Forget, for a moment, the possible loss of state school levy equalization money. Or the elimination of services to the most vulnerable among Washington’s population of disabled citizens. Or a Band-Aid in the form of a half-cent sales tax increase.
No, Washington legislators gathered for a special budget session must first save the Greater Wenatchee Events Center Public Facilities District. If not, warns state Treasurer James McIntire, every municipality in Washington will suffer the consequences of the first bond default since the $2.2 billion Washington Public Power Supply System debacle of the early 1980s, the largest default in U.S. history at that time.
The district needs $42 million by Thursday, or it will default on securities sold in 2008 to finance its sports arena. Because it was a very bad year to sell bonds – Lehman Brothers bankruptcy, etc. – the district sold short-term notes to buy time while the market improved. But the district never refinanced the debt, in part because of infighting among the nine member jurisdictions.
One option, a $25 million bond sale by Wenatchee alone, was nixed by a Superior Court judge who ruled the additional debt would push the city over its allowable debt limit. That decision is under appeal. Meanwhile, the time for other alternatives has expired.
McIntire has offered an option he says will get the debt refinanced without putting the state on the hook, and one that will assure taxpayers within the district – and they alone – will make good on the “bridge loan.” His plan: Paying the debt off with funds from the account holding local sales and use taxes or, more accurately, the $300 million “float” between when the money is collected and when it is disbursed. The nine taxing jurisdictions could repay the principal and onerous interest – as much as 5 percent – out of their share of sales taxes. Or the district could impose a 0.2 percent sales tax increase that might allow a private, 20-year refinancing package with a lower rate.
To put it mildly, this proposal is not going down well with the small cities and unincorporated areas of Chelan and Douglas counties that get little direct benefit from the arena, but will get stuck with higher taxes. There has been talk of a lawsuit if the plan is adopted. Even legislators representing the area are unhappy.
But the decision before the Legislature boils down to this: Give the district the relief it needs – at a punitive cost to Wenatchee-area taxpayers – or allow default, with potential consequences for every Washington city and county.
Of course, if the state does step in, other financially shaky municipalities could step forward in the future, cup in hand. One other Washington public facility district is rumored to be in peril. Tempting as it may be to throw Wenatchee under the Zamboni, the state probably has little choice.
For example, the financially strong Spokane Public Facilities District is in the process of refinancing $17 million in bonds, and in 2013 will have to roll over $73 million. Bondholders are aware of Wenatchee’s situation, SPFD Executive Director Kevin Twohig says.
Legislators need to lift this cloud, and move on to the really ugly business before them.
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