OLYMPIA, Wash.-- Washington finance leaders are scrambling to establish a $42 million bailout package to help a Wenatchee-area agency avoid default on the city's arena, fearing that a failure to pay the dues could have a radiating impact on the rest of the state.
The Office of the State Treasurer is currently working on a proposal to make a crucial bond payment on Dec. 1 and allow local governments around Wenatchee to pay the state back over time.
Lawmakers would have to rush the measure through the Legislature in the opening days of a special session later this month, with assistant state treasurer Wolfgang Opitz warning that a default could make it more difficult for local governments to borrow money.
"These things start to blossom out from local jurisdictions," Opitz said.
He also said a default has the potential of impacting the state's credit rating simply by association. The last municipal bond default he is aware of in the state, the infamous Washington Public Power Supply System default during the 1980s construction of nuclear power plants, remained a cloud over Washington's credit rating for years.
In the current problem, the Greater Wenatchee Regional Events Center Public Facilities District has been unable to pay off short-term debt for the Town Toyota Center arena, a 4,300-seat facility completed in 2008 that hosts hockey games and other events. A judge ruled in September that the city could not legally back the sale of new bonds without exceeding its debt capacity, and local officials have been unable to figure out how to meet their obligations.
The state is looking at stepping in to make the short-term payment that would essentially convert to a loan in which local officials would pay the state back over time.
Officials haven't decided where the money would come from, but the state treasurer has a variety of cash and investment options that are separate from the state's general fund. The effort comes at a time that lawmakers are considering up to $2 billion in budget cuts.
Sen. Linda Evans Parlette, R-Wenatchee, said it's impossible to say right now whether a proposal from the treasurer's office would be able to pass in the opening days of the special session, and she declined to take a position on the issue without seeing the plan. But she said she was irritated that lawmakers were faced with a rushed decision just before the deadline to make the December payment.
"I'm not happy about it at all," Parlette said.