BELLINGHAM - The recent partial rebound of sales tax revenue is welcome news for the Bellingham-Whatcom Public Facilities District, which depends on sales tax receipts to cover repayment of $19 million in bonds that helped finance the Whatcom Museum and improvements to the Mount Baker Theatre.
City Finance Director John Carter expects the facilities district's roughly $1 million in state sales tax rebate revenue to cover its debt payments and other costs comfortably in 2012. But the increasing cost of servicing that debt in future years, and the uncertainty about future sales tax receipts, means that the district still could face a financial squeeze starting in about eight years.
At a Thursday, Feb. 2, meeting of the PFD board, Carter noted the district's borrowing was based on projections of slow but steady 4.5 percent annual growth in sales tax revenue. The projection seemed conservative in 2002, when the district was formed to capture a small slice of sales tax revenue that otherwise would have gone to the state.
Then the real estate bust triggered a Great Recession, and for the first time in anyone's experience, sales tax revenues went down instead of up. While those revenues have rebounded in the last couple of years, it no longer seems likely that those revenues will make it all the way back to levels that had been projected for future years.
The board quickly endorsed a plan to refinance some of the district's indebtedness to take advantage of the extreme low rates available today. If City Council approves the deal, Carter said the refinancing would save the district a total of about $1.1 million in interest costs, and push back the possible financial crunch to no sooner than 2020.
If the district proved unable to cover bond payments with its own sales tax rebate revenue, the city would have to cover the shortfall with other tax revenue.
Also on the board's agenda was a resolution to ask the state legislature to extend the existing sales tax rebate for all public facilities districts in the state for an additional 15 years. Extending the rebate would allow the districts to refinance their bonds at longer terms, reducing the amount of money needed to service those bonds each year.
Under current law, a public facilities district can collect the sales tax rebate of 0.033 percent for 25 years. That means the local district would cease getting the state revenue in 2027.
City Planning Department staffer Tara Sundin said the Spokane district had drafted the resolution and was circulating it in hopes of drumming up support from public facilities districts across the state.
Board member Dean Brett said he didn't like the idea. He noted that the state is struggling to cover basic costs of public education, highways and social services. He argued that those needs were more important than the financial woes of some public facilities districts. The rest of the board quickly agreed, and no vote was taken on the resolution.
Brett also noted that the financial condition of public facilities districts varies widely. Worst case: Wenatchee, where a district with a smaller tax base than Whatcom County took on a $42 million debt burden that was supposed to cover both the construction and operating costs of an ice arena and events center. The Wenatchee bonds are headed for default, and the arena may be headed for bankruptcy.
The Bellingham-Whatcom district is responsible for about $19 million in bond debt but is not on the hook for operating costs of the theater or the museum.
