BRADENTON, Fla. - Jefferson County, Ala.’s bankruptcy judge is being asked to reconsider his decision to postpone action in a case brought by ratepayers who say they will be unfairly impacted by the county’s settlement with major sewer system creditors.
The ratepayers, represented by attorney Calvin Grigsby, are challenging whether $1.6 billion of the county’s $3.1 billion in outstanding sewer warrants were issued legally.
In court documents filed Tuesday, Grigsby said a recently announced settlement with a majority of creditors “does not reasonably consider” the financial status of sewer system ratepayers and taxpayers, a “significant” number of whom they believe live in households under the poverty level.
“It is unconscionable that county ratepayers and taxpayers have reportedly been charged with approximately $70-80 million in legal and professional fees in this dispute and none of this money they are paying has helped plaintiffs avoid overcharges from bribery and fraud,” Grigsby said.
The sewer system rate increases to support refinancing $1.835 billion of sewer warrants later this year would be on top of an average 5.8% rate increase the county adopted late last year, the filing said. Imposing the stay prevents the plaintiffs from objecting to the plan or rate increases.
The proposed settlement calls for refinancing the warrants using “a grossly distorted back-end loaded debt service structure that imposes steep sewer rate increases over a 40 year period,” said Grigsby, adding that the increases would be imposed “without any input from representatives of the ratepayers who are looking at one-third of their income going for sewer fees before this is all over.”
Judge Thomas Bennett issued a stay postponing the case after Jefferson County announced that it would file a plan detailing a path toward resolving claims and exiting the country’s largest municipal bankruptcy.
On June 4, the county announced it reached agreements with JPMorgan, bond insurers, and seven hedge funds holding $2.4 billion, or 78%, of the county’s outstanding sewer debt.
The deal requires the county to refinance $1.835 billion of sewer debt, and raise sewer rates 7.41% a year for the first four years with smaller annual increases after that.
The county has said it will file a plan of adjustment and disclosure statement by July 1.
