BIRMINGHAM, Ala. - Jefferson County, Ala., negotiators resumed talks with Wall Street creditors yesterday, County Commission President Bettye Fine Collins said in a press conference here.
Those talks include extension of the county's forbearance agreements, which have delayed accelerated and swap payments on $3.2 billion of outstanding sewer debt, most of which is in troubled auction- and variable-rate securities. The current agreements expire Thursday.
Collins, in her press conference following commission committee meetings yesterday, focused on difficulties now posed by a proposal unveiled last week by the state's pension fund director, David Bronner.
Bronner, chief executive officer of Retirement Systems of Alabama, laid out a proposal in the Birmingham News last week while the commission's negotiators were in New York presenting a proposal to deal with the sewer debt crisis that does not involve any bankruptcy filing.
Under Bronner's proposal, the pension plan would consider offering as much as $2 billion for the sewer system but only if the county places it in bankruptcy.
Collins complained that the commission had not seen a formal proposal from Bronner, only a statement in a newspaper. She said there are many unanswered questions, including whether Bronner would resell the system and what would happen to the people who work for the sewer system.
"Dr. Bronner needs to fully flesh out his proposal," Collins said. "We've been talking about this since February, where has Dr. Bronner been with his plan?"
Collins, who rejected Bronner's proposal on Friday along with two other of the county's five commissioners, said the issues are complex. She also indicated the public doesn't understand the implications about what Jefferson County would face if it placed the sewer system in bankruptcy.
A buy-side analyst said there could be a "permanent taint on Jefferson County, Birmingham, and the state" from a bankruptcy filing. "Investors will forever question the willingness of these entities to make good on their obligations," he said.
When water and sewer, and other types of bonds are sold, there is an implicit understanding that rates and charges will be increased, if necessary, to make payments on the debt, the analyst added.
"We have some responsibility to the bondholders," Collins said yesterday. "I get email from people who bought bonds for their children's future."
Collins said she would suggest that the pension fund proposal, and all others under consideration, be vetted in a public hearing. No date has been set.
She also admitted that the commission should have been holding public hearings all along. "That was a mistake," she said.
Jefferson County Commissioner George Bowman was in New York for three days last week with the county's new negotiating team discussing a new restructuring plan when news of Bronner's proposal broke.
"The very idea that as a director of a state agency he would propose a municipality of the state go bankrupt so that his agency could acquire the assets of the county at fire sale prices is highly irresponsible," Bowman told The Bond Buyer in an interview Friday.
Bowman said Jefferson County is dedicated and committed to paying its debt in full.
"Jefferson County will not declare bankruptcy nor will we default on our loans," Bowman said.