BRADENTON, Fla. - An analyst yesterday recommended that investors "be highly cautious in purchasing any bonds" issued by Alabama or its localities as two Jefferson County commissioners pushed once again to file what would be the largest municipal bankruptcy ever in the U.S.

Those latest developments came as Gov. Bob Riley continued to negotiate with the county's creditors over restructuring $3.2 billion of troubled sewer debt, most of which is in auction- and variable-rate mode.

The situation Jefferson County faces with its sewer system is a "cash flow and credit crisis enabled by excessive leverage, aggressive cost overruns, and non-economic sewer rates," Matt Fabian, managing director of Municipal Market Advisors, wrote in his Weekly Outlook column yesterday.

"However, the political intransigence against [Wall Street] creditors being developed and hardened by both county leaders and the governor ... himself is deeply disconcerting and more reminiscent of the state's anti-carpetbagger debt repudiations of 1876 than 2008," Fabian said. "Investors should be highly cautious in purchasing any bonds issued by the state or its localities."

Fabian is "simply wrong," Riley press secretary Tara Hutchison said in an e-mail. "A majority of the commissioners and the governor have worked for months to achieve a resolution."

Since negotiations started in mid-February, most county commissioners have blamed Wall Street for some or all of the financial crisis. Riley has reiterated that creditors must "share the pain" and less than two weeks ago he said Wall Street wasn't making needed concessions.

Creditors have not spoken publicly about negotiations, but they reportedly have agreed to give as much as $1 billion in concessions.

"Listening to what politicians say around here and blaming it squarely on Wall Street and the bond insurers, I'm not surprised that people are warning people not to invest in Alabama securities," said Andreas Rauterkus, a finance professor at the University of Alabama.

Meanwhile, county commissioners Jim Carns and Bobby Humphreys, both Republicans, yesterday approved a resolution as members of the county's Environmental Services Committee authorizing attorneys to file for bankruptcy. The resolution is expected to be voted on by the full commission on Oct. 14.

"Naysayers predict bad things for the county if it enters bankruptcy," Carns said in a statement, while admitting the bankruptcy is a step is "fraught with risk and uncertainly" and that Jefferson County likely would not sell bonds any time soon.

"On the other hand, I find it difficult to conceive how the county can hurt its reputation any more than it already has," Carns said. "And if bankruptcy works as intended, Jefferson County citizens should get answers to the question of who did what to whom, and these answers may come considerably faster than they are coming from the [Securities and Exchange Commission] and the Justice Department."

The SEC is pursuing a pay-to-play scheme in a lawsuit against former county commissioner Larry Langford, who is now mayor of Birmingham, as well as Montgomery bond dealer William Blount and his firm Blount Parrish & Co., and Albert LaPierre, a lobbyist and friend of Blount and Langford. The Justice Department recently announced that former county commissioner Mary Buckelew agreed to plead guilty to lying to the grand jury about gifts she received from an investment banker involved in the county's bond transactions.

Carns opposes current suggestions that the county supplement sewer system revenues with other funds to pay off the debt and said he hoped that a bankruptcy plan would "be fairer to all creditors and to the county than the likely result of the current negotiations."

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