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The city of Seattle has agreed to pay $50 million to Washington Public Power Supply System bondholders left holding $2.25 billion in debt after the system abandoned two nuclear power plants and defaulted.

Junius Hoffman, a court-appointed special master overseeing negotiations to settle lawsuits in the case, announced the agreement this week. The tentative settlement has to be approved by the federal court handling the securities-fraud litigation.The city is the fourth party to settle in the case, which stemmed from the largest default in the history of the municipal bond market. The two plants were abandoned six years ago, following cost overruns and studies indicating the power from the plants would not be needed.

The city of Seattle was not among the 88 utilities that participated in constructing the plants, WPPSS Nos. 4 and 5. However, Hoffman noted, the city was a member of the supply system and designated individuals who served on the WPPSS board of directors and its executive board at the time the bonds for the two projects were issued.

The agreement was worked out between attorneys for class plaintiffs people who have a fraud claim against the defendants and Chemical Bank, which represents bondholders, on one side, and lawyers for the city and its insurance carriers on the other.

Doug Jewett, Seattle city attorney, said the city would pay $6.8 million while its insurance carriers would pay $43.8 million.

"We think it is a good settlement for the city because the dollar amount . . . is less than would have been spent on defense costs alone. Those costs have been running $2.5 million a year," Jewett said.

Of even more concern to the city of Seattle was its risk as being a defendant in a case where the plaintiffs are seeking $2.25 billion plus interest.

"With the settlement of the underwriters, we had become the deepest pocket in the lawsuit," Jewett said. "We are breathing easier tonight now that that exposure has been removed."

Jim Irwin, an attorney with the Seattle law firm of Shidle McBroom Gates & Lucas, who represented bondholders, said, "We think it is a fair and reasonable settlement, and we are pleased."