BRADENTON, Fla. – It’s been a year since Jefferson County, Ala., stopped paying debt service on its outstanding general obligation warrants, and that didn’t change Monday when the April 1 payment came due.
The county, which filed for bankruptcy in November 2011 with $4.2 billion of outstanding debt, told investors Tuesday in a market notice on EMMA that it would continue to suspend GO payments “until such debt service can be restructured under the county’s plan of adjustment under Chapter 9.”
At the time of the bankruptcy filing, Jefferson County had $46.185 million of outstanding fixed-rate 2003A GOs and $49.335 million of 2004A fixed-rate GOs insured by National Public Finance Guarantee Corp., formerly MBIA Insurance Corp.
The April 1 payments on the fixed-rate warrants were to be made by NPFG, according to a separate notice filed by the trustee, U.S. Bank N.A.
Another $105 million of 2001B variable-rate GOs are in default and held under standby warrant purchase agreements with JPMorgan and Bayerische Landesbank.
Jefferson County stopped payment on the GOs a year ago to preserve revenues in the general fund to pay for essential services. The county is also facing increased legal costs, most related to filing the country’s largest municipal bankruptcy.
The county had expected to pay about $1 million a month for fees related to the Chapter 9 case, though the county attorney said in a recent memo that fees for bankruptcy case and other legal matters could reach $25 million this year, according to a report in the Birmingham News.
The GO warrants are payable from revenues flowing into the general fund, including ad valorem, sales, and business license taxes, other revenues, and two occupational taxes that were struck down by Alabama courts as unconstitutional.
In an unaudited annual financial report last week, Jefferson County reported that some revenues supporting the general fund rose in 2012. The general sales and use tax generated $96.5 million, an increase of $5.14 million over 2011. Ad valorem tax collections were up by $937,829 for a total of $546.7 million.
However, the county still suffers from lower revenues due to the loss of a legislatively enacted job tax that generated $62.55 million in fiscal 2010, and was nearly 30% of total revenue in the general fund. The Legislature has refused to pass a bill reinstituting the tax.
Jefferson County officials have said they hope to file with the bankruptcy court in the next six months a plan that would propose how they would exit Chapter 9 through the adjustment of debt, including $3.14 billion of defaulted sewer system warrants.
