County sets U.S. record, files $4.1 billion bankruptcy

MONTGOMERY, Ala. – Alabama’s most populous county filed the largest municipal bankruptcy in U.S. history Wednesday, years after being plunged more than $4 billion into debt by a corruption-riddled sewer project.

Just two months after it seemed Jefferson County could stave off embarrassment by striking a deal with creditors, talks broke down over about $140 million, said Commissioner Jimmie Stephens.

Since 2008, commissioners have tried to avoid the move to settle the debt, which resulted mostly from a mix of outdated sewer pipes, the lagging economy, court rulings and public corruption.

The filing does not wipe out the whole $4.1 billion, said commission president David Carrington, who wasn’t certain how much the county will have to pay back. A plan would have to be worked out in bankruptcy court. The bankruptcy’s financial burden for residents and employees likely won’t be known until that plan is in place, Carrington said.

Still, the four men and one woman on the board in their 4-1 vote decided it was time to bring the issue to an end and remove the cloud hanging over the county, home to Birmingham, the state’s largest city, commissioners said.

“Jefferson County has, in effect, been in bankruptcy for three years,” Stephens said.

If Jefferson County’s bankruptcy is approved, it would overshadow the one filed by record-holder Orange County, Calif., in 1994 over debts totaling $1.7 billion.