Aug. 5 (Bloomberg) -- Officials in Jefferson County, Alabama, will keep negotiating with creditors over a $3.1 billion sewer-debt crisis, as the governor said a deal to avert the largest municipal bankruptcy in U.S. history was “within striking distance.”
The state’s most populous county and its creditors extended an agreed standstill yesterday for the second time in a week. The bankruptcy decision was postponed until Aug. 12, county Commission President David Carrington said yesterday in Birmingham. Governor Robert Bentley asked for the delay, Carrington said.
“I think there are more concessions to be had from the creditors,” David Perry, Alabama’s finance chief, said yesterday in a telephone interview, without elaborating.
“The governor would not have asked the commission to give the negotiations more time if he didn’t think negotiations could be successful,” Perry said. “The gap is narrowing substantially.”
Justin Perras, a spokesman for JPMorgan Chase & Co., the county’s biggest creditor, didn’t immediately respond to an e-mail seeking comment on Perry’s view.
The county’s options include seeking Chapter 9 bankruptcy protection, accepting last week’s settlement offer from creditors, or making a counteroffer. A vote on bankruptcy or a settlement was on the county commission’s agenda for yesterday’s meeting. Several county officials said the creditors’ last offer would push sewer rates too high for too long, and might block needed growth.
Jimmie Stephens, the commission’s finance chairman, said after a closed-door meeting yesterday that the two sides were closer and that the county would send some “minor adjustments” to creditors.
“We are in a good position to have a deal,” he said.
In a letter to commissioners, Bentley said his preference is “for a negotiated settlement that protects the interests of both the county and the state, but I will support a properly structured bankruptcy if a satisfactory agreement cannot be reached by the end of next week.”
“Based on the progress that you have made in recent weeks, I believe that the county and the state are within striking distance of a negotiated settlement that includes substantial concessions from the creditors and is fair to sewer ratepayers,” the governor said.
Sewer Rate Increases
The county had proposed raising rates 7.8 percent annually for three years, followed by 3 percent increases in the next two to help make payments. Creditors wanted 8 percent annually for five years, Commissioner Sandra Little Brown said last week.
Protesters began gathering two hours before the midafternoon meeting. Joe Minter, 68, who said he is retired and a lifelong county resident, wore a sign reading, “Bankruptcy is the Answer.”
“This is the kind of clown activity that has been going on for four years now,” said Keith Mims, of Birmingham’s Titusville neighborhood. “Even with a negotiated settlement, they can’t service the debt and they know it. What’s good for the people is to bankrupt this mess and move on.”
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