March 17 (Bloomberg) -- Jefferson County, Alabama, will file a plan to exit bankruptcy within three months that would cut its sewer debt by at least $1 billion, said the president of the county commission.
The plan would need to be approved by a federal bankruptcy judge, Jefferson County Commission President David Carrington, said in an interview today.
The county, home to Birmingham, Alabama’s most populous city, in 2011 filed the biggest municipal bankruptcy in U.S. history, totaling $4.2 billion.
Jefferson County’s bankruptcy was the legacy of a sewer project dogged by political corruption and by derivative-laden bond financing deals that made the county’s debt costs soar after the credit crisis on Wall Street in 2008.
Jefferson’s financial stress worsened in 2011 when the state Supreme Court struck down a city wage tax. The tax had generated about $70 million per year -- a quarter of the county’s revenue. State legislation would be needed to replace the tax.
Since its bankruptcy filing, Jefferson County has ended in-patient treatment at a county hospital, closed a jail, cut back on road and park maintenance and fired hundreds of employees.
Jefferson has reached settlement agreements with at least three of its smaller creditors. It has yet to resolve its battle with holders of more than $3 billion in sewer debt, led by JPMorgan Chase & Co.
The Birmingham News earlier reported the county’s planned court filing.
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