Alabama Lawmaker Vows Death for Jefferson County Debt Deal
Anyone wondering how steep a climb Jefferson County’s Sept. 16 debt settlement still faces need only talk to one man: state Representative John W. Rogers Jr. of Birmingham.
The cost of averting a record municipal bankruptcy would be “inhumane,” Rogers said in a phone interview yesterday, and the 70-year-old Democrat vowed to stop it in the Alabama Legislature however he can. Rogers said he would draw on influence gained over 29 years to persuade colleagues to block the bargain with holders of $3.14 billion of county debt, a legacy of failed financing for sewer renovations.
Governor Robert Bentley, a first-term Republican, has promised to deliver laws to make the preliminary deal a reality. A Republican legislative majority may help, as may fears of the statewide impact of a bankruptcy by Alabama’s most populous county.
In his path stand Rogers and a tradition of deferring to local lawmakers on local issues. Rogers said the deal’s cost would be passed on in higher rates that would fall disproportionately on poor areas of Birmingham that comprise 70 percent of sewer-system customers.
“What they’re doing is cruel,” Rogers said. Bentley “is trying to force the entire state to vote against two predominately black, low-income districts.”
Statewide Sickness
The bankruptcy threat has loomed over Jefferson County, home to Birmingham and more than 658,000 residents, since 2008 as officials sought to keep sewer fees from ballooning to pay the debt. The prospect already has elevated borrowing costs in other parts of the state, according to Jonathan Nordstrom, a managing director at Morgan Keegan & Co., which he said was the top underwriter in Alabama. He said issuers pay 0.2 percentage points more than governments in other states because of the specter of a filing.
Jefferson County commissioners voted 4-1 last week to accept a provisional agreement with creditors. The deal includes $1.1 billion in concessions, including $750 million from JPMorgan Chase & Co. (JPM), which arranged most of the sewer debt. The deal calls for annual sewer-rate increases of about 8.2 percent for three years, followed by yearly boosts of up to 3.25 percent.
A sewer customer with a $600 annual bill would see it rise to almost $800 after the deal’s first three years.
Ticking Clock
The county and its creditors have 45 days to complete the terms. Commission President David Carrington said in Birmingham last week that the governor will not call a special session to deliver the state’s piece of the bargain until the commission approves the agreement in its final form.
The Legislature would then be asked to agree to create an independent authority governing the sewer system and to grant the state’s “moral obligation” backing for new bonds. The term falls short of a guarantee but it is treated as one in the credit markets.
Lawmakers also will have to resolve Jefferson County’s general-fund deficit if it is to avoid bankruptcy. The county faces a $40 million shortfall in the budget that begins Oct. 1, thanks to a court decision striking down a tax on wages. The Legislature declined to replace the levy in June.
Carrington said last week that the commission was neutral on how the Legislature chooses to replace the revenue.
“That’s not our fight,” he said. “That’s theirs.”
Alabama lawmakers honor a “local courtesy” rule and don’t interfere with bills backed by a county delegation. That deference requires unanimity by a county’s legislators: One lawmaker can kill a local bill.
Internal Divisions
Jefferson County’s 18-member delegation isn’t unified on any of the legislation needed to complete the deal, according to interviews with several members.
Representative Paul DeMarco and Senator Scott Beason, both Republicans, oppose solving revenue problems by replacing the struck-down tax.
“There’s sufficient revenue to operate the county now,” Beason said in a phone interview yesterday. “The problem is that the revenue is tied to certain funds.”
Beason and DeMarco want to remove state “earmarks” on local sales-tax revenue instead. Those requirements direct money to special purposes, the biggest of which is health care for the poor.
Rogers favors instead a new tax, as long as the revenue is split between the county general fund and its sewer system -- a provision the preliminary deal did not contemplate.
The legislation to close the deal is “already dead,” because of the divisions in the county delegation, Rogers said.
The governor has other options: DeMarco said the new sewer authority might be added into existing law, for instance, skirting the local delegation.
Rogers said he would fight that, too.
“I’m going to beg other county lawmakers, don’t do this to Jefferson,” he said. “Don’t jump on Jefferson County. If you do, the next thing is it will happen to you.”
To contact the reporters on this story: Margaret Newkirk in Atlanta at mnewkirk@bloomberg.net; Simone Baribeau in Miami at sbaribeau@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
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