BRADENTON, Fla. — The Birmingham City Council Tuesday decided to spend up to $10,000 on an outside attorney to determine if litigation can prevent sewer-system rate increases proposed in a restructuring of Jefferson County’s troubled sewer debt.
The council presiding over Alabama’s largest city also urged the county to file what would be the country’s largest municipal bankruptcy to date. Birmingham is the Jefferson County seat.
About 25% of Birmingham residents are customers of the county sewer system living at or below the poverty level, and those customers, along with small businesses, cannot afford “to continue paying the spiraling, excessive, and unjust monthly sewer bills,” according to a resolution passed by the city Tuesday.
Annual sewer rate increases of 8.2% over the next three years have been proposed in a term sheet approved by the County Commission more than a month ago to restructure $3.14 billion of variable- and auction-rate sewer warrants. The deal includes concessions of $1.09 billion from creditors in return for refinancing about $2.05 billion of sewer warrants, most of which are in default.
Attorneys are still working on the detailed settlement, which county commissioners could formally approve as early as next week.
The first sewer rate increase could be implemented Dec. 1.
John Young, the state court-appointed receiver for the Jefferson sewer system, said the average sewer bill is just over $37, and the proposed rate hike would add $3 a month. He also noted that customers haven’t had a rate increase in four years, and the proposed settlement includes a low-income assistance program.
“The primary beneficiaries of the settlement and refinancing are the institutional and individual holders of the warrants, who knew or reasonably should have known, and fully appreciated the risk of non-payment to which they subjected themselves when they purchased the warrants,” the Birmingham council’s resolution said.
The resolution also urged the Jefferson County Commission, the Legislature and the governor, Robert Bentley, to reject the proposed settlement and consider bankruptcy and other unspecified measures to improve the county’s financial position.
