BRADENTON, Fla. — As a hearing continued in Birmingham, Ala., Thursday to determine what amount of sewer revenues will go to pay debt, Jefferson County said in a filing that it is pursuing avenues to set sewer rates and has hired a consultant.

The disclosure was in response to Financial Guaranty Insurance Co.'s motion on March 28, asking bankruptcy Judge Thomas Bennett to raise sewer rates and increase revenues pledged to $3.14 billion of defaulted sewer warrants because the county had not taken action on rates.

The county's filing divulges that Eric Rothstein has been hired as an expert consultant on sewer rates and related issues.

The document does not name Rothstein's firm, but a footnote said that he was "engaged by counsel in order to protect the county's privileges and work product."

In January, Bennett ruled that the special revenue pledge securing the sewer warrants remains in force, and that debt-service payments would continue during the bankruptcy case. He said debt payment would be made after necessary operating expenses are paid.

The amount available for operating expenses is being argued in court this week.

"The county and its professionals fully understand the importance of this issue and the implications of the court's statements in the January ruling," Thursday's filing said. "The fact that the matter has not formally been advanced at any commission meeting does not mean that the county has been inactive."

County employees and advisers are "working diligently on the rate issues," though the work has occurred "against the backdrop of a crescendo of litigation by the sewer creditors," the county said. "Much of this litigation has required attention from the same county professionals and employees who would otherwise be working on rate-related matters."

The filing also seized upon a revelation that came to light during this week's revenue hearing that state court-appointed receiver John Young has been retained by the sewer warrant trustee as a "factual resource regarding historical issues."

The county said that is a "profound conflict of interest."

Young was appointed receiver to run the sewer system in September 2010 when creditors filed suit in state court after the county defaulted.

Bennett ruled in January that the bankruptcy trumped Young's right to oversee the system. The county has been in charge since then.

In another case related to the Chapter 9 case, Assured Guaranty Municipal Corp. said in a filing Wednesday that its fraud case against JPMorgan in New York should go forward because it won't involve Jefferson County.

That suit claims the investment bank induced Assured to provide coverage for the county's failed sewer warrants by concealing bribes that JPMorgan paid to county officials to obtain underwriting and swap business.

JPMorgan and Jefferson County, in an unusual agreement, have objected to the case moving forward and contend that the automatic stay associated with the county's bankruptcy petition applies to the New York case.

"JPMorgan's sole purpose for seeking application of the automatic stay to the Assured action is to delay resolution of Assured's fraud claims and the day of reckoning when JPMorgan will have to answer for its years of bribing public officials and concealing those bribes from insurers like Assured and investors who purchased the county's sewer warrants on the basic assumption that no such criminal activity was occurring in connection with the issuance of those warrants," the insurer said.

"This is not the purpose of the automatic stay."

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