Jefferson County Bankruptcy Update

Tanya Ott | October 30, 2008

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Listen to the story

90.3 WBHM Birmingham–County commission meetings are usually pretty mundane, but at a recent Jefferson County commission meeting in Birmingham a routine reading of county business revealed a lot of underlying tension – and passive-aggression.

Commissioner Sheila Smoot: “I’m glad you’re in my brain cells this morning! I didn’t realize I was diong that!”

Commissioner Bettye Fine Collins: “Are we through?!?”

Emotions are high as the county faces not one – but two bond payment deadlines tomorrow. Payments officials can’t afford to make. It’s complicated, but here’s what happened.

Several years ago the county renegotiated debt for sewer upgrades, swapping fixed rate bonds for adjustable ones. Those rates have gone up dramatically, and the county is now $3.2 billion in debt for the sewer.

That triggered the companies holding the county’s non-sewer debt to also call for payment. So tomorrow, the county is supposed to pay $90 million dollars. County officials have been working furiously to strike a deal, but at a recent meeting, Commission president Bettye Fine Collins kept it close to the vest.

“I really don’t want to get into that for this reason. Remember the word negotiation. And if you reveal what the negotiations will be it might muddy the water.”

It’s already muddy. Several commissioners have competing plans for solving the mess. Various state leaders have weighed in with other ideas, and critics say the power plays are getting in the way. The back and forth frustrates everyone, including Alabama Governor Bob Riley.

“When we start having negative reports in national and international magazines about our choice not to pay debt, then we better take it seriously.”

Riley sat on the sidelines initially, but has stepped up to negotiate $1 billion in concessions from Wall Street creditors. This week, he renewed his call for Washington to commit some of the federal bailout money to Jefferson County. Some observers have suggested bankruptcy might be the best option, but Riley disagrees.

“Morally, I have a real problem with somebody walking in and saying, I’m not going to pay that bill. I’m going to let somebody else worry about it. We have an obligation to all the people in this state to make sure that everyone lives up to their duty to say what they mean, and when they do, mean what they say.”

Pinched by sewer prices that have more than tripled in just a few years, local business leaders are worried. Russell Cunningham, president of the Birmingham Regional Chamber of Commerce, says if the county defaults the resulting cuts to basic services would be a huge drag.

“Because the curtailment could be in the education system. It most definitely will be in public safety and public service and all economic development activities would be at risk.”

The county’s reputation is already at risk. Since 2005, four former county commissioners have been prosecuted for public corruption while in office. The latest pleaded guilty this week to accepting thousands of dollars in gifts from an investment banker handling the sewer bond deal. Birmingham’s mayor – a former county commissioner – is also under investigation and more criminal charges are expected.

~ Tanya Ott, October 30, 2008.