Alabama Offers To Help Jefferson County Avoid Largest-Ever Muni Bankruptcy

jefferson county sewer

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In an effort to avoid the largest municipal bankruptcy in U.S. history, the state of Alabama may offer to help debt-burdened Jefferson County make a deal with its creditors.”We’re willing to do whatever it takes” for the county to avoid filing bankruptcy, short of a “cash bailout,” Alabama Finance Director David Perry told Dow Jones Newswires today.

He said the state is open to providing a “credit enhancement” that would make a deal “more palatable” to the county’s sewer creditors, including JPMorgan Chase.

Jefferson County has struggled since 2008 to repay $3.2 billion in sewer debt that was largely the result of bad financing. 

By making the sewer system a separate entity from the county, Alabama could help lower the rate that would have to be paid when the sewer debt is refinanced, Perry said.

Perry’s remarks are a departure from the state’s previous willingness to support bankruptcy for Jefferson County. The new stance indicates growing fear that a Jefferson County bankruptcy would have a negative economic impact on the rest of the state.

Jefferson County, home to Birmingham, is the largest county in Alabama and a key economic driver for the state. A bankruptcy filing could lead to financial problems for the county’s school districts and municipalities, as well as higher borrowing costs for the state and other local governments.

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