bonds under water
Some general questions this all raises beyond the political fireworks. What are the legal liabilities that fall back on the City of Pittsburgh if the PWSA, or any of the city authorities for that matter, run into dire circumstances? I would suggest that is not a fully answered question that impacts a whole lot of things in town here. More important than the details of this one bond deal.
But on this particular issue in the news. The professionals are better at explaining the heart of the problem here in a finite number of words. For the less feint of heart you can read the whole bond prospectus here:
Maybe we will throw in here for good measure the obvious question of why things like this bond prospectus are not put up on the PWSA web site?
I can't find anything in the bond prospectus to explain the current machinations. Further detail has to be in other covenants somewhere that are less available to the public. But here are some things to consider. Not too long ago the School District of Erie sued JP Morgan over some similar interest rate swap deals that went south. Is the PWSA considering similar litigation in its case which involves a much larger sum than what was in play in Erie? What is also worth noting is that JP Morgan got out of the muni bond interest rate swaps bond business not long ago. The PWSA deal may actually have been one of the last such deals they got involved with. Think about that a bit.