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Commissioners of Jefferson County, Alabama, voted today to file for the largest-ever municipal bankruptcy today, ending nearly three years of drama over the county’s $3.1 billion sewer debt.The decision comes less than two months after the county reached a provisional agreement with its creditors, that included $1.1 billion in concessions. But county officials have been unable to get signed commitments from its creditors before today’s vote, according to Bloomberg.
Another factor in the decision was that the county’s legislative representatives and the state legislature have not been able to unite behind bills that would help Jefferson County deal with its fiscal issues. Alabama’s Republican Gov. Robert Bentley had promised creditors that the state would find a way for Jefferson County to increase its revenues.
Chapter 9 municipal bankruptcies are rare, and tend to end poorly for all of the parties involved. In the case of Jefferson County, the bankruptcy could have disastrous consequences for the state — as Alabama’s largest county, it is a major economic driver for the state. It will also likely result in millions of dollars in losses for the county’s creditors, and could lead to major sewer rate hikes for the county’s residents, something commissioners have sought to avoid.
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