BRADENTON, Fla. - Jefferson County, Ala., commissioners late yesterday released a one-page "Overview of Strategic Plan" about how they may deal with $3.2 billion of troubled sewer warrants, most of them variable- and auction-rate securities insured by downgraded bond insurers and covered by out-of-synch swaps.

The overview, released to the media, vaguely outlines a proposed position that county commissioners have yet to officially consider. It was prepared by Merrill Lynch & Co., which was hired by the commissioners on June 1 to serve as their "financing adviser and structuring consultant" for the restructuring of the county's outstanding sewer debt.

The proposed overview states that the county "wants to avoid bankruptcy" and "wants to repay all principal owed at a reasonable market rate." It goes on to suggest that the county may seek authority to use excess sales tax revenue to help restructure the sewer debt. It also suggests increasing sewer rates 2.85% per year, and that the county may consider using a "limited general fund subsidy of up to $10 million for sewer operating and maintenance."

Commission President Bettye Fine Collins, whose office released the strategic plan overview, declined to discuss it.

Members of the county's negotiating team were in New York this week with Merrill Lynch meeting with creditors.

Jefferson County has forbearance agreements with swap counterparties and banks, which were forced to hold $850 million of variable-rate warrants after failed remarketings. When insurers were downgraded, repayments on the variable-rate debt were accelerated. The county also had failed auctions on some of its $2.2 billion of auction-rate securities resulting in higher interest rates.

Since the turmoil began, Moody's Investors Service and Standard & Poor's have downgraded the underlying ratings on the county's sewer debt to junk status.

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