City of Bainbridge Island granted summary judgment

The City of Bainbridge Island has won a key battle in its quest to secure bond funding for the $4.5 million in remaining costs of upgrades to the Winslow Waste Water Treatment Plant, but it remains unclear whether further legal action could halt the city’s pursuit of a $6 million bond anticipation note.

Judge M. Karlynn Haberly’s decision last Friday was only a partial summary judgment; she ruled solely on the validity of the bond issue the city seeks. Several claims made by the Bainbridge Ratepayers Alliance were severed from the issue of bond validity.

Judge Haberly’s office declined to comment on the decision.

City Finance Director Elray Konkel said the potential creditor, Cashmere Valley Bank, gave the city until Sept. 15 to provide a signed order by a judge finding the bond issue legally valid.

City Manager Mark Dombroski said that before the lawsuit was filed in April, the city obtained a bond anticipation note from Cashmere, but because of the ongoing litigation the bank could not grant the note.

“If we’re made aware of legal claims and legal protests against an issue we will typically not issue credit in those instances,” said Cashmere Chief Financial Officer Alan Crain. “The dollar amount is fairly sizable for our bank so we obviously want to be extra careful considering the amounts that are involved.”

Crain said it was his understanding that if the superior court ruled in favor of the city, then the bank would be comfortable issuing the anticipation note.

The anticipation note works like a short-term loan. The deal runs over three years, and it allows the city to enter the bond market to pay back the loan when market conditions are most advantageous.

The RPA, represented at the hearing by secretary Sally Adams, President Richard Allen, and attorney Richard Stephens, indicated the decision would be appealed. Adams, who previously practiced law, said the superior court was only the first step in a long battle.

“We knew going in that the probability was that we would have to appeal,” she said. “I always told clients, if you’re not ready to go the to court of appeals, then don’t get started.”

It wasn’t immediately clear if an appeal would cause Cashmere to refuse issuing the note, but Konkel said a lengthy appeal could cause the city great financial difficulty.

“As far as cash flow goes, we don’t have months,” he said. “We certainly don’t have past the first of the year.”

Konkel said if the appeal causes Cashmere to withhold the note, the city has a couple alternatives. The first is to seek an extension on the Sept. 15 deadline until the appeal plays out. The second option is to forego the anticipation note and attempt to seek bonds directly, Konkel said.

Any delay in receiving financing would continue to put pressure on the city’s utility funds. Of the three funds (water, sewer and storm), the water fund is the healthiest; the sewer fund continues to lose money quickly.

“We’re using water funds to maintain the sewer at even a zero balance at this point,” Konkel said.

If the appeal happens, it has to be filed within 10 days of the original ruling, Adams said. She said the longer the process wears on, the more it favors the ratepayers.

“The farther away you get from the jurisdiction where the situation occurred, the more likely you are to get a ruling based on law that’s fair,” she said.

The summary judgment didn’t rule on several of the ratepayers’ claims.

Adams still wants to see a city-wide audit going back to 2006 so the uses of ratepayer money can be examined.

“We unfortunately do not have access to the information to describe the full extent of the misuse of ratepayer money for general-fund purposes,” she said.

Adams said the RPA will refile the other claims.

The city’s motion, filed in July, employed the legal reasoning to justify the summary judgment in the form of three questions: Did the Washington State Legislature delegate authority to the city to issue those bonds? Was that state statute constitutionally enacted? Are the bonds issued for a public purpose, as distinguished from a private purpose?

The motion argued that the bonds were meant for a public purpose, and the other two conditions have been met, so the RPA’s claims should not void the bond issue.

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