Government default could make things more expensive here



Posted on July 29, 2011 at 5:26 PM

Updated Saturday, Jul 30 at 4:54 PM

SEATTLE  -- Local governments like Seattle and King County are seeing a real threat of a ripple effect if the U.S. government defaults.

“This drama that is being acted out in Washington, D.C. has very direct, real world impacts here,” said King County Executive Dow Constantine.

Moody's Investors Service has contacted Washington state, King County, Seattle, Bellevue and the University of Washington, threatening to downgrade their bond ratings.

“This is not a joke. This is a huge risk,” said Washington state Treasurer James McIntire. “I have one message for the decision makers in Washington, D.C. Stop playing Russian Roulette.”

Why are we among the hardest hit? Because we have a high number of federal contracts and federal workers who could lose their jobs.

If our government's credit ratings go down, interest rates will go up.

Imagine if you paid your bills on time, but you were forced to pay higher interest rates. That could happen to local governments, costing much more to borrow money for a new State Route 520 floating bridge, the Mercer Street project in Seattle or the tunnel to replace the Alaskan Way Viaduct.

The City of Seattle says it has $55.5 million in reserve funds. A spokesperson with Mayor Mike McGinn's Office also says the city does not rely heavily on federal dollars.

King County says it has $50 million in reserves, which a spokesperson for executive Dow Constantine said would last “quite awhile.”

The state does have a small rainy day fund which would leave it with about six to eight weeks of cash available to pay its bills.