The Washington Supreme Court has protected taxpayers in its Thursday ruling that a public guarantee of debt is legally equivalent to a public debt.
The case has to do with Wenatchee’s Town Toyota Center, a municipal arena completed in 2008. The arena authority was not financially strong enough to sell bonds. The city of Wenatchee proposed a contract obliging it to lend the money to make bond payments if the authority were short. The legal question was whether that promise would be a debt under the state constitution, which limits a city’s debt to 1.5 percent of the value of assessed property unless the borrowing is approved by a 60 percent public vote. Counted as a debt, it would put Wenatchee over the limit and require a public vote.
A lower court ruled that it was a debt. City officials abandoned the guarantee proposal and asked voters for a sales-tax increase instead. Voters said yes, the increase has gone into effect, and $48 million in bonds were sold. Wenatchee’s problem was solved but the legal question remained: Would the proposed guarantee have been a debt?
Five of the nine justices have now said yes. Speaking for the Court, Justice Charles Wiggins wrote, “We cannot sit idly by while municipalities creatively attempt to exceed their proper debt limits, frustrating the principles enshrined in our constitution.”
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That is exactly right. Kudos to Wiggins and the justices who signed his opinion: Steven González, Charles Johnson, Jim Johnson and Debra Stephens.
Their decision apparently does not jeopardize the arena proposal of Seattle and King County because each has enough debt capacity without requiring a public vote. The Court’s ruling, however, applies to all public agencies in Washington. The constitution says municipalities shall not “become indebted in any manner” above certain limits, and officials should honor those limits.