JeffCo sails toward fateful deadline
By Tom Baxter
Southern Political Report
July 31, 2008 — There’s been many a twist on the road to default since we last visited the story of Jefferson County’s sewer bond disaster last May, when the Securities and Exchange Commission charged former county commission president and current Birmingham Mayor Larry Langford with cronyism in the sale of the bonds, which have mushroomed into an unprecedented fiscal disaster for the Alabama county. Barring some close-to-miraculous intervention, however, the road appears near an end. Commission President Bettye Fine Collins the county didn’t intend to sign another forebearance agreement when a $100 million payment on the county’s $3.2 billion sewer debt comes due. According to Fine Collins, this doesn’t technically put the county into bankruptcy. “We could conceivably sit on this a while,” she told the Birmingham News. The commission is scheduled to meet today to pass a resolution requesting a special session of the state legislature to enact an increase in the county’s sales tax and changes revenue structure related to a compromise with the county’s creditors. But Jefferson County’s legislative delegation so far appears cool to the idea. Even some 11th-hour pass-off to the legislature isn’t likely to spare the county from becoming the biggest municipal default in the nation’s history. The commission appeared to be working its way, slowly and painfully, toward an agreement with its creditors. But with less than a month to go before the Aug. 1 deadline, the commission, on a 3-2 vote, fired a negotiating team which included Merrill Lynch, Porter, White and Co., and the Birmingham law firm of Bradley, Arandt, Rose and White. That group had put forth a plan, which the commission found “unacceptable,” which would have raised sewer rates, tapped the general fund and education sales tax, and established an independent oversight board over the sewer system. The commissioners say they are still trying to work out a deal with their creditors through their new team, which includes Morgan Keegan, Sterne, Agee and Leach, Citi, and the law firm of Haskell, Slaughter, Young and Rediker. Last week, however, a new player showed his hand. David Bronner heads the Retirement System of Alabama, which hardly begins to describe the mythic place Bronner holds in the annals of Alabama finance. Through imaginative ventures like the Robert Trent Jones Golf Trail, Bronner has turned the state employee’s pension fund into a gold mine. But the idea Bronner floated last week was enough to send bond underwriters up the wall. If the county bit the bullet and went into Chapter 9 bankruptcy, the pension chief said, RSA would consider buying the system for between $1.5 billion and $2 billion. The rest of the debt would be eaten by the banks, bond underwriters and bond holders. “Quit trying to make these guys whole. They make their living off of fools, and they were up to their eyeballs in this mess,” Bronner is quoted as saying in an article posted on the RSA website. Two of the five commissioners support Bronner’s plan, but Fine and two others say they’re committed to working out a compromise with the new team that avoids bankruptcy. That will be a cliffhanger. |
