Municipal Bond Forum
Detroit and ‘Whoops’ not similar
Q
Are there any similarities between Detroit’s situation and the “Whoops” (WPPSS) muni bonds from the ‘70’s?
A
James A. Klotz responds:
Other than mismanagement, there are no similarities between the Detroit situation and that of the infamous nuclear power projects WPPSS #4 & #5 (Washington Public Power Supply System Rev.).
As you know, Detroit is a major city that was unable to meet its obligations due to a shrinking tax base and drastically reduced tax receipts.
WPPSS issued revenue bonds to fund the construction of five nuclear power plants. The bonds issued for the first three plants were secured by the U.S. Department of the Interior and these bonds are still outstanding and being paid on a timely basis by the government.
Projects #4 & #5 were to be secured by the power purchases of public utility companies in the northwest. No power was ever produced and the bonds defaulted when the “take or pay” contracts entered into by the participating utilities were judged to be illegal by the Washington State Supreme Court.
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