Bankrupt Jefferson County, Ala., has formally set its next hearing on sewer system rates for July 24. No specific rate proposal has been proposed.
Creditors were invited to make presentations, though they declined to appear at the hearing, according to a court filing Tuesday. They said their position is well known, and that is to have the county repay more than $3 billion borrowed from investors. The creditors did offer to meet with the county to discuss terms of repaying the debt.
Last week, Assured Guaranty Municipal Corp., which insures some of the county’s $3.14 billion of defaulted sewer warrants, complained that Jefferson is delaying the bankruptcy case by failing to propose rate increases. Assured asked the court to set a deadline for the county to propose a plan of adjustment.
In a matter related to sewer revenues, Bank of New York Mellon Tuesday objected to the county’s request for the court to reconsider the June 29 order that prevented Jefferson County from using sewer revenues to pay for depreciation, amortization, reserves or estimated expenditures for the legal expenses related to the county’s bankruptcy case.
The county had asked the judge to consider revising the ruling to determine if actual expenses could be paid, instead of estimated future expenses.
BNY Mellon, trustee for the sewer warrants, said the issue of whether actual professional fees and expenses can be paid with system revenues is not properly before the court, partly because bills for expenses have not been submitted by the county.
The trustee also said the county should discuss with creditors of what bills can be paid.
In a municipal market commentary last Friday, Citi said Jefferson County’s ruling concerning the use of sewer revenues, if not overturned, could have broader implications for the market.
Citi said that many issuers sold long revenue bonds secured by dedicated revenue streams the last several years rather than general obligation debt.
“Jefferson County’s sewer warrant case proves that, thus far, this assertion was correct and will be looked as a precedent, though would not be binding, in future Chapter 9 filings, which is a mild credit positive for the whole revenue portion of the municipal market,” the Citi report said.
