Arena weighs on Wenatchee
Wednesday, August 11, 2010View full version
WENATCHEE — If residents of the nine municipalities that own Town Toyota Center don’t agree to share more of this events arena’s $41.8 million debt, Wenatchee’s residents, alone, could have to foot more than two-thirds of the bill.
That’s the way it’s looking now, as the deadline to refinance the debt looms, a state sales tax rebate earmarked for arena debt covers less than a third and the arena, itself, is expected to cover expenses, but not much more.
Both the city and the nine municipalities that form the arena’s Public Facilities District are scrambling.
“There are some potentially big implications of not funding the center,” Joe Jarvis, president of the arena’s all-volunteer board, said Tuesday. “You have potential bond defaults. It would definitely be a black eye for this community. People would wonder how viable this community is.”
The board last week recommended asking voters who live within the arena’s nine-municipality district to approve adding 0.2 percent to the sales tax on items purchased within the district.
The additional tax would cost each district resident about $33 extra per year, according to Wenatchee city estimates.
It would raise an estimated $3.6 million per year — enough to cover the arena’s anticipated $3 million in refinanced annual debt, plus extra the arena could bank for maintenance and capital improvements.
The district comprises the municipalities of Wenatchee, East Wenatchee, Cashmere, Entiat, Chelan, Rock Island, unincorporated Chelan and Douglas counties and the town of Waterville.
Jarvis said the board considered alternatives to the sales tax, but nothing else comes close to covering the debt.
The district needs to secure a revenue source to replace the arena’s existing debt, made up of short-term “bond-anticipation” notes, which expire in 2011.
City sources say the notes were the only financing source available following the Wall Street crash and ensuing recession in 2008, when the district needed to pay for the newly completed arena.
Next year, the district will seek conventional financing in the form of 20-year bonds to replace the notes.
To qualify, Jarvis said the district needs to show it has a revenue stream to cover the debt.
A “yes” vote on the sales tax proposal in February would spread the debt over the approximately 106,870 people who live in the arena district, plus everyone else who makes a purchase there.
A “no” vote means Wenatchee, as the district’s lead municipality, and its 31,120 residents go it virtually alone.
That could mean:
• The city would use its remaining non-voter-backed bonding authority of about $20 million to fund half the arena’s outstanding debt.
• The balance would come from the city’s general fund, which pays for all non-self-sustaining city services, including police and fire.
The City Council would decide how those services would be affected, if arena debt becomes a permanent addition to the city’s yearly budget.
Interest-only debt service this year is nearly $2.2 million. About $600,000 of that is expected to come from a state sales tax credit earmarked for arena debt. The remaining $1.6 million comes from city funds.
A refinanced debt would add principle to the yearly payments starting in 2012, boosting expected debt service to $3 million. The city’s share would be $2.4 million, after the state sales-tax rebate.
Some relief could come if the arena manages to make more money than it spends. This year, city officials say it’s on track to end the year $300,000 in the black.
As the recession receeds and consumer spending increases, the size of the state sales-tax rebate will also increase, taking further pressure off city finances.
For now, these are unknown contributors to a very real debt.
“It has the potential to be scary, yes,” said Mark Calhoun, Wenatchee finance director. “The sales tax option from the PFD (arena district) is the most viable to generate the amount of money needed.”
The sales tax proposal, which would be put to voters in February, must first be independently approved by each of the municipalities’ councils or commissions.
All ballots from all municipalities would be tallied together. It would pass with a simple majority — 50 percent plus one.
State law allows the arena district to propose a maximum 0.2 sales-tax increase to cover arena costs.
If arena-district voters approve a sales tax increase, Wenatchee will become only the second of some 24 public facilities districts statewide that collect the tax. The first is Spokane, which collects a 0.1 percent sales tax for its events center.
Christine Pratt: 665-1173