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Jefferson County commissioners postponed a bankruptcy decision — again — today in order to take a larger role in negotiations with the county’s sewer creditors.Local officials met all day today to consider the creditors latest proposal to settle Jefferson County’s $3.14 billion sewer debt. Commissioners ultimately rejected the plan this evening, and opted to extend talks until Sept. 16 in the hopes of reaching a better deal.
According to Bloomberg, the latest proposal from the creditors would have forgiven a little more than $1 billion of the debt, while raising sewer rates 25% over the next 18 months. In the end, bondholders would get back $2.07 billion, with JP Morgan taking the biggest hit from the 33% haircut.
The plan also calls for the creation of an independent sewer authority, with the majority of board members appointed by the governor. State lawmakers would also be asked to shore up Jefferson County’s general fund to make up for the loss of occupational tax revenue.
The deal would be backed by the state’s good credit. In the event that Alabama had to bail out Jefferson, its largest county, the county would have to pay the state back with local revenues.
Jefferson County commissioners said today that there are too many contingencies in the plan. At Alabama Gov. Robert Bentley’s request, they agreed to extend the negotiations, but demanded that local leaders be allowed to take control over negotiations, which have so far been conducted by state officials.
County officials say Chapter 9 bankruptcy is still an option if no deal can be reached. Bentley has said he will go to any length to prevent a bankruptcy, which would be the largest in U.S. history and would likely have ripple effects throughout the state’s economy.