Kelly Sloan, CEO of Sloan & Associates, joins us to talk about the risk of municipal governments turning to litigation to absolve themselves of debt.
These are complicated issues, for sure.
One case in point is the city of Lamar, Colorado. After a bond measure passed to make improvements to an aging power-plant, the project faced cost-overruns and technical failures amounting to millions of dollars in debt. Further attacked by a litigious environmental organization, the City of Lamar was left with a ton of debt and no power plant. When the Arkansas River Power Authority (APRA) stepped in to adjust electrical rates and offer settlements to help defray the cost, Lamar opted to sue ARPA in an attempt to get out debt.
If they succeed, what are the consequences, both on the bond market and on how other municipalities may be incentivized to be more reckless with their borrowing? Is theft okay when the government is doing the thieving?