BRADENTON, Fla. - The firm hired last week by Jefferson County, Ala., to lobby for a federal backstop or guarantee to help restructure the county's nearly $3.2 billion of troubled sewer debt has declined to do so.

Book Hill Partners LLC said in a letter Friday to County Commission President Bettye Fine Collins that although a comprehensive strategy and action plan was being devised to help the county avert bankruptcy, "the decision by some to use the sewer debt crisis for their own ends has created a toxic political landscape around Jefferson County."

"This toxicity has already seriously undermined the county's ability to garner the political support necessary for the substantial federal assistance you need to address the debt crisis," said a letter signed by Al Rutherford on behalf of Book Hill Partners. "As a result, we feel compelled to decline the representation and are returning the proposed contracts unsigned."

Collins was expected to issue a response late Monday.

The commission initially was to consider a one-year contract with the Washington, D.C., firm at a cost of $950,000 to be paid from sewer system revenue. With the county government facing layoffs because a recent court ruling struck down an occupational tax that provides revenues for the general fund, the lobbying contract drew criticism from local residents

Last Tuesday, commissioners voted three to two to approve an amended 90-day contract for $237,500 with renewal and cancellation options. After the vote, local media questioned how Book Hill was selected to represent Jefferson County.

The continuing controversy in Jefferson County is the result of a deeply divided County Commission and disagreement in the local community over how to resolve the sewer system's financial problems, and whether to file what would be the largest-ever municipal bankruptcy.

The county has spent a year negotiating to restructure the sewer debt, most of which is in variable- and auction-rate mode, and to terminate related swaps. Political disputes upended several proposed restructuring plans last year.

When it appeared negotiations were at a stalemate, Alabama Gov. Bob Riley stepped in and the commission agreed to make him a facilitator of restructuring talks.

Last week, the county attorney's office said in a report that Riley had "negotiated concessions from certain of the county's sewer creditors worth nearly $2 billion." Those concessions are believed to include cash and insurance related to the restructured debt, as well as conceding swap termination payments.

The attorney office's report said it would be in the best interest of the county to lock in the concessions negotiated by the governor to reduce the amount of the sewer debt, and restructure the remainder into traditional fixed-rate debt.

To accomplish the restructuring, federal assistance would be necessary to obtain the lowest interest rate and keep sewer rates as low as possible, the report said, adding that employing a lobbyist made it more likely that the county would obtain federal assistance.

The county also needs assistance from the state Legislature, which begins its annual session today.

A change in state law is needed to allow Jefferson County to apply funds from a locally collected sales tax to the restructured sewer debt. Currently, the sales tax is dedicated by law to capital needs of local public schools.

There is no indication yet that legislation has been filed for lawmakers to consider. However, time is a factor: the county's current forbearance agreements delaying sewer debt and swap payments are scheduled to expire on Feb. 20.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.