BRADENTON, Fla. - Jefferson County, Ala., appears poised to overhaul a complex proposal to restructure $3.2 billion of troubled sewer debt by eliminating its request for a constitutional amendment that would require statewide voter approval.
County Commission president Bettye Fine Collins said in an exclusive interview yesterday that she believed the county could get more support for the proposed plan without requesting a constitutional amendment.
But she also said a special session of the Legislature still would be required to pass bills allowing the county to use revenues from a one-cent sales tax, now dedicated by law to education needs, and to repeal exemptions from an existing occupational tax so both taxes could be pledged to the sewer debt. She said that would eliminate the need for a statewide referendum.
Alabama Gov. Bob Riley has said he will not call a special session without solid support backing the plan.
Collins said she announced the change in plans because time is running out. The county's latest forbearance agreements with creditors stipulate dates by which milestones must be reached, or the agreements terminate and the county could default on its obligations. One such milestone stipulates that the governor call for a special session by Aug. 29.
"We're sitting here today, 18 days from the deadline, and no special session has been called for and there seems to be no support among our legislative delegation," Collins said.
A majority of the commission asked Riley to call a special session this week, but the governor has not responded, she said.
Last week, Riley reportedly told local newspapers that he did not believe taxpayers should assume 100% of the liability for resolving Jefferson's sewer debt crisis. Riley's office did not return phone calls seeking comment from The Bond Buyer.
The county initially released details of a restructuring plan with three main revenue streams - the existing one-cent sales tax, the occupational tax, and sewer revenues. That plan proposed using increases in the sales tax rate and increases in an existing property tax as backstops if the main revenue sources did not generate the proper debt service coverage.
Last Friday, during a contentious public forum, Citi's Guy Logan presented the plan in which automatic sewer rate increases could serve as a backstop instead of the property tax. The Legislature's approval would be needed to get the property tax backstop, but county commissioners could approve the automatic sewer rate increases.
"Citi continues to work on refinements to the plan that can provide the county and its citizens with the lowest-cost refinancing structure within existing constraints," Citi said in a statement this week.
Logan said the restructuring plan was designed to replace the troubled securities with fixed-rate debt and position the sewer system with the best legal and credit structure going forward.
But that plan also is troublesome to Collins, who revealed for the first time yesterday that it is dependent on refinancing some or all of the existing debt with a synthetic fixed rate.
"It called for a swap and that would put us back in the same situation we are now," Collins said, referring to out-of-synch swaps that now cover the outstanding sewer debt.
The forbearance agreements delay some payments until Nov. 17. But the agreements could terminate early and place the county in default if a special session of the Legislature is not called by Aug. 29. The agreements will terminate early if the Legislature has not taken necessary action to implement the restructuring plan by Sept. 29. Early termination also will occur if voters statewide don't approve the constitutional amendment necessary to implement the plan on Nov. 4.