Bloomberg News

Deadline for Jefferson County Bond-Debt Settlement Delayed

October 14, 2011

(Updates with commissioner’s comment in sixth paragraph.)

Oct. 14 (Bloomberg) -- A final settlement to help Jefferson County, Alabama, and holders of $3.14 billion of its debt avert a record municipal bankruptcy has been delayed, said John Young, a court-appointed receiver managing the county’s sewer system.

The parties had intended to have a fleshed-out and signed document ready to show Governor Robert Bentley, a Republican, by tomorrow, in anticipation of his calling a special legislative session in November. The deal to repair damage from a botched financing of sewer renovations hinges on lawmakers’ action.

Disagreements among Jefferson County’s 25 state lawmakers threaten to derail the settlement, which may push the county into bankruptcy by year’s end.

At best, the session “will be called in November to take place in December,” Young said in a telephone interview today. “We want to give the governor as much flexibility as possible.”

Lawyers expect to finish a final deal this month, he said.

County Commission President David Carrington disputed that there had been a set date to finish the agreement.

“There wasn’t a deadline, just a goal,” Carrington said in an e-mail.

Tentative Deal

On Sept. 16, Jefferson County commissioners voted 4-1 on to accept a tentative deal with the creditors. The agreement included more than $1 billion in concessions from creditors. JPMorgan Chase & Co., which arranged most of the $3.14 billion debt, would take the biggest loss.

It also required the Legislature to create an independent sewer authority; mandate sewer hookups from new developments; give state moral-obligation backing to new sewer debt and fix the county’s operating revenue shortfall.

The revenue problem stems from a March state Supreme Court ruling striking down a local tax on wages. After dismissing 547 employees, Jefferson County is $40 million short of the revenue needed in the current fiscal year.

Bentley promised to call a session to deliver those bills only if the Jefferson County delegation unites behind them. Legislative protocol allows one lawmaker to block a measure related to his or her county.

The delegation’s Democrats criticized the deal in a meeting with county commissioners yesterday, saying it would gouge the poor with higher rates and cramp economic development. The delegation also splits on party lines over the revenue solution. Democrats want to replace the lost tax. Republicans want to reallocate sales tax money now earmarked for indigent medical care.

Justin Perras, a spokesman for JPMorgan in New York, didn’t immediately return a call for comment. Ashweeta Durani, a spokeswoman for Hamilton, Bermuda-based Assured Guaranty Ltd., which insures some of the debt, said the company would have no comment.

--With assistance from Martin Braun and Andrea Riquier in New York. Editors: Stephen Merelman, William Glasgall

To contact the reporters on this story: Margaret Newkirk in Atlanta at mnewkirk@bloomberg.net; Kathleen Edwards in New York at kedwards27@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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