Avoid a contagion, help resolve Wenatchee's debt crisis
Helping resolve the debt crisis around a Wenatchee-area regional center is in the best interest of local government finances around the state and region.
STATE lawmakers must accept that failure to help a Wenatchee-area public facilities district through a debt crisis has substantial consequences for local governments around the state.
In an already fragile finance environment, state Treasurer Jim McIntire and key legislators worry that Thursday's default on $42 million in bond debt on the Town Toyota Center will alarm investors, shake confidence in regional debt offerings and make borrowing more expensive.
Legislation has been drafted for the state to cover the debt and give the Greater Wenatchee Regional Events Center Public Facilities District a year to sort things out. In essence, the term of art presented to bond markets is a late payment, not a default.
Money would be advanced from contingency funds in the state-managed pool that collects local taxes to make debt payments. No state funds are used. The money is a loan to be paid back. Otherwise, the Wenatchee PFD — Chelan and Douglas counties, the cities of Wenatchee, East Wenatchee, Chelan, Cashmere, Entiat and Rock Island, the Waterville township — would have their sales-tax distributions dinged for $4.8 million for 10 years to cover what is owed.
This exercise falls under the category of enlightened self-interest for all levels of government. Move beyond the understandable frustration with this dilemma. Think about how one problem can compound expensively for others.
A 2010 audit of the Town Toyota Center by State Auditor Brian Sonntag reads like an outline of all the glib behavior and hubris that brought on the Great Recession.
Community enthusiasm to build a regional center envisioned a venue to host hockey, soccer, trade shows, concerts, graduations and other events. The 4,300-seat arena opened in October 2008. Early rosy estimates, from the developer and an independent source, had the arena easily covering its debt payments. The reality was short-term borrowing to pay for construction, no long-term financing and a flood of red ink.
The full faith and credit of the city of Wenatchee was appended to the deal. The city's subsequent pursuit of bonds to cover financial commitments was stopped by a judge this fall who said the municipality maxed out its credit limit.
The state auditor's 2010 report on the PFD essentially cataloged a mess with a glaring absence of a contingency plan.
The remedial legislation does not complicate the state's general fund deficit problems. A welcome provision would have the state review other municipal corporations "for signs of financial distress."
What happens in Wenatchee will not stay in Wenatchee. Washington suffered through previous bouts of overreach and economic downturns. The lesson is to act and not compound the problems.
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