OLYMPIA – The Washington House of Representatives passed a bill that would loan a troubled public facilities district $42 million, but only after limiting the way cities and counties involved in that project can raise taxes.
On a bipartisan vote, the House passed House Bill 2145, which would loan the Greater Wenatchee Regional Events Center Public Facilities District $42 million to repay investors who hold short-term bonds that went into default on Dec. 1. The money would be repaid to the state over 10 years, starting in 2013, and the cities and counties involved could raise local sales taxes by as much as two-tenths of a percent to cover the loan payments to the state.
A change just before the bill came to a vote did not sit well with Rep. Mike Armstrong, R-Wenatchee, one of the bill’s original sponsors. The original bill said taxes could be raised by a vote of the local legislative body or the voters. The amendment requires voters to approve the sales tax increase.
“This takes us down the slope to total bond default,” said Armstrong, who voted no.
The Wenatchee PFD, which includes two counties and seven cities in central Washington, was unable to issue long-term bonds to pay for its new arena in the fall of 2008 because of problems with the nation’s bond and credit markets. It issued three-year bonds instead, which came due last Thursday. Revenues from the arena have been substantially below estimates and courts have ruled against one plan by the city of Wenatchee to pay off the short-term notes.
Investors received an interest payment on Dec. 1, but not the principal, and the bonds went into default. But legislators were told investors would probably not sue if the Legislature approved a bailout in the coming days.
The problems with the bonds could spread beyond the central Washington communities and affect the Spokane Public Facilities District, which operates the Spokane Veterans Memorial Arena as well as the Agricultural Trade Center.
Kevin Twohig, chief executive officer of the Spokane PFD, said the district is scheduled to refinance about $17 million worth of bonds at lower interest rates on Dec. 13, a move that could save about $1.6 million based on rates quoted earlier this year. When Spokane area officials went to San Francisco last week to talk with rating agencies, agency staff were watching the Legislature’s discussion of the Wenatchee bailout on TVW, he said.
“We made the point we’re not Wenatchee,” Twohig said. The Spokane district initially sold bonds in 1992, refinanced them in 2001 and has never missed a bond payment, and voters approved taxes to support the arena.
The district won’t know what interest rate it will be charged until next week. If it’s higher than previous estimates, at least some of that will be a result of the Wenatchee problems, he said.