EDITOR’S NOTE — The city manager’s letter is online at http://tinyurl.com/padaletter.

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PORT ANGELES — The city has suspended payments to the Port Angeles Downtown Association and has threatened to terminate funding to the organization.

In a blistering three-page letter emailed Friday to association President Bob Lumens, City Manager Dan McKeen said financial-accountability concerns the city raised May 23 remain unresolved and demanded the organization demonstrate compliance with its funding agreement with the city by Aug. 25.

Nathan West, city community and economic development director, said Tuesday the downtown association continues in default of its funding agreement, which expires Dec. 31, and remains in breach of the contract.

(McKeen was out of town Tuesday and unavailable for comment.)

In his letter, McKeen cited the downtown association’s “lack of measurable performance” and said the group must take “minimum steps for resolution” of the city’s concerns before funding can resume.

Lumens said without the funds, such activities as the downtown association adorning the Christmas lights on the downtown Christmas tree at Laurel and First streets and on regular street trees would fall by the wayside because of lack of funding.

“This is all stuff that at this point in time they have pulled out from under us,” Lumens said Tuesday.

The downtown association is made up of 178 to 200 businesses, Lumens said.

McKeen’s letter said the organization must intensify business recruitment and provide the city with detailed information on programs, begin submitting monthly reports on new businesses opening and existing businesses closing, and establish a long-term plan for improving association-managed downtown parking lots.

McKeen characterized the lots as “in a state of disrepair.”

“Main Street program reports have not provided evidence that local businesses have been supported for expansion and no evidence of individual business recruitment has been provided,” McKeen added.

The downtown association receives $65,000 from the city to manage city-owned parking lots in the downtown Parking Benefit Improvement Area (PBIA).

West said the PBIA is funded by tax assessments on businesses, parking-permit decal sales and proceeds from a lease agreement that covers maintenance of the parking lot used by the state Department of Social and Health Services.

The downtown association also receives $20,000 in B&O — business and occupation — taxes from the city for the Main Street Program that also may be cut.

“The [funding] agreement expires at the end of the year, and past performance rules out consideration of B&O tax contributions to the downtown association,” McKeen said.

That leaves $34,000 in B&O taxes the organization receives directly from businesses — enough to survive on, but not by much, Lumens said.

The letter from McKeen is “a gem, believe me, it’s a gem,” Lumens added.

It was emailed to Lumens at 3:46 p.m. Friday afternoon, West said.

Barely an hour later, at 4:54 p.m. Friday, Lumens emailed downtown association members the news that the group would not participate in PA United, abiding by the 13-member board’s 7-1 vote rather than have the general membership decide on consolidation.

Organizers of PA United were trying to merge the business group with the Port Angeles Regional Chamber of Commerce and the Port Angeles Business Association, which includes businesses outside downtown, to spur economic development.

The board said in a statement to downtown association members that consolidation is “premature,” while Lumens in a preface to the letter compared a merger to “a hostile takeover.”

The chamber and business association are continuing efforts to consolidate.

Lumens said the downtown association board would discuss McKeen’s letter at its 6:15 p.m. Aug. 14 regular meeting but may hold a special meeting sooner.

The seven lots managed by the downtown association need asphalt paving, an asphalt overlay or a seal coat, McKeen said.

West said the City Council will decide how the parking lots would be managed if the downtown association does not “follow through” on McKeen’s letter, West said.

“It is certainly our hope that we see the downtown association cure the issues and concerns that have been identified in the letter.”

The city also is scheduling a financial audit for August, McKeen added.

Mayor Dan Di Guilio said Tuesday the city is seeking “measurable outcomes” from similar groups it funds, such as the chamber and the Clallam County Economic Development Council.

“We are not picking on the downtown association,” he said.

“If you say you’re going to do something in a contract, we’d like to see you do it.

“The downtown association has a role that is important, and I hope it all turns out well for everybody.”

In one criticism common to his letter, McKeen said city staff has had to do the work of the downtown association, including conducting a quarterly walk through downtown to obtain an accurate accounting of new businesses.

“Adequate funding is provided by the city to the downtown association for the performance of required services,” McKeen wrote.

“For our staff to perform this work would negate the need to contract for services.”

Said Lumens: “People have to understand that we do a hell of a lot of stuff and do good for the community.

“If they are not buying that, I don’t know what to say.”

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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at pgottlieb@peninsuladailynews.com.