As I write this blog our legislature is probably not going to pass legislation authorizing the Treasurery to pay the Arena’s $42 million Bond Anticipation Notes on December 1 – but it should.  Assuming it is resurrected and passed, Wenatchee City leadership would be needed and must be supported by neighboring municipalities and us as citizens. 

After December 1 the nine municipalities would owe the state $42 million with interest accumulating at a fiscally painful rate 2.4 times higher than municipalities pay for similar bonds. They must act before December 31, 2012 or all would start paying for a ten-year note at high interest rates.

The bill gives each municipality the power to pass a sales tax increase of up to 0.2 percent for up to 25 years by a majority council or citizen vote. They can use that power to lower payments with longer terms and lower interest.

Wenatchee must act first. The Council’s most prudent and neighborly financial action would be passing an additional 0.2 sales tax at the first possible meeting.

Next the City must explore ways to shoulder all the debt, such as increasing bond capacity, issuing more bonds and allocating money from budget restructuring. Unlike past efforts, this self-imposed discipline needs to be highly transparent for citizens and neighboring municipalities.

Wenatchee’s first step was recommended to me by Dale Snyder, Chairman of Douglas County Commissioners. He told me, “The bill is a good thing. It allows Wenatchee to come up with a plan to pay off the debt. It’s their debt. And default is not a good thing.”

Rep. MIke Armstrong told representatives that mayors and council members expressed acceptance of the most recent draft. The bill has the support of the Association of Washington Municipalities.

Even so, some voices incredibly demand a lawsuit against the legislation, which the Treasurery and Attorney General are ready to defend. Testimony made it clear municipalities are extensions of the state and when local agreements damage state finances and innocent state municipalities, the state can and should intervene.

Local municipalities should welcome this bill and commit to get new bonding as soon as possible. Under a shortfall of revenues to pay the debt, every municipality would pay a per capita assessment on the note. Snyder said Douglas would face approximately $200,000 annually. A voluntary longer-term note with lower interest rates would be much cheaper.

The frustration facing Snyder’s commissioners is they believe the county experiences no value from Arena events because it has no hotel or restaurant sales tax receipts. And they fear a sales tax increase could harm Douglas County car sales, a significant revenue source. Snyder told me, “The County will employ everything in its power to force Wenatchee to step up to a plan. And it will employ everything in its power to avoid a county vote on a sales tax.”

East Wenatchee Mayor Steve Lacy also publicly supported the bill to give Wenatchee’s new leadership time to work on plans. East Wenatchee receives one percent of its revenue from hotel/motel taxes, but twenty-four percent of its revenues from sales and use taxes in the Wenatchee Mall and automobile dealerships. At the Council meeting on November 22, Lacy appeared to anticipate negotiating with Wenatchee to assure a plan is worked out so East Wenatchee can avoid an estimated $900,000 annual obligation. 

Wenatchee must overcome the fear that it will delay action and thereby force other municipalities to shoulder an unfair burden because they’d avoid the penalizing note.

Wenatchee must convince every jurisdiction it has given an honest, open effort to do everything in its power to pay the debt with the new tools available in the bill and still provide adequate services. If so, and City revenue falls short, the bill’s incentives enable municipalities and their citizens to act as good neighbors on a united or selective basis to arrange payments in equitable amounts over twenty to twenty-five years at a much lower rate.