JeffCo: We Did It Again

Jefferson County, Ala., filed a brief notice with the bond market on Tuesday stating that it once again defaulted on its sewer warrants. The county said warrants were purchased by banks that entered into standby warrant purchase agreements.

“Under the terms of the standby warrant purchase agreements, $46,046,250 in aggregate principal amount of warrants was due for accelerated redemption on July 1, 2011,” the notice said, adding that the county failed to pay the redemption price of the warrants.

The county has $3.14 billion of outstanding sewer warrants mostly in failed variable- and auction-rate mode. The warrants began soaring to penalty interest rates several years ago upon the collapse of the auction-rate securities market, then additional penalties and accelerated payments were levied when bond insurers lost their required credit ratings.

The county is continuing to negotiate with creditors to refinance or restructure the debt, though commissioners are meeting with several muni bankruptcy experts this week. A special meeting is scheduled for Thursday so commissioners can meet in private to discuss legal strategy.

Last year, an Alabama judge appointed a receiver for the sewer system at the request of Bank of New York Mellon, the trustee. The judge still oversees the case and approves expenses of the receiver, John Young, who now heads the county’s environmental services department.

Young recently proposed double-digit rate increases and other measures as part of a plan to pay the system’s debts. His proposal resulted in a public outcry and prompted several people to seek to intervene in the receivership court case.

State Rep. Paul DeMarco, R-Homewood, last week told the Birmingham News that he requested that the Alabama Department of Examiners of Public Accounts review spending by the receiver.

DeMarco reportedly asked for a breakdown of expenditures and documentation for contracts and requests for proposals sought by the receiver. “There has to be some accountability in place,” he told the paper. “Citizens hold elected officials accountable. We need to make sure that there is transparency and the public has complete knowledge of how every dollar is being spent to manage the affairs of the environmental services department.”

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