Jefferson County, Alabama Faces 80 Percent Chance Of Declaring Municipal Bankruptcy

Alabama's troubled Jefferson County faces an 80 percent chance of declaring bankruptcy, one of its commissioners said on Thursday, as U.S. experts gathered to discuss the implications of a possible Chapter 9 filing.

Another commissioner said the county has yet to hear a response from creditors over its proposal that $1.3 billion be shaved off its crippling $3.2 billion sewer bond debt as part of a settlement to avoid what would be the largest municipal bankruptcy in U.S. history.

With a "standstill" period for talks with creditors that include JPMorgan Chase due to end on July 29, the county began a long-scheduled meeting to discuss pending litigation surrounding its debt and bankruptcy.

"We are real close to filing bankruptcy, probably at 80 percent," said Sandra Little Brown, one of five county commissioners.

Other commissioners and the state's governor have said bankruptcy remains a real option if talks with creditors fail but have still held out hopes for the talks success. Jefferson County is home to Birmingham, Alabama's largest city.

Default could rattle confidence in America's $2.9 trillion municipal bond market and heighten concern about the fiscal stability of some of the nearly 90,000 U.S. counties, cities and local governments that issue debt.

Jefferson County has hired the attorney, Kenneth Klee, who worked on the 1994 bankruptcy of Orange County, California, Brown told Reuters before heading into the meeting." He's very knowledgeable, the best in the country," she said. "I want to know what's the good, what's the bad about bankruptcy."

Orange County had declared Chapter 9 bankruptcy over failed investment strategies.

Commissioners have said it was unlikely that a decision on bankruptcy would be taken at Thursday's meeting.

"I have not heard from the creditors yet," said commissioner Joe Knight, referring to the county's settlement offer.

"I don't know where today's meeting is going to go. It's going to start out as informational. We will make the determination (about bankruptcy) at some point," Knight said.

Commissioners and John Young, the court-appointed financial manager of the county's sewer system, have repeatedly said that Chapter 9 bankruptcy would not free the county of its debt obligations.

Young argues he would be forced to raise sewer rates for consumers even if Jefferson County went into bankruptcy.

(Writing by Matthew Bigg; Editing by Tom Brown and Leslie Adler)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[garymc8]

09:23 PM on 07/25/2011

RED STATE=DEAD STATE

[dadw5boys]

09:12 PM on 07/24/2011

So if JP Morgan owns it now they can be sued by land owners for the clean up of waste and diease laden material ?

[dadw5boys]

09:08 PM on 07/24/2011

Reagan Bailed Out Mexico to pay off a Bond to Goldman Sachs !
But a town in the USA that loves low tax rates and low wages just like Mexico should not expect help !

[MauricioC]

12:27 PM on 07/24/2011

Another end product of Reaganomics.

You can't run a government without collecting revenue. You can try, but it won't work.
All you're going to wind up with is dilapidated infrastructure, bridges falling into rivers, an inadequate power grid and slow communications. Oh, we already have that, don't we?

[sloreader]

02:18 PM on 07/24/2011

And fewer jobs repairing/building bridges, etc.

[vote4anya]

04:58 PM on 07/24/2011

Yep, the only thing that "trickled down" was that sewage.

[guveqzero]

10:50 AM on 07/24/2011

No, bond holders are not safe. The fictious us economy can not support the lifestyle the rich are accustomed. When the end comes, assets and debt won't mean a thing.

[Mister Grumpy]

08:44 PM on 07/23/2011

Just another example of the crumbling of America...........

[knott wrench]

08:28 PM on 07/23/2011

This is in part:

Grover "The Gopher's" Norquest's, End result of:

"Starving the Budget and 'Drowning Government in the Bath Tub'".

And so it will go, around the USA, as a Result of the GOPers signing on to his Amoral Pledge.

Grover, needs to be Investigated by the DOJ and IRS for "Influence Peddeling"!

[bsmkchan]

08:52 AM on 07/23/2011

The failed experiment of this country USA is coming to an end. On the other end, Canada as an experiment in country creation is getting very close to become a success

[MauricioC]

12:27 PM on 07/24/2011

Canada is already a success.

[Mark Schwebel]

04:30 PM on 07/24/2011

Canada understands how to balance the needs of big business against the needs of society. We also understand how to keep corporate money to a minimum in elections.

[nikolasoddfellow]

01:31 AM on 07/23/2011

It's republican run and republican controlled. This is what they'll do to the whole of the USA if they get full power.

[TiredOfNo]

01:08 PM on 07/23/2011

As a progress, I would like to agree with you, but it's not exactly like that. The truth is closer to ".......{ a previous Democratically controlled mob of corrupt local officials} and morally absent financiers got together to build a giant device that converted human "she it" into billions of dollars of profit for Wall Street............." Republicans now control Alabama's legislature, but that did not occur until 2010. As for Birmingham/Jefferson, I believe they are still under Democratic control.
If you are looking for a villain, it would be Wall Street Banks. Sometimes the it hurts, but I cannot "Fox" the truth.

[Genosse Joe]

01:08 AM on 07/23/2011

Liberal solution in cases when county has problems handle its existing debt is simple.

They should drive local buisnesses and rich tax paying residents out of the county by rising taxes.

They should also order local newspaper to print them $2 billion and consider those $2 billion a loan they borrowed and their grandkids must pay back tl the newspaper.

That must solve their problem.

[xilduq]

05:08 PM on 07/22/2011

JP Morgan Chase bilked jefferson county (and countless others) out of $billions - paid a paltry fine in the $millions - admitted no wrongdoing - and rinses and repeats

your "justice" system at work

[Micheal G Groshong]

02:21 PM on 07/22/2011

Naturally this would happen in Alabama where concervative virtures hold sway....

[Republicanistan]

04:55 PM on 07/22/2011

Or Orange County, the most conservative county in California, home of the John Birch Society.

[ALL OK HERE ON PLANET X]

08:37 PM on 07/22/2011

Not that it matters much, but the JBS home is in Wisconsin, they may have a local chapter there in CA. Back on topic, O. C., CA when bankrupt in the '90s due to failed investments or so they say. Cities or towns with a strong right-wing base often fall flat financially. Often it is because of corruption, fraud, double-dealing, graft or other political / donation scheming. We in IN. are all to familiar with the rackets. Thanks for reading.

[MauricioC]

12:28 PM on 07/24/2011

Wasn't Orange County the site of the biggest municipal bankruptcy of it's time back in the '90's?

[dudecrush]

02:01 PM on 07/22/2011

They were screwed over by Wall St. Matt Taibbi wrote an in depth article about it last year. Follow the link for deets...

http://www.rollingstone.com/politics/news/looting-main-street-20100331

[MSaxe]

03:15 PM on 07/22/2011

Nice research... nice find. Taibbi is the best current investigative reporter.

Your reference is what I come to HP looking for. Good, solid additional information, backed by a reference. Thanks. F&F.

[frank day]

04:37 PM on 07/22/2011

Thanks for putting this out there.

It's a disgusting ripoff.

[Republicanistan]

11:17 AM on 07/22/2011

$3.2 Billion Sewer Project in Alabama?

Is this some kind of joke?

[jcolvin325]

12:38 PM on 07/22/2011

That's what I was thinking....geeez.

[phoenixdoglover]

01:03 PM on 07/22/2011

Lots of that sort of thing, especially in the eastern half  (older parts) of the US. Usually, these are programs to upgrade many parts of the overall system, with the main objective of preventing sewer overflows and backups during heavy rains.  But $3.2 billion is a big price tag, especially for second-tier metropolitan area. Could be the malfeasance isn't just with the investment banks.

[Republicanistan]

01:15 PM on 07/22/2011

There is no way Birmingham, Alabama should have spent $3.2 Billion on a sewer. I smell some shady business.

[JCKib]

07:45 AM on 07/22/2011

I hate reading stories like this. The locals need to step up with a massive lawsuit, stop making all payments, and generally give it back the way they got it. And when their Reps are in town, have the cops arrest them. Arrest their parents and children. Have the taxing authority double up on their friends and supporters. Shut off their water and sewer. No more phone or electricity. Make it so flipping annoying for everyone who stands in your way. Tow their cars. Whatever it takes. Stop being a victim.

[edejan]

03:20 AM on 07/24/2011

Agree. It's time to fight these criminals on their own level. Fanned and faved.