BRADENTON, Fla. — Bankrupt Jefferson County, Ala., is once again suffering from an assault by Mother Nature as tornadoes and severe storms ripped through the county, killing several people and injuring dozens this weekend and into early Monday.
Gov. Robert Bentley declared a state of emergency for all 67 counties in Alabama shortly after Jefferson County issued its own disaster declaration to begin recovery and clean-up efforts. Bentley also cancelled a scheduled briefing on last April’s devastating storms, which killed hundreds.
It was not clear at press time what damages the financially strapped county would be required to pay, or if it has the money to do so.
Commissioner Jimmie Stephens, who oversees the finance committee, did not respond to a request for comment.
Meanwhile, Jefferson County’s Chapter 9 filing came under assault Friday as numerous appeals of Judge Thomas Bennett’s recent rulings were filed.
The county, Alabama’s most populous, filed the largest-ever municipal bankruptcy on Nov. 9 after failing to reach a settlement to restructure $3.2 billion of defaulted sewer revenue warrants.
At the time, the county’s sewer system was in control of state court-appointed receiver, John Young, who oversaw the system’s finances and operations and had the ability to set rates.
On Jan. 6, Bennett denied motions by Young and other creditors seeking to have the receiver be exempt from the automatic stay that went into effect when the county’s bankruptcy petition was filed. The stay freezes lawsuits and actions by creditors and others acting on the county’s behalf.
Bennett, however, held that the special revenue pledge Jefferson made when it issued the sewer warrants remained in force, and that debt-service payments would continue to be made.
In turning the system back over to the county, Bennett said he would determine the amount available for debt payments after operating expenses in a ruling that has not yet been issued.
On Friday, the Bank of New York Mellon — trustee for the sewer warrants — filed a notice of intention to appeal most of Bennett’s rulings, including an order Nov. 28 in which Bennett ruled that he would not consider arguments based on the Rooker-Feldman Doctrine and the Johnson Act.
Rooker-Feldman prevents a federal court from undoing the judgments of a state court, while Johnson prevents a federal court from issuing a ruling that affects rates charged by a state-chartered utility.
Bennett said that the federal bankruptcy code pre-empted the state court’s appointment of a receiver, a ruling that stripped Young of nearly all power except the retention of the receiver’s title.
Along with BNY Mellon, similar appeals were filed Friday by Young, JPMorgan, Bank of America NA, Assured Guaranty Municipal Corp., Financial Guaranty Insurance Co., and a consortium of six liquidity banks: the Bank of Nova Scotia, Societe Generale, Regions Bank, BNY Mellon, State Street Bank and Trust Co. and Lloyds TSB Bank.
The appeals were sparked, in part, by Jefferson County’s plan to reduce the amount that had been set aside under the receiver for debt service payments.
A ruling still pending before the court concerns whether Jefferson County is eligibility to file for bankruptcy. The county only has warrants outstanding and Alabama law only allows local governments with funding or refunding bonds outstanding to file for Chapter 9.
While state law recognizes cities and counties can issue bonds and warrants, voters must approve the issuance of bonds, but not warrants.
Bennett has said he may ask the Alabama Supreme Court to determine if warrants are the same as bonds.
