Historic. Unprecedented. Ginormous.
Jefferson County in Alabama has just filed a 101-page plan in an attempt to cut the county’s $4.2 billion debt by over $1.2 billion, thereby exiting the largest municipal bankruptcy in American history. While Detroit has made headlines in recent weeks because of the city’s mounting debt, the city’s situation is minute compared to the situation down south. The plan includes solutions to combat the county’s debt including raising the county’s sewer rates by 7.41% annually for 4 years and then 3.49% per year afterwards.
Alabama County Tackles Historic Debt
Most of Jefferson County’s debt is a result of the bonds that funded the county’s sewer system updates and repairs. The 101-page plan details exactly how the county can use the sewers to pay for the debt that the sewer system repairs created. Jefferson County is home to Birmingham, the largest city in Alabama with a population over 650,000 people. The bankruptcy was originally filed in 2011 after the county failed to negotiate debt settlement options with its lenders.
On August 6, 2013, Thomas Bennett, a United States Bankruptcy Judge from the Northern District of Alabama, will determine the fate of the county’s plan. However, while the plan that was just filed will allow the county to exit bankruptcy if approved, not everyone in the county agrees with how the debt is being handled.
“I totally disagree with this. A crime has been committed … Why then should the cost of the remedy of the crime be passed along to the rate payers?” asks Jefferson County Commissioner George Bowman. According to the Commissioner, the county’s poorest citizens are going to be those who finance the bulk of the remaining debt.
However, the exit-plan still passed and was largely consensual among the commission. Proponents of the exit-plan argue that it offers solutions that the Chapter 9 bankruptcy wasn’t able to identify or solve. Now, all eyes in Jefferson County are set on August 6, when the future of the county’s bankruptcy and debt will be decided at 9 a.m. on what’s sure to be a historic Friday morning.