Reporting from Atlanta — In an effort to avoid filing the largest municipal bankruptcy in U.S. history, officials in an Alabama county Friday flirted with a potential settlement with creditors but eventually decided to take a few more weeks to try to hammer out a better deal.
Jefferson County, the state's most populous, is staggering under a $3.14-billion debt incurred after officials borrowed money to fix their troubled sewer system, and then entered into a number of complicated and corruption-laced refinancing deals that backfired in 2007 with the mortgage lending crisis.
In a meeting Friday, the five-member County Commission considered an offer drawn up by a court-appointed receiver that would have forgiven more than $1 billion in debt. But commissioners also found much to dislike in the offer, including sewer rate hikes that would have amounted to about 25% over 18 months. That was a particularly bitter bill to swallow in a county where more than 100,000 of its 665,000 residents live below the poverty level, according to Census Bureau figures.
Commissioner George Bowman noted that sewer rates had already increased 329% in the last 10 years in Jefferson County.
"I believe this is excessive," Bowman said of the proposed hikes. "Totally excessive."
The commission unanimously voted to hold direct negotiations with the creditors, including JPMorgan Chase, which reached a multimillion-dollar settlement with the Securities and Exchange Commission after it was accused of engaging in pay-to-play schemes related to the financing deals.
Those schemes also resulted in the conviction of a number of local officials and businessmen.
Commissioners had said earlier that they were determined to either reach a settlement or declare Chapter 9 bankruptcy by Friday. In their meeting, they said that Republican Gov. Robert J. Bentley had asked them to put off their decision until Sept. 16.