Jefferson County, AL is considering bankruptcy because of a huge amount (over $3 billion) of sewer debt. Officials have been in talks with sewer bondholders. The Jefferson County Commission has repeatedly delayed the bankruptcy filing decision. The commission has said that it would “try to reach an agreement” with bondholders by September 16, 2011.
Jefferson County, AL residents have seen sewer rates triple over the past 10 years. County commissioners say that future rate increases are inevitable.
The state of Alabama is involved in the discussions. The Alabama state legislature may need to provide a state guarantee of bonds that would be used to refinance the restructured sewer debt. The guarantee would significantly lower the county’s interest costs by about $1 billion.
In addition, the county will ask the state to help close a shortfall in its general fund budget. There is a $41 million budget gap for the fiscal year starting Oct. 1, even after cutting services and slashing expenses.
If the county decides to file bankruptcy, it would be the largest municipal bankruptcy (Chapter 9) in US history.
On Friday, September 16, 2011, officials in Jefferson County voted to accept a deal with holders of $3.14 billion of county debt instead of filing bankruptcy. However, Jefferson County stays on the bankruptcy watch list because this deal is not written, has several oral contingencies that must be met, and needs some legislative action before it is solidified.
UPDATE: Jefferson County, AL filed Chapter 9 bankruptcy on November 9, 2011.