BRADENTON, Fla. — The Jefferson County, Ala., Commission has rejected the lease for the Bessemer courthouse and jail that secure $82.5 million of outstanding 2006 revenue warrants.
A payment default could occur on Oct. 1.
The commission voted to end the lease on Monday, though the issue was not on the regular agenda for the meeting, which had been continued from last week.
“The vote was final and the lease is rejected,” said commissioner Jimmie Stephens, chairman of the board’s finance committee. Stephens voted against rejecting the lease because it could mean that the courthouse will close as the county continues to look for budget cuts.
Jefferson County filed the largest municipal bankruptcy in the country last November, with $4.2 billion of outstanding debt that included the lease revenue warrants.
The special limited obligations were issued by the Jefferson County Public Building Authority in 2006 to finance the cost of purchasing land and building a new courthouse and jail in the city of Bessemer. The authority leased the facilities to the county, which agreed to pay rent to service the debt.
The bankrupt county already defaulted on the warrants when it failed to forward $6.2 million for the lease payment in March.
The county obtained emergency permission from the federal judge overseeing its Chapter 9 case to allow reserve funds to be used for the warrant payment due April 2.
At the time, the reserve fund contained about $8 million, and the county said using reserves for the debt-service payment would avoid making a demand from the insurer, Ambac Assurance Corp.
Ambac Assurance reportedly has continued to fulfill its insurance obligations, though its parent company, Ambac Financial Group Inc., filed for Chapter 11 bankruptcy in November 2010.
It is not clear if the county intends to close the courthouse or jail in Bessemer, though it has raised questions about the provision of public services.
The move to reject the Bessemer lease came less than a week after commissioners faced a firestorm of criticism for plans to end inpatient care at Cooper Green Mercy Hospital, the county’s indigent-care hospital. They ultimately postponed making that decision.
The Bessemer lease of the courthouse and jail is subject to annual renewal coinciding with the county’s fiscal year, which ends Sept. 30, according to bond documents. The county asked for the judge to extend the time it has to assume or reject leases though Sept. 27.
