Jefferson, Alabama taxpayers are bracing themselves for the effects of their city filing the largest Chapter 9 bankruptcy in history. Jefferson filed for Chapter 9 bankruptcy protection late last month requesting help with debt reorganization. The municipality suffered increased debt over rebuilding costs after a devastating tornado, their over-reliance on insured bonds and internal corruption scandals. While Jefferson officials are working to climb out of debt, taxpayers are worried about what this will mean for their own wallets.
Costs Of Borrowing
As Jefferson, Alabama tries to find a way to fund their overdue highway and bridge repairs, the public anticipates an increase in taxes to support their damaged credit rating. Unfortunately for tax payers, they are right in assuming part of the responsibility to bail out the local government will fall on them.
If Jefferson intends on borrowing any money to fund their major projects, they will be subject to an increased interest rate on the loan. Compared to other municipalities with the same credit rating, Jefferson has suffered a slight set back in their risk-free status for borrowing. The increase could be as high as nearly a full percentage point higher than comparable cities.