August 13, 2011 in Business

Alabama county rejects debt settlement

Associated Press
 

BIRMINGHAM, Ala. – Leaders of Alabama’s most populous county voted unanimously Friday to reject a settlement with Wall Street creditors to pay off more than $3.1 billion in debt and bought more time to avoid what would be the largest municipal bankruptcy ever filed.

The five members of the Jefferson County Commission also unanimously approved a resolution to give the commission president and finance chair until Sept. 16 to personally negotiate a deal.

The county has been trying to avoid filing bankruptcy over more than $3.1 billion in sewer system debt for three years. Its problems stem from a mix of outdated sewer pipes, the economy, court rulings and public corruption.

State officials and a court-appointed receiver have been closely involved in the negotiations.

Republican Gov. Robert Bentley’s chief of staff, David Perry, attended Friday’s meeting.

Perry said a Chapter 9 bankruptcy proceeding was still a possibility but “a general framework for a deal is in place.”

Perry said Bentley and legislative leaders would get personally involved to make sure any needed legislation passes if county officials can work out a deal.

“The county and creditors do not have a definitive deal in place yet but they have a conceptual framework that keeps sewer rate increases at a minimum and resolves the problem once and for all for the county,” the governor said in a statement.

Commissioner Jimmie Stephens, who oversee the county’s finances, said members thought they could get a better deal in bankruptcy court than was offered by lenders.

“That’s the reason we didn’t accept the creditors’ offer,” he said.

The main problem is some $3.14 billion in sewer debt. The total value of the bankruptcy would exceed $4.1 billion once the county’s debts for schools and other projects are included, officials said.

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