The Washington Times: Ala. county files for largest municipal bankruptcy
MONTGOMERY, Ala. (AP) — Alabama’s most populous county filed what became the largest municipal bankruptcy in U.S. history in an effort to retake control of its beleaguered sewer system and wipe away as much of its whopping $4.15 billion in debt as possible.
Jefferson County’s Chapter 9 filing on Wednesday gives it protection from creditors while it develops and negotiates a plan for adjusting its debts. It could accomplish that restructuring by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
But there are risks. Perhaps the biggest is the potential impact on the county’s 658,000 residents, who could be asked to endure even higher sewer rates than were contemplated under the deal with creditors that fell through. That’s because the sewer debt, which represents the bulk of what the county owes, is secured against net revenues from the sewer system, and the court will determine how much of that debt remains on the books and how the county will repay it. Unrestricted revenue in the county’s general fund totaled only $152.5 million in the fiscal year ended Sept. 30.
The problems were years in the making.
Its debt ballooned after a federally mandated sewer project was beset with corruption, court rulings that didn’t go its way and rising interest rates when global markets struggled.
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