In a 5-4 decision involving the Town Toyota Center in Wenatchee, the state Supreme Court has ruled that municipalities can't guarantee a loan to other entities if the obligation exceeds the city's debt limit.
OLYMPIA — The state Supreme Court ruled Thursday in a case sparked by debt troubles involving Wenatchee’s events arena that municipalities can’t guarantee a loan to other entities if the obligation exceeds the city’s debt limit.
In the 5-4 ruling, the high court affirmed a ruling by a Chelan County Superior Court judge that the city of Wenatchee would exceed its constitutional debt load if it backed nearly $42 million in bonds for the Town Toyota Center.
“The role of our judiciary in this scheme is self-evident: We must enforce the constitution,” Justice Charles Wiggins wrote on behalf of the narrow majority. “We must not assume legislative bodies will police themselves.”
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Arley Harrel, an attorney who represented the city, said the ruling doesn’t impact the center or the city because the city had refused to continue to back the debt in 2011 after the trial-court ruling and ultimately took the issue to voters, who authorized the arena’s Public Facilities District to impose a 0.1 percent regional sales-tax increase in April to bail out the arena.
The election was authorized by the state Legislature after the arena went into default.
“We were pleased that the judiciary stepped forward and gave us guidance, not only for this particular debt, but going forward,” Harrel said.
Justice Mary Fairhurst, writing for the dissenting judges, argued that the bond contract did not create a debt within the meaning of constitutional and statutory limits.
“The lead opinion invents an entirely new legal analysis to achieve a contrary result,” she wrote.
Thomas O’Connell, who represented Wenatchee taxpayers in the case, said the ruling offered guidance to other municipalities and protects taxpayers.
“From the taxpayer’s perspective, we don’t want to be faced with a situation where elected officials decide, without a vote of the electorate, to guarantee huge projects where the risk of having to pay can come back on the taxpayers,” he said.
O’Connell said the ruling could have far-reaching impacts on other municipalities.
An attorney for the facilities district was out of town and not available for comment Thursday.