KP Fire District 16 to Assess Options for Key Center Properties

Editor's note: This article has been updated to include comments from Randy Boss received after press time and to include a lower estimate for foundation repairs to Station 45.

The Key Peninsula Fire District 16 board of fire commissioners will determine options for constructing a new headquarters facility in Key Center — or not — and renovations to existing stations after review of two independent reports due in May or early June, and present them to the public for feedback amid controversy over real estate purchases intended for that same new HQ.

The district hired Bremerton architecture firm Rice Fergus Miller to evaluate the condition of district facilities and pitch ideas for a new headquarters in August 2021. It also hired the financial consulting firm FCS Group of Redmond earlier this year to evaluate the financial health of the district and how to best manage its resources, including possibly paying for capital improvements or new construction, or selling off the new properties.

At the same time, the district underwent an examination by the Washington State Auditor’s Office that determined there was no illegal use of funds in the years 2020 or 2021, when the Key Center properties — the Olson estate and Calahan property — were purchased, but made two strongly worded recommendations (see sidebar below).

The conclusions of the architect and financial reports will guide the district’s Capital Facilities Planning Committee on what to advise the board concerning new construction and renovation, and the future of the district, according to fire commission Chair Stan Moffett.

“The committee was originally made up of internal and a few external (to the district) people last year,” he said. “But it was just too much — too many contradictions and too many different ideas — so, eventually this last fall, that committee was made an internal committee of fire district people. The district has to determine what its needs are, and that was the reason for doing that. What should a new facility, if it is built, look like?” 

KPFD bought two properties in Key Center for $2.125 million negotiated by then Fire Chief Dustin Morrow at the end of 2021 as possible locations for a new headquarters, training facility, community rooms and a health clinic, according to Moffett. Morrow subsequently left the district to run Central Pierce Fire & Rescue Dec. 1, 2021.

“I was apprised of what was going on and was involved in the final purchase price of those properties,” Moffett said. “They are unique pieces of property, and the thing about property is you basically have only one opportunity, generally speaking. We felt strongly enough that to be located in Key Center and to have a headquarters was important enough for us to acquire those properties.” 

Once the Capital Facilities Planning Committee reviews the Rice Fergus plan, it will make recommendations to the board about new construction and repairing or improving existing facilities. After reviewing the financial forecast as well, the board may decide not to proceed at all. “There’s no need for another clinic now, which is what we thought might go on the corner. Personally, I could see that property getting sold, and a new station on the Olson property,” Moffett said.

The design work of Rice Fergus has cost $84,281.81 from August 2021 to date. The FCS Group has been paid $6,148.75 so far, under an agreement not to exceed $24,050.

Many KP residents have spoken up at the twice-monthly commissioner meetings to question or complain about district spending and the ongoing expense of the properties. One such resident, John Pat Kelly, was moved to join the Citizen’s Advisory Panel in April 2022 and to apply to fill an open commissioner’s position, which went to KP resident and Tukwila firefighter Ben Rasmussen Jan. 24, 2023.

“The board should have built up funds before committing taxpayers to a new facility that they haven’t even proven that we need,” Kelly said. Referring to purchasing the former Key Center restaurant property, he said, “The O’Callahan’s fiasco is textbook on why local boards should not get into the real estate or restaurant business.”

Kelly pointed out that, in addition to paying for extensive repairs on the building, “Besides their ongoing fees, the property manager made an $18,000 commission for lining up a tenant (for O’Callahan’s) that had his deposit returned, plus expenses and another $2,500 to not sue the district.”

Randy Boss of Harborside Property Management, LLC, billed KPFD an $18,000 commission on the later canceled O’Callahan’s property lease in April 2022 and continued to hold those funds in the rental trust account. There is no provision for such a commission in the management contract, according to Moffett, and the district’s attorney is attempting to reclaim that money. 

"I have two contracts with the fire department," Boss said. "One to manage the property and then when I leased the property to the new tenant, that was another contract separate from the management contract, and the commission was 5%, which is a standard commission."

The lease with the tenant, Adam Hill, was for $6,000 a month, or $360,000 over five years, 5% of which is $18,000. Because of a disagreement between the tenant and fire department over completing needed structural work for the builidng, the lease was canceled in December 2022.

Fire Commissioner Shawn Jensen said acquiring the properties and funding studies about what to do with them is part of a years-long process to improve or replace existing district facilities.

“The Citizen’s Advisory Panel recommended that we rebuild Station 46 (headquarters), and the preference was to keep a fire department presence in Key Center,” he said. “It’s something we have talked about for a long time, at least since 2015 when I was on the committee.”

The existing headquarters was built in 1972 and has already undergone numerous remodels, but it’s only one piece of the puzzle.

“Rice Fergus is pricing not just a headquarters station but all of the potential improvements we’re looking at so we can establish a priority list,” Jensen said. “Anything we do regarding a headquarters probably needs to include funds to address other needs within the next five years because a new headquarters is five plus years out.”

Those needs include roof repairs, HVAC and seismic upgrades, and improvements to aging mechanical systems. Station 45 at the corner of Wright-Bliss Road and State Route 302 will undergo extensive foundation repairs for approximately $89,000, down from the original estimate of $150,000, and covered by insurance according to KPFD.

“It’s certainly not our intent to build some kind of fancy facility,” Jensen said of the Key Center properties. “We’re not Gig Harbor; we don’t have the resources. But we still have stations that are aging and need to be maintained or replaced and how best to do that is the long process that we’re undergoing right now. We’re trying to gather all the background data to take to the community with some possible ideas on how to address them, and then we’ll ask: What would you folks like to do?” 

KPFD’S REAL ESTATE DEALS

The first Key Center parcel is called the Calahan property, site of the former O’Callahan’s restaurant (aka Reed’s and Buck’s), including its kitchen equipment, located at the corner of KP Highway NW and 92nd Street NW. The second parcel is known as the Olson estate, which consists of two lots located across KP Highway from Station 46 headquarters, with a residence and a portion of the pasture behind it totaling 2.8 acres.

The Calahan property was not appraised or inspected before the purchase, but the Pierce County Assessor-Treasurer tax valuation was $473,600. KPFD paid $950,000 Nov. 8, 2021. The Olson estate was appraised at $460,000; the district bought it for $1.2 million on Dec. 15, 2021.

The district financed the deals with a private bond for $2.125 million at 1.82% interest. Biannual debt service is interest only and began Dec. 1, 2021, at $13,106.53 until Dec. 1, 2024, when principal and interest payments starting at $129,337.50 will be due every six months until 2040.

The Olson house is rented and a lease for the former O’Callahan’s was signed in April 2022 with the expectation that it would reopen as a new restaurant, but the building required extensive renovation and remained vacant. The department spent $23,000 on repairs and estimated another $50,000 would be needed to complete them. Instead of spending more, and after failing to reach an accommodation with the tenant, the department terminated the lease and refunded the tenant his $6,000 deposit together with a $2,500 “goodwill” gesture. The tenant indicated he would seek further reimbursement and perhaps damages, but had not done so by press time.

The Washington State Auditor’s report for the years 2020 and ’21 included two recommendations for the district. The first states:

“We reviewed the property manager’s (Harborside Management LLC) monthly activity statements for July and August 2022 and noted PM was holding almost $20,000 in a trust account in August of 2022. The district should determine how much funds are necessary to be maintained in the trust account and collect any excess funds above what is necessary in a timely manner. We also noted the PM did not charge the correct management fees per the agreement.”

In April 2022, Harborside billed the district $18,000 in commission on the later canceled lease for the Calahan property. The district did not agree to that in its management agreement with the property manager, according to fire commission Chair Stan Moffett, and the district’s attorney is pursuing the matter.

The property manager has continued to pay itself its monthly $595 fee plus administrative expenses, according to its statements. The only income is from the Olson house rent, which is $1,900 per month. After this edition went to press, Randy Boss of Harborside told KP News his fees and commission are industry standard.

The second recommendation regards the fire commissioners violating the Open Public Meetings Act in 2021.

“Based on the information provided in the board meeting minutes for October 26, 2021, the district violated the OPMA when all five commissioners discussed district official business during attendance of the Annual Fire Commissioners’ Conference ... The public was not notified of the meeting or given a chance to attend. We recommend that the district ensure compliance with the OPMA requirements.”