BRADENTON, Fla. — Commissioners in Jefferson County, Ala., are preparing a counteroffer to be submitted to creditors holding $3.14 billion of defaulted variable- and auction-rate sewer warrants.
A final decision on whether to accept a settlement is expected Aug 12.
Commission President David Carrington announced those details while reading from a prepared statement after the board met Thursday for more than four hours in private with bankruptcy and county attorneys, as well as Alabama state finance director David Perry.
“The commission has reviewed the creditor’s offer in exhaustive detail, point by point,” Carrington said. “We are working on a counteroffer to their proposal.”
“[Gov. Robert Bentley] has requested the commission enter into another standstill [agreement] to get additional concessions from the creditors,” Carrington said without providing any details.
The standstill agreement means that for another week no action will be taken by the county to file for bankruptcy and the receiver for the county’s sewer system will not proceed with implementing a plan announced recently that included raising sewer rates by 25% annually over several years to pay down the sewer debt.
In mid-July, the county submitted a settlement proposal that asked creditors to take a $1.3 billion haircut while agreeing to sewer rate increases of 7.8% annually for three years then 3% hikes each year.
Last week, creditors submitted a counteroffer agreeing to forgive $1 billion of the debt while seeking 8% rate increases each year for five years. Those details were released by county commissioners, not creditors, which are mostly banks that have never spoken publicly about their requirements for restructuring the debt.
Carrington said no details about the county’s new settlement offer would be divulged going forward.
“Please understand that negotiations are extremely fragile and confidential and the commissioners are not at liberty to discuss or disclose any details,” said Carrington, who was the only commissioner to speak after Thursday’s lengthy meeting. He announced that the board would meet again in closed-door session at 9 a.m. Aug. 12 in Birmingham, the county seat.
Carrington read a lengthy notice about the meeting topics, which cover a wide range of actions the board could potentially take and their legal ramifications.
Commissioners will consider approving a term sheet outlining a settlement with creditors as well as a timetable for its implementation and a forbearance agreement that would halt penalties associated with the variable- and auction-rate sewer warrants, according to the meeting notice.
Commissioners could also decide to file the largest municipal bankruptcy in U.S. history.
“In other words, a decision will be made” on Aug. 12, Carrington said, indicating that it is likely the board will end negotiations at that time.
There was no public discussion Thursday of efforts to get local lawmakers on board to approve portions of a settlement requiring their attention.
It will take legislative action to create a public benefits corporation to take over the sewer system and issue refinancing debt, which reportedly is an element of settlement proposals made by both the county and its creditors.
No details have been released about how the county will deal with a financial crisis created by the loss of an occupational tax that was struck down by Alabama courts earlier this year because state lawmakers improperly enacted it.
The tax provided a significant source of revenue for the county’s general fund but lawmakers refused to provide a replacement tax or other financial relief during their regular session this year.
With revenues dwindling, the County Commission placed 500 workers on leave in mid-June.
Commissioners have said that they wanted the sewer warrant problem and the general fund crisis solved at the same time but never explained how that would occur.
Separately, the 11th Circuit Court of Appeals in Atlanta Friday affirmed the conviction of Larry Langford, former president of the Jefferson County Commission.
Langford sought to overturn his 2009 conviction on 60 counts of bribery, money laundering, mail and wire fraud, conspiracy, and filing a false tax return. He is in prison serving a 15-year sentence.
Most of the charges are related to the county’s troubled sewer warrants that have been the subject of restructuring negotiations with creditors for more than three years.
