If it’s any consolation, this time all county taxpayers are in the same boat when it comes to paying the Bremerton Harborside condominium project’s debts.
Four years from now, the balance due will be paid by the county — assuming that neither the condominiums nor other real estate owned by the Kitsap County Consolidated Housing Authority (KCCHA) can be sold for enough to pay it all.
Whatever amount remains to be paid in 2013 will be paid with money borrowed through the issuance of long-term bonds, and the bonds will be paid off with a portion of the county’s property tax revenue.
Unlike another key element in the dream of revitalizing Bremerton’s downtown area — the new marina — this debt belongs to more than the taxpayers of the Port of Bremerton.
The county had to borrow the money needed to fulfill its obligation to lend enough to KCCHA to pay KCCHA’s debts, since revenue from selling the condominiums is insufficient up to now.
Back in 2005 the county commissioners who were then in office entered into a contingent loan agreement that created this obligation.
The county’s promise to lend money to KCCHA is part of the security pledged to the lender, so the county cannot renege.
Simply allowing KCCHA to default on its debts and hand the unsold condominiums to the lender is not an option, since the county essentially guaranteed payment of the debts when the commissioners made that contingent loan agreement.
Once those commissioners — Chris Endresen, Jan Angel, and Patty Lent — made that agreement, the question was whether the project would pay for itself, not whether the county could choose to ignore its obligation.
Unfortunately, the commissioners were fairly sure the booming market for housing meant that the county wouldn’t have to come up with the money, so they seem to have given little thought to how the county could keep its promise.
Neither a reserve fund nor a revenue source was identified as a means to provide at least part of the promised loan to KCCHA.
Now, the county has to buy time, and that costs money — as much as $4.3 million in this case.
Selling the remaining condominium units and other KCCHA assets at whatever price buyers offer in the current economy certainly could not raise enough money to pay the debt.
Perhaps over the next four years the market will improve enough that most of the debt can be repaid by selling the condominiums and other assets, but there will almost certainly be millions still unpaid when this new county loan comes due.
Our current commissioners had no choice but to borrow enough to pay the KCCHA debt now and to pay interest on the county’s new loan and the cost of maintaining the unsold units for up to four years.
The only other possible source of money is the county’s current tax revenue, which is already so low that the county has been cutting spending for many months.
Over the long term, paying off the bonds that will be issued in 2013 will be a continuing reminder of the need to do more than assess the risk before agreeing to guarantee payment of a debt for what is claimed to be economic development.
Unless the county’s voters approve a property tax “lid lift” to provide additional revenue, a part of the normal increases in tax revenue each year for up to 20 years will pay for the bonds, not county government functions.
The amount may be small each year compared to the total county budget, but even one or two million a year that isn’t available to pay for law enforcement, for example, would probably be noticed.
Sometimes, the claimed benefit of government’s economic development spending doesn’t pan out, and the cost has to be paid anyway.
It’s something to think about whenever any of our elected officials seem to be charging ahead with dreams of economic development using public funds because no private investors will take the risk.
Bob Meadows is a Port Orchard resident.
