Jefferson County, Ala.’s bankruptcy case administrator must search for new members to serve on a committee representing unsecured creditors, Judge Thomas Bennett ruled last week.

Bennett disqualified two of three proposed committee members, vendors Beckman Coulter Inc. and UAB Health System.

The county argued that it had already promised to pay trade vendor bills, and has paid a significant portion owed to Beckman Coulter and UAB. The judge agreed with the county that the firms were ineligible to serve.

Bayerische Landesbank, which owns $52.9 million of defaulted variable-rate general obligation warrants along with JPMorgan, also applied to serve on the creditor’s committee. Though the county pledged its full faith and credit, the GO warrants are secured by general fund revenues.

“The county’s ability to make payments on the GO warrants and other general obligation warrants issued by the county has been impaired by the county’s unprecedented funding crisis,” attorneys for the county said.

The court filing went on to explain that the county lost revenue from an occupational tax that was struck down by the court, and that the Alabama Legislature has failed to provide a replacement.

The tax provided a significant amount of general fund revenues. Jefferson County does not have the authority to raise taxes or fees without the approval of lawmakers.

Legislators ended their 2012 session last month failing to agree on a fiscal relief measure. It was at least the second year lawmakers refused to assist Alabama’s largest county.

“The loss of occupational tax revenue has resulted in the cessation of essential services, has impaired the county’s ability to satisfy its general obligations, and has jeopardized the health, safety and welfare of the county’s citizens,” the county said.

The county also said that because of its funding crisis, it could not commit to paying fees and expenses of a committee.

Jefferson County filed the largest Chapter 9 bankruptcy in the county last November after losing the occupational tax and failing to negotiate the restructuring of $3.14 billion of sewer warrants.

County commissioners this week began a series of public hearings on sewer rates. Commissioners said they wanted to hear from the public before any rate increases are proposed. Sewer rates have not been raised in more than four years.

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