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Jefferson Chapter 9 Vote Chances ‘50-50,’ Commissioner Says

There is a “50-50” chance that Jefferson County, Alabama, officials will vote to file for Chapter 9 bankruptcy tomorrow, Commissioner Sandra Little Brown said today after seeing creditors’ latest offer.

While the gap between creditors holding $3.14 billion of the county’s sewer debt and local officials has narrowed over proposed sewer-fee increases, differences remain over issues including a fund to help poor residents pay wastewater bills, Little Brown said. She previously had estimated there was an 85 percent chance the five-member commission would approve a Chapter 9 filing.

Divisions also exist between state legislators representing the county of 660,000 residents over how to shore up its general fund, according to interviews with delegation members. Any agreement to avoid bankruptcy will require state lawmakers to pass “strong legislation,” to raise revenue, Little Brown said.

“We’ve got everything they’re going to give,” Little Brown said in an interview in Birmingham. “Hopefully we can get this settlement; still, a few things concern me.”

The commission has scheduled a meeting tomorrow morning at which it said it may vote to file the largest-ever U.S. municipal bankruptcy. The session comes after three weeks week of negotiations with creditors including JPMorgan Chase & Co. and bond insurers Assured Guaranty Ltd., Syncora Guarantee Inc. and Financial Guaranty Insurance Co.

Creditors’ Terms

County commissioners received an offer from creditors around noon today. Terms of the proposal include four scenarios for raising sewer rates, with yearly increases ranging from 6.1 percent to as high as 7.8 percent over three years, Little Brown said. She said she was satisfied with the size of rate increases the creditors are willing to accept, though she said the conditions on the lower boosts were less favorable to the county.

She also said that the agreement would require that the county end all lawsuits against banks.

“It says that all litigation stops, the bankers are off free,” she said at a community forum at Hopewell Baptist Church tonight. “If we go into bankruptcy, the litigation stays on.”

Little Brown said that more people would go to jail because of the earlier deals that led to the sewer system’s financial problems. Former Commissioner Larry Langford was convicted of accepting bribes in connection with the sewer financing, and two associates pleaded guilty in the scheme.

State’s Role

State lawmakers would need to agree to offer a non-binding promise to make up for any deficiencies in sewer revenue that would back a new bond issue of about $2 billion.

Legislators have been unable to reach an agreement on how or if to bolster the county’s revenue, and interviews this week indicate the disagreements persist.

State Senator Scott Beason, a Republican from Gardendale, derailed a bill during the legislative session that would have given the county the power to levy new taxes.

Jefferson was forced to cut more than 500 employees and close satellite courthouses in June after Beason blocked a bill that would have let the county boost levies on sales, leases and rentals, alcoholic beverages and other goods and services.

Beason said he would fight such a tax again.

“I’m still opposed to raising taxes,” he said. “I think you can right-size this county without raising its revenues.”

State Representative John Rogers, a Democrat from Birmingham, meanwhile, said he didn’t support the state backing the county’s debt.

“Where are you going to get the money to do that,” he said. “We’ve got enough problems at the state. We can barely do a budget. We can’t even fund the prisons right now.”

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