Moody’s Investors Service said Tuesday a new voter-approved sales tax to support a struggling arena that has defaulted on notes is a credit positive for Wenatchee, Wash.
Voter in the counties that make up the Greater Wenatchee Regional Events Center Public Facilities District approved a 0.1% sales tax increase on April 17 that will secure long-term bonds to allow the district to refinance the district’s $42 million of defaulted bond anticipation notes.
“The new [public facilities district] sales tax authorization is a credit positive for the city of Wenatchee (A3 negative) because it reduced the financial burden, and limits litigation risks stemming from its contingent loan agreement backing $36.6 million of the defaulted PFD notes,” Moody’s said in a note.
Moody’s said paying off the Bans would resolve the largest municipal default in the state in 30 years.
The district, which was formed in 2006 to build and operate the Toyota Town Center arena in Wenatchee, defaulted on $42 million of bond anticipation notes upon their Dec. 1 maturity as they lacked the money or means to pay them off. The default followed failed rescue attempts by the city and the state.
It issued the Bans to help fund the 4,300-seat arena, which has been a financial disaster since it opened in 2008.
That year, it issued three series of notes — $5 million of limited sales-tax Bans, and $5.5 million and $31 million of revenue and special-tax Bans.
The city and the district are also dealing with an investigation by the Securities and Exchange Commission due to the default.
The SEC asked the city to voluntarily produce several different types of information, including anything tied to the event center’s finances and Ban issuance.
Piper Jaffray & Co. was the underwriter for the 2008 issuance of the notes while K&L Gates LLP was the note counsel.
The SEC asked to see any requests for proposals, contracts, or anything tied to advice from legal or financial advisors.
After the Wenatchee arena default, Standard & Poor’s downgraded the short-term rating on debt issued by the district to D from SP-3.
The rating agency also downgraded the city’s long-term and underlying rating to BBB from A-minus because of its legal obligations to the district’s debt.