BRADENTON, Fla. - Facing the prospect of increasing sewer rates nearly 400% to pay debt service, the Jefferson County, Ala., Commission yesterday unanimously voted to suspend automatic sewer rate increases.
In a resolution, commissioners said that they would not consider taking action on rates until reports are received from a county-hired rate consultant and two special masters appointed by a federal court, which is considering if a receiver should be appointed to oversee the financially strapped sewer system.
Sewer debt service has escalated this year because most of the $3.2 billion in outstanding sewer debt is in variable- and auction-rate mode. The county has spent most of the year trying to restructure the debt and seek concessions on repayment of some debt as well as swaps.
"The bottom line is we suspended the rate increase today because that would have put us at more than 300% on the rate increase," said commissioner Shelia Smoot. "No one could do that no matter where you live in the country."
"It means rates stay as is for now, and we operate at last year's rate," she added. "For me that's a temporary fix."
Smoot said the commission must still find a way to add users to the sewer system to increase revenues and to maintain it for at least the next 25 years or more. She expects the committee that oversees the sewer system to suggest avenues to increase revenues, she said.
Last week, commissioners postponed action on a proposed resolution by commissioner Jim Carns that would have abolished the automatic rate increases, effectively abolishing the county's ability to send out sewer bills altogether. That concerned the federal judge overseeing the lawsuit seeking a receiver for the sewer system.
Smoot said the substitute resolution approved yesterday would enable the county to continue to send out sewer bills under the existing rate and maintain the flow of revenues. She also said the county's lawyers informed the federal judge about the action.
The receivership lawsuit is pending while Alabama Gov. Bob Riley continues to facilitate talks with the county's creditors to restructure the debt.
A hang-up stalling the current restructuring plan is that the county needs additional revenue to make a refinancing work. One source of additional revenue is excess funding from a locally collected one-cent sales tax that now goes toward paying off school bonds sold by the county.
Local lawmakers have balked at that idea. However, a plan is afoot to have the full Legislature consider the funding source during its regular session early next year.
Another problem with the restructuring plan is the need for a backstop or guarantee. Riley twice has attempted to get such a backstop from the Troubled Assets Relief Program, but the idea has been rejected.
Smoot said yesterday that the county plans once again to ask for relief from the federal government after President-elect Barack Obama is inaugurated on Jan. 20 and his administration is in place.
"We're not asking for cash like everyone else is asking for," said Smoot, a Democrat. "We're asking for them to back our debt. And someone ought to understand we need relief, not cash."
Smoot said the county has tried to pay its debt, at reasonable rates, and she said the county still wants to pay its debt. She also opposes the county filing for bankruptcy.