Kennewick asserts refinancing not hurt by Wenatchee default

While the Legislature wrestled most of Wednesday with trying to free the Wenatchee Town Toyota Center from a $42 million default, Kennewick officials refuted the state treasurer's assertion that the debacle also dinged their recent efforts to refinance the Three Rivers Convention Center.

Wolfgang Opitz, assistant treasurer, said last week that Wenatchee's inability to pay off loans by Dec. 1 cost Kennewick an optimum interest rate on the $10 million refinance, or about $200,000 over the life of the new loan.

But Marie Mosley, Kennewick city manager, said Kennewick taxpayers not only saved $450,000 with the renegotiated loan package, but the supposed $200,000 penalty against Kennewick because of Wenatchee's bad performance on its loan doesn't fit the facts.

Opitz told the Herald on Wednesday that, "as we understand it," the underwriters for Kennewick's refinancing had lined up bond buyers at a determined interest rate. But by the next morning, "the buyers they counted on backed out and new buyers had to be found," he said.

"It was unexpected," said Opitz, adding that the new buyers wanted the bonds at an interest rate that was 30 basis points higher than what the original buyers were willing to accept. That would be about a third of a percentage point higher.

Such a dramatic increase would take away about $200,000 from Kennewick's refinancing savings.

"They didn't get as much as they could have," he explained.

Opitz said Wenatchee's woes with its debt were believed to be what triggered the overnight surprise.

But Mosley told the Herald on Wednesday afternoon that the facts as reported to her by the Seattle Northwest Securities, which handled the bond sale for Kennewick, showed nothing close to a 30 basis points shift that would have been necessary to trigger a $200,000 difference.

According to Mosley, the city checked Nov. 1 and found the bond rate at3.1 percent, with a potential savings on refinancing of $424,000.

The bond rates fluctuated and improved during the next two weeks, going to 3.04 percent on Nov. 16, with an estimated potential savings of $475,000 for the renegotiated loan.

Then on Nov. 17, the city and its underwriter put the bonds on the market. The overnight change was to 3.085 percent, for a potential savings of $441,000, orabout $34,000 less in cost for the life of the loan over what was quoted the day before.

Mosley said the final deal was far from a $200,000 ding as asserted by Optiz, but still $17,000 better than the Nov. 1 rate.

"We expected about $450,000, and we got about $450,000. At no time did we think we were going to save $650,000," she said.

"I don't think it is the case that we lost 30 basis points. It didn't happen overnight, for sure," she added.

By late Wednesday afternoon, the Legislature still hadn't agreed on a rescue plan for Wenatchee's $42 million default.

Unless that debt is paid soon, creditors with the bond anticipation notes may start filing lawsuits.

Sen. Linda Evans Parlette, R-Wenatchee, who has been shepherding the rescue effort, said even if the Legislature can't deliver a solution, taxpayers are going to pay "one way or the other" because creditors' lawsuits are sure to come.