Federal bankruptcy Judge Thomas Bennett on Monday continued indefinitely proceedings related to Financial Guaranty Insurance Co.’s request for sewer rate increases in Jefferson County.
In late March, FGIC filed a motion asking the judge to raise sewer rates and increase revenues pledged to $3.14 billion of defaulted sewer warrants, noting that the bankrupt Alabama county had not increased rates since before 2008.
FGIC insures $1.6 billion of outstanding sewer warrants, and backs another $19.8 million though debt-service reserve fund policies. The insurer said it currently is owed $101.4 million for sewer warrants acquired after the county defaulted on payments and $3.3 million under its reserve fund policies.
Since the bankruptcy judge removed a state court-appointed receiver and returned control of the system to the county Jan. 6, FGIC said nothing had been done by the county to address the rate increase. The county said that it has engaged the Chicago-based Galardi Rothstein Group to work on sewer rates.
A group of homeowners filed a friend-of-the-court brief Friday complaining that the Bank of New York Mellon is refusing to allow repairs to be done on a failing sewer line in their neighborhood.
BNY is the trustee for the defaulted JeffCo sewer warrants.
The homeowners said they wanted to provide the court “with their unique perspective as property owners directly affected by failing sewer lines that have been inadequately maintained and pose a threat to the health and welfare of their families.”
They also said the problem had caused raw sewage to back up into bathtubs and showers, and that the county has obtained a contractor to work on repairs.
Bennett has held a hearing in the case, in which BNY Mellon is claiming that the county is using sewer revenues for improper expenses such as attorney’s fees for its bankruptcy case.
The bank wants the judge to determine what expenses sewer revenues can be used for, and how much can be devoted to debt service. Bennett has not ruled on the matter.