JeffCo Sewer Improves

A federal judge in Birmingham Monday said that a portion of Jefferson County’s sewer system could be removed from the county’s 1996 consent decree for violations of the Clean Water Act.

The affected sewer basin system is in Leeds, about 16 miles east of Birmingham.

It is the fifth of nine local systems removed from the consent decree ordering Jefferson County to make repairs because of overflows into local waters.

“The management and staff of the county’s Environmental Services Department have worked diligently and effectively to remediate the sanitary system in this basin to reduce overflows and eliminate bypasses,” said a statement by County Commission President David Carrington.

The county sold more than $3 billion of warrants and refunding warrants to repair the sewer system; they are now in default.

Most of the debt was sold in variable- and auction-rate mode, with associated swaps, which crumbed in the 2008 credit crisis.

The county was unwilling to go to the bond market to restructure the debt early on, and eventually could not go to market because its ratings dropped well below investment grade.

After failing to work out a restructuring agreement with creditors, Jefferson County filed the largest Chapter 9 case in U.S. history in November, with more than $4 billion of debt outstanding.

The judge overseeing the bankruptcy is expected to rule soon on how much sewer system revenue can be used for operations and how much will go to pay debt service.

The sewer system has suffered from widespread public corruption and more than a dozen contractors, commissioners and people involved with the financings have gone to prison.

JPMorgan, the county’s largest creditor, paid $75 million to the Securities and Exchange Commission to settle violations of securities laws, though the firm did not admit or deny guilt.

Eventually, all the funds paid by the investment bank went to the county.

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