Jefferson County Commission President David Carrington said creditors led by JPMorgan Chase & Co. (JPM) have resolved issues blocking a settlement over the Alabama county’s $3.1 billion of sewer debt.
Carrington said he believed the new terms resolve objections raised by fellow commissioners in August, when they rejected an earlier proposal. At least two commissioners were less willing to voice approval in interviews.
“If you go down the list, they’re all there,” Carrington said yesterday in an interview in Birmingham, referring to a document laying out terms of a proposed deal.
The commission plans to vote tomorrow on whether to accept a settlement or declare the largest U.S. municipal bankruptcy. Jefferson County, home to Birmingham and more than 658,000 residents, has been in fiscal straits since a sewer-bond refinancing collapsed more than three years earlier.
The proposal includes a compromise on ownership of the county’s $1.5 billion in sewer assets and a 25 percent increase in sewer rates that would be spread over three years, instead of 18 months, Carrington said. Parts of the deal would require approval by Alabama’s Legislature.
The deal would require three annual sewer-rate increases of 8.2 percent starting as soon as Nov. 1, followed by future projected annual increases of no more than 3.25 percent, according to a term sheet obtained by Bloomberg News.
‘A Few Concessions’
Commissioner Sandra Little Brown said yesterday that she could still get more concessions, such as a smaller sewer-rate rise. She said she was satisfied with a number of other changes.
“They did make a few concessions there,” she said.
Under the proposed deal, creditors would erase more than $1 billion in debt, according to the term sheet. The county would refinance $2.05 billion to repay old debts, contingent on an additional $30 million in concessions from creditors. As much as $1 billion of the 40-year debt may be insured by Assured Guaranty Ltd. (AGO) if the county chooses to purchase coverage. Assured carries a AA+ rating from Standard & Poor’s.
To ease commissioners’ concerns about the transfer of the sewer system’s assets to a new authority, the county would get the assets back after the refinancing debt is repaid. The authority would be prohibited from selling or transferring sewer assets without the county’s approval.
The county agreed to set up a fund to help poorer residents pay for the rate increases.
Jimmie Stephens, the Finance Committee chairman, said in an interview he has reservations about the new terms and is inclined to vote against the deal as structured now.
Commissioner George Bowman said a settlement was close, though he didn’t say how he’d vote. Commissioner Joe Knight told the Birmingham News that the commission is “close enough to where we can make this thing work.”
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