Trying to avoid largest municipal bankruptcy in U.S. history
Hoping to avoid the largest municipal bankruptcy filing in U.S. history, leaders in Jefferson County, Ala., apparently have delivered their “final and best offer” for a negotiated deal with creditors and expect a response from the holders of their $3.14-billion sewer debt Thursday.
The story of Jefferson County’s staggering debt load is a kind of zeitgeist-defining parable of the aughts. The county -- the state’s most populous and home to the city of Birmingham -- initially took out loans to make fixes to its sewer system required under the Clean Water Act. The costs were higher than expected, and beginning in 2002, the county commission refinanced using complicated interest-rate swap schemes that backfired in 2007 with the mortgage industry crisis.
Like many American households, Jefferson County found itself stuck with soaring interest rates and payments it couldn’t make. The complex financing deals, the voters learned, were hatched in a culture of corruption. Larry Langford, the former commission president, was convicted of corruption charges, and creditor JPMorgan Chase reached a multimillion-dollar settlement with the Securities and Exchange Commission for allegedly engaging in pay-to-play schemes.
The county’s latest offer to creditors, reported in the Birmingham News, asks them to erase $1.17 billion of the debt and create a relief fund for sewer customers who cannot pay what will almost certainly be extremely high sewer bills to come.
The county commissioners are expected to hear back from creditors Thursday. They are scheduled to meet Friday to decide on the bankruptcy filings.
-- Richard Fausset in Atlanta
Photo: Jefferson County, Ala., home to Birmingham, has submitted a second offer to creditors in an attempt to settle its $3.14-billion sewer bond debt. Credit: Reuters