JeffCo Sewer Ratepayers Object to Ch. 9 Exit Plan

BRADENTON, Fla. — Jefferson County, Ala., failed to properly inform residents and sewer system ratepayers about the plan that will enable the county to exit from bankruptcy, according to a complaint filed with the federal court in Birmingham on Friday.

The complaint - which objects to the process the county used to notify residents about the plan and the lack of financial detail — was filed by a group of sewer system ratepayers led by local resident Charles Wilson.

The ratepayers contend "that the plan of adjustment is deficient, unfeasible [and] not grounded in sufficient fact or legal bases, and [it] cannot be confirmed as proposed."

Among objections supporting the claim that the plan is deficient, the complaint said the county failed to detail its methodology for new sewer rates, explain the roles financial institutions played in past corruption "that lead to the county's current financial state," and failed to compare financial concessions being made by sewer system creditors versus illegal funds received by those involved in the sewer system financing.

The ratepayers also objected because Jefferson County failed to disclose any recent financial details, and noted that the proposed plan of adjustment only includes financial data from fiscal 2011, which ended on Sept. 30.

"There is no way of knowing whether any of the undisclosed assumptions made for the financial projections are either true, reasonable or reliable," the Wilson complaint said. "Likewise, without such information there is no way of knowing whether the financial costs associated with this plan are accurate or even reliable given the absence of financial data from Jefferson County."

The county's plan contains a notice stating that auditors were working on the 2012 audit, but there was no date for it to be released.

The Wilson group also said a recent mailing by the county concerning a Nov. 12 plan confirmation hearing was inadequate.

The group has pursued legal action the since 2008 when it filed a civil suit in local court against current and former county officials, investment banks, underwriters, bond insurers and others who were convicted of corruption in rebuilding the sewer system and financing improvements.

That suit was moved to the bankruptcy court after Jefferson County filed for Chapter 9 in November 2011.

As part of the exit plan, Jefferson County expects to refinance $2 billion of sewer system refunding warrants immediately after exiting bankruptcy in December.

County officials reportedly will head to New York later this week to meet with sewer system creditors that agreed to support the exit plan.

Most of the creditors agreed to accept a recovery rate between 65% and 80% of their investment. The lower cash recovery will go to creditors that choose to keep insurance wraps on their warrants.

Because interest rates have increased since the original plan was announced several months ago, officials will ask creditors for additional concessions. If creditors do not agree, the county will attempt to cram down higher losses without their consent, according to the Birmingham News.

Creditors voting on the plan were required to submit their ballots by Monday.

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