BRADENTON, Fla. — Jefferson County, Ala., Thursday agreed to take the next week to review a counteroffer submitted by creditors holding $3.14 billion of variable- and auction-rate sewer warrants on which the government has defaulted.
Creditors reportedly agreed Wednesday to consider a solution that would give them about $1 billion less than they are owed and to allow for only single-digit future sewer rate increases.
The county initially sought a haircut of $1.6 billion for investors. That offer was forwarded to creditors through court-appointed sewer system receiver John Young.
Then Alabama Gov. Robert Bentley and state finance director David Perry stepped in to assist the county with negotiations and submitted the most recent settlement offer, which sought to shave $1.3 billion off the sewer debt.
The counteroffer is in “striking” distance of being acceptable and there are “only two or three points of contention” short of reaching a successful settlement, commissioner Jimmie Stephens said Thursday. Stephens heads up the board’s finance committee.
“I’m not so sure when you add it all together that [the creditor’s counteroffer] falls under reasonableness,” he said. “But it’s getting close.”
At the request of the state Thursday, county commissioners canceled a meeting during which they had planned to discuss legal strategies, including preparations for a potential bankruptcy filing. The meeting was delayed until Aug. 4 to continue negotiations, according to a brief statement by commission President David Carrington.
“A settlement has not been reached,” Carrington said. “The commission appreciates the continued cooperation of the state and the receiver in the joint efforts to reach a settlement of the outstanding sewer financing issues.”
Creditors have made no public statements about settlement talks.
At the same time the county is trying to hasten an end to the three-year-old sewer debt problem, it is facing yet another financial crisis due to the loss of an occupational tax that provided $63 million for the general fund in 2010.
The job tax was struck down by an Alabama court earlier this year because it was improperly authorized by the Legislature. The county has expenses from that lawsuit and a previous job tax that was also struck down by the court.
Lawmakers refused to provide relief during their regular session this year. Though the county has trimmed as much as $200 million from the budget, another $100 million of recurring revenue is needed to have a balanced budget beginning Oct. 1, Stephens said.
When Bentley offered to intercede in negotiations with sewer debt creditors, he told commissioners that he would call a special session of the Legislature on the budget problem, according to Stephens.
The governor “is offering two or three legislative solutions for us,” he said, declining to provide specifics. “That’s a necessary component in solving this problem.”
County officials have said that even if a settlement is reached to restructure the sewer the debt, the county could still file for bankruptcy if it has a general fund shortage and cannot pay its bills.
Bentley said in a statement that the extra week would be used to thoroughly review the counteroffer presented this week.
“I believe this offer deserves serious consideration,” he said. “We look forward to continuing to work with the Jefferson County Commission and their creditors to pursue an agreement that best serves the citizens of the county and the state.”
Whether the two sides will get close enough so the county can avoid the largest-ever municipal bankruptcy filing in the United States is unclear.
Only snippets of settlement offers have been leaked to various media outlets.
The county is intent on conducting “serious and meaningful negotiations to settle this crisis in lieu of filing for bankruptcy,” Stephens said. “Bankruptcy … may turn out to be the path we pursue but I want readers to understand that is nothing commissioners take lightly. We really do want to reach a settlement to this.”
Jefferson County has a week to reach a settlement, he said, indicating that he doubted the commission would agree to another extension of time even if negotiations were close to a settlement.
“What we’ve got is a very meaningful offer and a counteroffer. I don’t know that it benefits anyone to take [negotiations] out any further,” Stephens said. “Everyone is of understanding that this is a situation we’ll be resolving quicker than most anticipate.”