Jefferson Officials Delay Discussing Repeal of Automatic Sewer Rate Hikes

BRADENTON, Fla. - The Jefferson County, Ala., Commission yesterday postponed for one week consideration of a resolution designed to repeal automatic increases in sewer rates.

The proposal has concerned a federal judge overseeing a lawsuit seeking the appointment of a receiver for the county's financially ailing sewer system, which is laboring under $3.2 billion of outstanding debt in troubled variable- and auction-rate mode.

The resolution was removed from the meeting agenda by commissioner Jim Carns, a Republican, who originally proposed it. He could not be reached for comment about why he postponed action on the measure.

The ordinance requiring automatic sewer rate increases was put in place in 1997.

Carns said last week that sewer ratepayers soon could be facing an increase as high as 20%, and commissioners should be required to vote on all rate hikes.

"The people have suffered enough, and it is time to put a stop to out-of-control rate increases," Carns said in a statement. "With the passage of this resolution, commissioners will be accountable to the people. No longer will commissioners be able to stand behind an outdated resolution that legitimizes annual increases on ratepayers who are already paying too much."

Although the county's debt service has ballooned because of the market disruption and the downgrade of bond insurers, it's not clear how Carns determined that rates could soon grow by as much as 20%. Bond documents for the sewer system require that the finance director annually evaluate rates and determine if revenues are sufficient to comply with rate covenants.

This year's rate analysis has not been completed, commissioner Shelia Smoot, a Democrat, said yesterday.

"Based on our rate structure and covenants, and debt service that allowed us to borrow the money, we can't undo [the rate ordinance] in that manner," Smoot said, referring to Carns' proposal. "We would have to restructure that debt, which we cannot do at this point."

Even if the resolution proposed by Carns resurfaced next week, Smoot said she believed it would not pass.

Smoot also said she is working on a plan of her own to provide relief to ratepayers. She would not be more specific but indicated that her proposal would not reduce revenues generated by the sewer system.

"This has been in the works for a while, we just didn't tell anybody," Smoot said, adding that her proposal may be presented at the same time Carns' resolution is considered next week.

In recent published reports, Carns reiterated his feeling that the county should seek protection by filing for bankruptcy.

"We will not file bankruptcy," Smoot said. "We will not be the poster child for bad financing in bond deals."

Smoot said the commission on Monday took a positive step in approving a series of forbearance agreements delaying sewer debt and swap payments until Feb. 20.

The Alabama Legislature will be in session before those agreements expire and lawmakers can then act on proposals that would help the county refinance the sewer debt, Smoot said.

One proposal would allow Jefferson to apply the excess amount of a locally collected one-cent sales tax toward the sewer debt. The idea has been opposed by local members of the county's legislative delegation, but some people believe that the full Legislature might be convinced to support it.

Currently, the sales tax is collected solely to pay off debt the county sold to fund school facilities.

Because specifics of a sewer debt restructuring plan have not been released publicly, it is not clear how the excess sales tax funds could be diverted from paying off the school debt to the sewer system.

Gov. Bob Riley is facilitating negotiations on behalf of the county.

Talks with creditors are continuing, Smoot said, adding: "I think negotiations are going to come out favorably for all participants involved."

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