significant portion of its estimated $1.5 million minimum capital project expense through 2024.

“To meet the objectives for the strategic plan in 2019, we need $100,000 in recreation programming in our budget — which we have — and we’ve committed to addressing $145,000 in capital needs, all paid out of levy dollars,” she said. “We can do that with this budget. It meant also having to rewrite the formulas that Scott formulated to build those reserves.”

Per the recommendations of the state auditing office, Ott-Rocheford said that the board is mindful of carrying any debt under the new financial management policy, and aims to responsibly govern cash flow without needing the use of debt instruments in the years ahead. To guard against an economic downturn, the board agreed to establish a permanent reserve of $400,000 intended as a buffer for managing cash flow during the months before the district would receive levy money from the county. Islanders will vote next year on the park district levy.

Ott-Rocheford said that $400,000 figure was approximated based on how much the district was hit in the last recession. Under the old policy, she said, the permanent reserve could be considered fully funded when “it hits the difference between the highest and lowest levies in the past 10 years.” The district’s highest levy was this year, at $1,330,025. The lowest came in 2013, at $993,000.

But the provision in the old policy specifying that the district’s expenses may not exceed the average in levy dollars from the last three years was, again, an impediment.

“Given the existing policy, we could fully fund the permanent reserve at $337,000, but what I found in doing that was that we’re still over-allocated per that three-year average. So it doesn’t work.”

Ott-Rocheford, therefore, determined that the board would either need to suspend the rule of the previous policy, she said, thus consciously violating it, or rewrite it to be appropriate for the needs of the district going forward. To meet their maintenance goals, the new policy is dependent on what the district asks for in the next levy cycle.

“That’s going to drive how large that capital reserve can grow, but it will grow,” she said. “I feel confident, and the other four board members felt confident, that we’re meeting our objectives.”

Doug Ostrom, chair of the park district board, said at the last meeting that he had spoken to Harvey about the new policy and expressed concerns that it will have inadvertent consequences.

“What I noticed was it didn’t appear as if the new policy has a means of funding the capital reserve, whereas his policy did,” he said. Ott-Rocheford disagreed, saying that per recommendations of the state auditor, the capital reserve will be growing under the new policy, as it requires the district to save enough for a minimum of five years to fund capital needs, plus an additional 10 percent for cost overages.

Responding to another concern of Ostrom’s about cash flow in 2020, Ott-Rocheford said that in the months before the district is scheduled to receive its next batch of levy money from the county, it will carry over an estimated $475,000 from the 2019 budget, according to her projections.

“I’m motivated by the fact that Scott developed this [policy] initially because we had a TAN (tax anticipation note) and we were trying to get out from under that. And my concern is that we’re risking going back to that,” said Ostrom.

Commissioner and board vice chair Hans Van Dusen, who is serving the remainder of Harvey’s term after he resigned earlier this year, said that he is confident in Ott-Rocheford’s month-to-month projections, adding that the district’s revenue is sufficient to cover their anticipated expenses in the months before they receive the year’s first levy funds.

“I think that the revisions to the original policy are good and solid and provide good flexibility with caution for the executive director,” he said. “And if we have an immediate near-term concern about the cash in March of 2020, that is explicitly addressed,” Van Dusen said.

The new financial management policy was approved by a vote of 4 to 1, with Ostrom opposed.