November 30, 2011 in City

Wenatchee bailout proposal hits major snag

Mike Baker Associated Press
 

OLYMPIA – Lawmakers on Tuesday struggled to corral enough support for a bailout plan that would make a key bond payment this week for a Wenatchee-area agency on the verge of default.

East Wenatchee Rep. Cary Condotta, a sponsor of the measure, said the package doesn’t have enough support in his Republican caucus.

He said hopes are waning on the bill and that it needs to be approved today in order to make a timely payment for the debt tied to the arena.

“Hour by hour, the chances are getting more distant,” Condotta said.

A Senate committee heard testimony on the matter Tuesday evening but did not approve it, as some lawmakers questioned whether a rescue would lead other jurisdictions to assume the state will serve as a backstop for bad debt. Democratic Sen. Ed Murray, the panel’s chairman, said it didn’t appear to have enough votes.

“I think many are worried about rewarding bad behavior,” said Murray, who also opposes the bill.

The plan would make Thursday’s bond payment by using cash in an account that collects local sales and use taxes, and it would not impact the state’s general fund. Jurisdictions in the Wenatchee area would pay it back over time, and the bill would allow them to increase the sales tax there by 0.2 percent.

State officials fear that a default will have a negative impact across Washington. Wolfgang Opitz, the assistant state treasurer, said the measure wasn’t designed to salvage Wenatchee’s credit so much as it was made to prevent a ripple effect on the rest of the state. Municipal bond defaults are rare.

“They are very significant. They are very much noticed,” Opitz said.

Wenatchee Mayor Dennis Johnson said bond buyers are already prepared to take legal action if the payments don’t come in Thursday. He said it would have widespread consequences for the Wenatchee area, tying up local funds and impacting local services.

“It would be felt by a lot of our community,” Johnson said.

The debt troubles spawned from the construction of the Toyota Town Center arena, which was finished in 2008. The Greater Wenatchee Regional Events Center Public Facilities District has been unable to pay off short-term debt, and a judge determined that the city can’t legally issue new bonds without exceeding its debt capacity.

House Speaker Frank Chopp said it’s too early to say whether the measure will pass or fail. He met with House Minority Leader Richard DeBolt on Tuesday afternoon to discuss the issue.

“We had quite a few votes for it, some no and quite a few undecideds,” Chopp said.

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