BRADENTON, Fla. - Jefferson County, Ala., commissioners yesterday voted 3 to 2 to ask local voters Nov. 4 how they want the county to solve its $3.2 billion sewer debt crisis, including whether or not the county should seek municipal bankruptcy protection from creditors.
Commissioners voted on a resolution calling for an "advisory" or nonbinding referendum that asks voters three questions. The first question asks voters to choose one of three options on how the county should resolve the crisis - file for bankruptcy, default on payment of the debt and accept appointment of a receiver, or pay the sewer debt in full.
The second ballot question asks voters if they feel it "is fair for only those citizens directly using the sewer system to bear the entire burden of its cost" when it benefits the entire county by preventing the contamination of waterways.
The third question is about an offer made through a local newspaper by David Bronner, head of the state's Retirement Systems of Alabama, or RSA. Bronner wants the county to declare bankruptcy so he can take over the sewer system. Initially, he offered to pay up to $2 billion. Recently, he reduced the purchase price to between $1.1 billion and $1.4 billion, according to published reports.
RSA "has publicized a proposal that calls for Jefferson County to attempt the implementation of a plan under Chapter 9 of the federal bankruptcy law, which involves the repudiation of a major portion of the sewer debt and the sale of the sewer system to RSA," the ballot said. It goes on to ask voters what price RSA should pay, if RSA's ability to sell the sewer system should be restricted, and if the county should seek indemnification from RSA or any subsequent purchaser for future liability arising under federal or state environmental laws.
Attempts to reach county commissioners voting for the resolution were unsuccessful. Bronner's office said he did not want to discuss the matter.
Bronner is scheduled to speak to Jefferson County's legislative delegation today. County commissioners say he has never talked directly to them or presented his plan in writing, and he declined an invitation to attend the commission's public forum last week.
It is not clear yesterday what impact the referendum decision will have on commissioners' negotiations with creditors, but some sources in the investment community expressed surprise at the move. Forbearance agreements involving debt payments by the county to various counterparties, including bond insurers, liquidity banks, and swap providers, are in effect but terminate early if the governor does not call a special session of the Legislature to adopt a restructuring plan by Aug. 29.
A restructuring plan proposed by the majority of the County Commission has come under fire from local residents because it makes local taxpayers bear the brunt of the costs resulting from the debt crisis. Those same critics, along with two commissioners, support Bronner's plan.
The plan also received little or no support from local legislators, and Alabama Gov. Bob Riley refused to call a special session of the Legislature, which would have been necessary to enact the plan because it called for the diversion of sales tax revenue and a property tax backstop for the proposed refinancing of the debt.
Moody's Investors Service about two weeks ago downgraded Jefferson County's non-sewer debt to junk status, while Standard & Poor's downgraded the debt to low investment grade due to the inability of the county to resolve the sewer debt crisis, which has raised the possibility that the county might file for bankruptcy. The county sewer debt has been rated junk by the agencies for some time.
Standard & Poor's analyst Peter Murphy said yesterday that the resolution calling for a referendum would not prompt his agency to take action on the county's credit ratings.
"When there was a possibility of a special session we had an idea of what might occur and that the state would vote on certain enhancements that would be a way for the county to move forward," Murphy said. "That was scuttled when the governor announced he would not call that session. Now they're back to square one."