Wenatchee, Wash., Public Arena Debt Dropped to D

SAN FRANCISCO — Standard & Poor’s said it downgraded the short-term rating on debt issued by a public arena in Wenatchee, Wash., to D from SP-3 after a $42 million default.

The district defaulted after the Washington Legislature refrained from passing a bill last week that would have enabled the Greater Wenatchee Regional Events Center Public Facilities District to pay off its bond anticipation notes before they matured Thursday.

The rating agency also said in the report late Friday it downgraded the long-term and underlying rating on the city of Wenatchee to BBB from A-minus because of its legal obligations to the district’s debt.

Standard & Poor’s analyst Chris Morgan said the downgrade is a result of the city’s failure to help the district retire the Bans, “despite agreeing to execute a contingent loan agreement to make a full faith and credit pledge to provide loans to the district, if needed, to cover the principal and interest payments.”

Wenatchee officials have said they expect the default claims to expand beyond just the district.

Morgan said a first lien on the event center’s net revenues and a second lien on the district sales tax revenues secure the debt.

He said the district agreed to issue enough revenue and special tax bonds, along with other available funds, to repay the Bans before maturity, but the arena is too poor to pay for long-term bonds.

The city had explored issuing long-term bonds to pay off the notes, but a Superior Court judge ruled in September that the bonds would put the city over its debt limit.

Earlier this month, Washington Treasurer James McIntire spurred the crafting of the rescue bill in a bid to keep the contagion of a default from spreading to other state credits.

The legislation would have had to have been pushed through and signed by Gov. Chris Gregoire in only three days during the start of an emergency session called by the governor to tackle Washington’s expected $2 billion deficit.

State officials had been trying to avoid dredging up memories of the Washington Public Power Supply System’s $2.25 billion default on tax-exempt debt in the 1980s. The WPPSS — often called Whoops — debacle haunted the state’s ratings for years.

The public facilities district, created in 2006 to develop the arena, includes two counties and eight other municipalities, but Wenatchee, with a population of 30,000, is its largest city.

City official said the firm hired to help build and manage the center, Global Entertainment Corp., made unrealistic revenue projections. After the first year, the center fired GEC, took over operations, and hired a general manager. Revenues then improved enough to at least cover operations.

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