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Alabama’s Jefferson County officials and creditors are still scrambling to resolve a $3.14 billion sewer bond debt ahead of tomorrow’s make-or-break deadline.County officials will meet tomorrow to decide whether to file for the largest municipal bankruptcy in U.S. history, or accept a settlement with Wall Street lenders, including JPMorgan.
Commissioners told Bloomberg this week that, after more than two years of negotiations with creditors, the two parties are the closest they have ever been to reaching an agreement. The final sticking point is creditors proposed plan to transfer the county’s sewer assets to a private company.
The county’s final terms, obtained by the Birmingham News, would erase more than $1 billion of the sewer debt and refinance $2.05 billion to pay off old debts, on the condition that creditors grant an additional $30 million in concessions. County sewer rates would increase annually by up to 8.2% for three years, and by up to 3.25% afterward.
Responding to creditors’ demands that the sewer system be transferred out of county control, local leaders will ask state lawmakers to create a governmental utility service corporation to run the sewer system. The majority of the GUSC’s directors would be appointed by the governor, but the county would need to approve any sale or transfer of the system’s assets.
If creditors agree to the plan, Jefferson County will likely be spared from bankruptcy — at least for a little while. But the county faces a projected $41 million deficit, due to the loss of its occupational tax earlier this year. Alabama Gov. Robert Bentley has promised creditors and local officials that he is committed to helping the county find alternative revenue sources to resolve its fiscal woes.
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