Published May 2005

Energized Entrepreneur
Mortgage broker Vaughn brings
small-business perspective to PUD position

By Kimberly Hilden
SCBJ Assistant Editor

In her office at Goldmark Financial Corp. in Lynnwood, Kathy Vaughn has an oversized, 12-month visual organizer hanging along one wall. Filled with black “X’s,” multi-colored lines and a variety of notations, the calendar is a testament to the hectic schedule inherent in the life of a small-business owner and public servant.

Snohomish County Business Journal/ KIMBERLY HILDEN “When I first came to the PUD, I said, ‘Just because we’re a public entity doesn’t mean that we can’t run like a private enterprise,” said Kathy Vaughn, who is serving her second term as a commissioner for Snohomish County Public Utility District No. 1.

And for the past 10-1/2 years, Vaughn has been both, running her own successful mortgage company as well as the administrative side of her husband’s construction firm while fulfilling her duties as District 2 commissioner for Snohomish County Public Utility District No. 1.

It’s a combination of duties that keeps her on her toes and requires the Lynnwood resident to make the most of her organizational skills.

“I’m good at multi-tasking — it’s the training of wife and motherhood that makes you a good multi-tasker,” said Vaughn, the mother of two grown children. “One minute, I’ll get a call about a loan; the next, I’ll get a call about the PUD.”

Whatever the call, it is never dull, Vaughn has learned.

The dynamite real estate industry of the past few years, fueled by historically low interest rates, has kept her whole office hopping, while issues facing the PUD, including a legal battle with Enron, have proved just as combustible, catching both regional and national attention.

“If nothing else, these ... things, they keep me off the streets,” Vaughn said jokingly.

A natural in business world
From the time she was a child growing up in Ballard, Vaughn knew she had a knack for business — it was evident in the way she processed information and accomplished tasks at hand.

“I always was kind of business-minded, even as a kid,” she said. “Everybody has a sense of their own abilities, and that was my ability.”

In 1979, she began putting that ability to the test when she and her husband, George, started G.M. Vaughn Construction, a general contracting company.

“When we first opened the company in 1979, I worked side-by-side with him. I had a 1-ton dump truck and was hauling materials,” Vaughn said. “I did all the books and office work.”

The national economy, however, suffering from high inflation and interest rates, was not conducive to short-term success, and in 1980, Vaughn sought additional income to augment the money being brought in by the construction company.

She landed at a Northgate mortgage company and began working as a clerk.

“That’s where I did my ‘apprenticeship,’” said Vaughn, who worked her way up to becoming a loan officer.

A few years later, she was recruited by U.S. Bancorp to set up a mortgage division at its Bellevue office. Soon, Vaughn was the top-producing loan officer in the company’s statewide system.

“I was with U.S. Bancorp a little over two years, until 1987. I left there because I’d had a bad car accident ... and this is a very stressful job,” Vaughn said of the mortgage industry. Needing to recuperate, she decided for a more sedate working atmosphere, spending a year at a title insurance company.

But the mortgage industry continued to beckon, and she returned to work in that field. By 1994, Vaughn struck out on her own, starting Goldmark Financial Corp.

“The interest rates were at 6-1/2 percent when I started, then went up to 9 percent,” Vaughn recalled. By weathering that first storm, she learned that if you could make it in the bad times, you could make it any time.

In the nearly 11-1/2 years since she opened Goldmark Financial, Vaughn has grown her client base mostly through customer referral. Although she makes loans throughout the state, the majority of her clients can be found in Snohomish, King and Skagit counties.

“I have very good customers. I appreciate their loyalty,” she said.

Vaughn also has increased business by working with a select number of real estate agents and garnering the respect of a number of financial advisers, attorneys and accountants who refer their clients to her as well.

“I’ve seen a lot of cycles in this business. You have to learn how to shift your business focus. The past few years have been incredibly busy — almost more business than anybody wanted or could handle,” said Vaughn, who had seven loan officers working during the peak of the interest-rate frenzy and now has four, including herself.

Working with 80 different lenders from around the country, Vaughn said she has plenty of options when it comes to finding the right financial package for her clients, whether they are looking to buy a home or refinance their existing one. And the demand for each of these changes with the economy.

The trick is to keep on top of lenders’ programs, get a handle on the economic climate — and plan accordingly, she said. “You switch to these venues to satisfy the demand of your customer base.”

Entering the energy arena
Just as Vaughn has become experienced in the cyclical nature of the mortgage industry, she has adjusted to the roller coaster ride that is the energy industry in the wake of deregulation, having served on the PUD’s Board of Commissioners since January 1995.

“It certainly hasn’t been boring,” said Vaughn, who decided to run for commissioner following her own personal experience in trying to get the PUD to provide electricity to a vacation cabin she and her husband purchased on the north fork of the Stillaguamish River outside of Darrington.

“My dad was an electrician ... but before my experience with the PUD and becoming part of the commission, I knew only that flicking on a switch would turn on my hairdryer and that a bill came every two months,” she said, smiling. “But I’m a quick learner. I have my business background sense, my sense of community, and I have always been active in the south-county community.”

Being a quick learner was a definite advantage in the energy industry of the mid-1990s, following the 1992 passage of the National Energy Policy Act, which gave energy producers the go-ahead to compete in selling their power to utilities, thus deregulating the wholesale energy market.

“This was a new frontier for all of us. There probably have been some mistakes made, and we’ve dealt with corruption and manipulation of the industry that deregulation has brought on,” Vaughn said.

One case in particular was that of Enron Corp.’s illegal manipulation of the energy market during the 2000-01 West Coast Energy Crisis, one of the factors that sent PUD rates skyrocketing in 2001.

“We were all taken aback, but we knew that something must have been going on,” she said.

By the fall of 2001, when Enron reported a $618 million third-quarter loss, disclosed a $1.2 billion reduction in shareholder equity and saw its credit rating plummet, it became apparent who might have the answers to what was “going on,” Vaughn said.

As Enron faced impending bankruptcy, the PUD canceled its contract with the energy trader after just eight months, a move that pushed Enron to sue the PUD, claiming that the utility owed the company $122 million for early contract cancellation. But the PUD has fought back, uncovering evidence of Enron’s illegal activity.

This past March, the PUD moved a step closer to victory when the Federal Energy Regulatory Commission issued an order saying that Enron’s manipulation of the energy market during the energy crisis invalidated its right to sell electricity during that time.

Now, the issue of just when Enron’s right to sell electricity should have been revoked moves to an administrative law judge, who is expected to make a recommendation to FERC by October, with the federal agency making a final decision possibly by year’s end.

“Fortunately, we’re halfway to the finish line,” said Vaughn, who credited the PUD — its staff and legal team — for its tenacity in seeing the issue through.

“We have refused to allow this community to pay the contract cancellation fee that Enron wanted,” she said. ”It’s an outrage, what they did. It’s corruption. ... They stole from everybody in this community.”

In more than 10 years of dealing with energy issues, Vaughn has remained steadfast in her approach to decision making: listen to everybody’s opinion; gather facts and figures, which she does with the aid of commission analyst Nancy Holbrook; and understand the pros and cons.

“I take that information and decide what will be best for the utility and the community, and that’s how I make my decisions — and experience is always a great educator,” she said.

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