(FORTUNE Magazine) – A decrepit bridge that links East St. Louis, Illinois, with St. Louis, Missouri, could give municipal bondholders everywhere a shiver. They already know extraordinary projects can be hazardous, having found out the hard way in 1983, when Washington State's nuclear construction agency, the Washington Public Power Supply System (WPPSS), defaulted on $2.25 billion of bonds. Now they fear the courts are turning soft on bonds issued for humdrum projects. To finance a four-lane toll bridge across the Mississippi, East St. Louis issued $15.5 million of 30-year bonds in 1956. After it built an eight-lane, non-toll bridge nearby, siphoning off traffic, the city defaulted and left the old structure, today named after Martin Luther King Jr., to rust. Now the governors of Illinois and Missouri want to make repairs, using federal highway funds. For them to do so, a new corporation created to own the bridge must buy out investors. The offering price was 55 cents on the dollar, or $550 a bond -- ostensibly ; fair since the bonds had been trading much lower. (They traded after maturing because they were never redeemed.) But several investors say the bond contract prevents a majority of holders from forcing a minority to accept a buyout at less than par, $1,000. They claim they don't have to go along with a price they deem unfair. A Missouri court disagreed in December, saying that the buyout is in the public interest. Now the minority bondholders are appealing, but their prospects are dim, suggests James Spiotto, a municipal bond expert at Chapman & Cutler, a Chicago law firm. Courts, he says, are increasingly letting the public interest supersede bond contracts. ''Given the problems of municipalities -- less revenue available from federal and state governments, increases in labor costs -- investors in municipal bonds are going to see more of these kinds of problems.''

PIX CREDIT: SCOTT DINE -- PICTURE GROUP CAPTION: The King Bridge to St. Louis left its bondholders suspended. DESCRIPTION: Color.