Regional News

Jefferson County, Ala., Opposes Disclosure Objections and Payment Claims

BRADENTON, Fla. – Objections to Jefferson County, Ala.’s plan to exit Chapter 9 bankruptcy will be heard by the federal court Tuesday, including a new one filed by a group of sewer system ratepayers led by Charles Wilson.

At the same time, the county has filed its own objection to claims submitted by another group of local elected officials and residents who are represented by attorney and former investment banker Calvin Grigsby.

Grigsby’s clients filed two separate proofs of claim for $1.3 billion seeking payment from the county. The claims are related to a lawsuit filed in the bankruptcy case alleging that sewer-system swaps and the variable- and auction rate-securities were issued in violation of Alabama’s constitution and related laws.

Bennett suspended action on the suit after the county said that issues relating to it would be resolved later this year when confirmation allowing it to exit bankruptcy is anticipated.

In a filing Friday, Jefferson County said the financial claims seeking payment should not be allowed because the claimants “fail to allege facts sufficient to support any claims of any kind against the county,” among other issues. One of the claims is a duplicate and should be cancelled, the county said.

The objection to Jefferson County’s disclosure statement filed by sewer system ratepayers led by Wilson will be heard during Tuesday’s hearing, along with those filed by a resident complaining about planned sewer rate increases and a joint objection filed by the city of Bessemer and the Water Works Board of the city of Birmingham.

On Monday, Jefferson County said that none of the objectors are creditors entitled to vote on the plan, and none raise valid disclosure objections.

“The fact that no legitimate creditor has objected to the disclosure statement demonstrates the merits of the county’s plan, which is not before the court at this time, and the fact that the plan embodies settlements and compromises with essentially all of the county’s main creditor groups,” the county’s attorneys said.

“It also demonstrates that the disclosure statement provides sufficient information to the creditors actually entitled to vote on the plan.”

The objections relate to the county’s refinancing of its sewer debt, though the court has acknowledged that the county’s bankruptcy case is about the sewer system and the fact that an occupational tax providing significant general fund revenue was invalided by state courts. The legislature has refused to authorize replacement revenue.

To address the loss of the occupational tax, the county cut $30 million from general fund expenses, hired a county manager, reduced the workforce, closed satellite courthouses, and closed in-patient services at the county owned hospital for the poor, the court filing said.

“County employees have shouldered the burden of discharging the full range of essential county services with decimated staffs,” said the filing. “By making these hard decisions, the county has fulfilled a basic purpose of debt adjustment under Chapter 9 by reducing expenses to match revenues.”

Jefferson County’s attorneys also said that in addition to cutting expenses to meet revenues, the county has reached binding agreements with a majority of those holding all of its long-term debt, including sewer system warrants.

“If confirmed, the plan restructures over $1 billion of non-sewer debt to stretch payments out to fit future revenues, converts risky variable rate debt into fixed rate debt, and implements other concessions that will save the county tens of millions of dollars in lower interest payments and other costs,” the court filing said. “The county now has a viable financial plan to pay these debts in full.”




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