Alabama Gov. Robert Bentley softened his stance on supporting bankruptcy for Jefferson County last week, according to the Birmingham News.
Bentley indicated to the paper that he recently changed his view of the seriousness of bankruptcy and how it could potentially affect other credits in the state.
"In the past … I did not understand it as fully as I do now, as far as ramifications of it," he told the paper. "Bankruptcy is still a strong possibility, but … we really feel like that would certainly not be in the best interest of Jefferson County or Alabama or for other cities and counties in the state."
The governor went on to say that bankruptcy can hurt everybody "and if we can avoid it, everyone will be better off."
Bentley reportedly met in the last two weeks with Jefferson County Commission President David Carrington and Commissioner Jimmie Stephens.
The county is in fiscal distress, including a default on more than $3 billion in revenue debt for its sewer system, exacerbated recently by the loss of a key tax used to fund general operations.
Last week, the county announced that it would not file for bankruptcy during a new 30-day "standstill" agreement under which Jefferson's sewer system receiver would allow negotiations to resume over defaulted sewer debt and would not pursue a rate increase.
Officials contemplated filing for bankruptcy after the court-appointed receiver, John Young, said he would propose 25% increases in sewer rates annually over several years to pay down some of the $3.14 billion of outstanding sewer warrants.
Young then filed a claim with the county seeking the $75 million in the general fund that came from a 2009 agreement between JPMorgan and the Securities and Exchange Commission that settled securities fraud and other charges involving the sewer warrants and related interest-rate swaps.
The $75 million is all the county has for liquidity in its tight budget due to the loss of an occupational tax that provided significant revenues for the general fund.
The tax, authorized by the state Legislature, was struck down by the Alabama Supreme Court earlier this year because it was improperly enacted.
Bentley announced recently that he would meet with Jefferson commissioners and lawmakers on solutions to the sewer debt as well as the loss of the tax revenue, which recently required the county to lay off more than 500 workers.
He also reportedly said that a settlement with creditors holding the defaulted sewer warrants will require compromise without increases in state or local taxes.
Meanwhile, a newly formed grassroots organization called "I Believe in Birmingham" began holding its own public meetings last week to discuss the county's financial crisis.
The group's president, Joseph Baker, said meetings would be used to let members of the public discuss the situation and solutions, including calling a special session of the Legislature to finally put an end to the crisis, according to the News.
