Jan. 4 (Bloomberg) -- Nine municipalities in central Washington are considering raising sales taxes to bail out a regional arena that defaulted on $41.8 million in debt, which the state treasurer had warned may taint other issuers.
Leaders of the two counties, six cities and town that make up the Greater Wenatchee Regional Events Center Public Facilities District are trying to organize an April 17 election to raise sales taxes by 0.2 percentage points, said Frank Kuntz, the Wenatchee mayor. Representatives weighed three proposals yesterday that all envision a vote by the public on a tax increase, Kuntz said by telephone.
“It’s going to take some work for all nine of us to agree on all of the details,” he said. “That’s still a big hurdle for us to jump over. I am hopeful, though.”
The district defaulted Dec. 1 on bond-anticipation notes sold in 2008 to build a 4,300-seat arena in Wenatchee, a city of 32,000 on the eastern flank of the Cascade Mountains, about 140 miles (225 kilometers) east of Seattle.
The tax proposal would need approval from the governing bodies of all nine jurisdictions by March 2 to make the April 17 ballot, Kuntz said. The tax would need majority support throughout the district, not necessarily in each jurisdiction, he said.
The district consists of Chelan and Douglas counties, the cities of Wenatchee, East Wenatchee, Chelan, Cashmere, Entiat, and Rock Island, and the Town of Waterville.
State Treasurer James McIntire had backed a proposal for the state to prevent default by loaning the district $42 million to be repaid through sales-tax collections. McIntire said in November that a default would drive up borrowing costs throughout Washington by adding to the perceived default risk of other issuers. His plan failed to pass the Legislature in late November.
It’s too early to tell whether McIntire was right, Wolfgang Opitz, the assistant state treasurer, said in a telephone interview Dec. 19.
Missed bond payments unrelated to tax-exempt debt in AMR Corp.’s bankruptcy fell to $2.6 billion for the year from about $2.8 billion in 2010, according to Matt Fabian, an analyst with Concord, Massachusetts-based Municipal Market Advisors Inc.
None of the approximately 100 holders of the Wenatchee bonds has sued to recoup the money, Fraley said by telephone Dec. 20.
The Wells Fargo Advantage Ultra Short-Term Municipal Income Fund holds about $4 million in Wenatchee bonds, said John Roehm, a spokesman for Wells Fargo & Co. in San Francisco. Other holders include Central Washington University, with $1.6 million; the city of Eugene, Oregon, with $750,000; and the Ely-Bloomenson Community Hospital in Ely, Minnesota, with $200,000, according to officials with those institutions.
Wells Fargo Action
Roehm declined to comment on any actions Wells Fargo may take to recoup its investment. Eugene’s finance director, Sue Cutsogeorge, said the city hasn’t decided how to proceed. Scott Kellerman, the Ely-Boomenson Community Hospital finance director, said the Wenatchee bonds represent about 1/30th of the hospital’s total investments.
“It’s a tough situation,” he said by telephone Dec. 23. “Even if it takes a month, as long as we’re getting interest in the meantime, we don’t need the money right away.”
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