A Birmingham City Council member embroiled in an election battle with the state reportedly will release his recommendations today as to how Jefferson County should deal with the financial crisis resulting from the credit crash of over $3 billion of sewer debt.
The county has options that haven’t been discussed by county commissioners, William Bell told the Birmingham News on Monday. “No one is speaking up on how we’re going to get out of this mess,” Bell said.
Bell wants bankers who worked with the county on debt sales to be held responsible for the situation and to participate in helping the county resolve its problems, the paper said.
Last month, Bell won election to the Jefferson County commission seat vacated by Larry Langford, who resigned to successfully run for Birmingham mayor. However, Gov. Bob Riley appointed George Bowman to fill Langford’s term through 2010, so the election is in dispute.
Jefferson County’s $3.2 billion auction- and variable-rate sewer finance plan has crumbled due to disruption of the volatile floating-rate credit markets. The highly leveraged sewer system has been affected by bond insurer downgrades and underlying rating downgrades that triggered potential termination of swaps.
Late last week, sewer system woes finally spilled over into the county’s other credits when Standard & Poor’s slashed Jefferson’s general obligation and revenue warrant ratings and placed all of the county’s credits on negative CreditWatch.
Standard & Poor’s even placed its A-minus rating on GOs issued on behalf of the Jefferson County Board of Education on CreditWatch with negative implications, reflecting “uncertainty as to whether the deteriorating credit quality of the county’s sewer system could potentially disrupt county collection functions.”
The rating agency said bankruptcy is an option for the county sewer system that could also impact the county’s other credits.
Standard & Poor’s dropped the county’s sewer revenue debt three notches to CCC from B after the county said it would not post collateral or insurance by March 7 to avoid termination of its swaps.
Moody’s Investors Service last week lowered the sewer debt rating to B3 from Baa and placed the county’s other credit ratings on review for possible downgrade.
