BRADENTON, Fla. - A federal judge in Alabama last week indicated he's unlikely to decide immediately about whether to appoint a receiver to oversee Jefferson County's sewer system. Also last week, several state lawmakers offered up legislation aimed at helping the troubled county refinance its massive sewer debt load.
After a one-day hearing last Thursday in Birmingham, U.S. District Judge David Proctor ordered both sides in the case to file follow-up briefs by next week. Major insurers of the county's sewer bonds, Syncora Guarantee Inc. and Financial Guaranty Insurance Co., and bondholders' trustee Bank of New York Mellon want a receiver appointed.
The insurers argued last week that the county's sewer system has been plagued by mismanagement and corruption, while a representative for the trustee testified that the county has failed to pay its obligations, according to published reports.
A flurry of activity occurred at the state capital of Montgomery late last week where bills were introduced as a result of Jefferson County's sewer crisis, which threatens to send the state's most populous county into bankruptcy.
Two senators, whose districts include Jefferson County, filed bills that would create a nonprofit state corporation, headed by the governor, the state treasurer, and the state's finance director, with the authority to refinance city or county utility debt. The bills establish different funding mechanisms that Jefferson County could use to refinance its $3.2 billion of sewer debt and deal with huge swap termination payments.
Sen. Scott Beason, R-Gardendale, filed SB 536 creating the State of Alabama County and Municipal Financing Resolution Authority to sell bonds or refund obligations of any county or city, including those of a qualified utility system.
Beason's bill would allow the bonds to be secured by operational revenues and local pledged taxes. The bill provides that any local tax that Jefferson County collects can be used to secure the bonds, including proceeds from a local one-cent sales tax that currently is dedicated to educational bonds sold by the county.
Beason in a recent interview said he feared inaction at the state level would affect the entire state in the long run. "I think the problem is that bond buyers and the financial markets will look on this as Alabama not meeting our obligations," Beason said. "They will want to know ... why there wasn't oversight of Jefferson County."
Sen. Steve French, R-Mountain Brook, filed SB 503 creating a state financing authority similar to Beason's. However, French also filed SB 532, which would divert a portion of another existing sales tax collected by Jefferson County that supports general fund operations.
SB 514, sponsored by Sen. Linda Coleman, D-Birmingham and Jefferson County, would authorize the county to levy a new one-cent sales tax to refinance its sewer debt and pay off outstanding school bonds.
Rep. Jack Williams, R-Vestavia Hills, last week filed HB 762, which would require the governor's consent before any county could file for bankruptcy.
In a related matter on Friday, a judge set Aug. 13 as the new date for the criminal trial of Birmingham Mayor Larry Langford and two others. Langford headed up the county commission when Jefferson County's troubled sewer bonds were sold.
The trial of Langford, Montgomery investment banker William Blount, and lobbyist Albert LaPierre originally was scheduled to begin May 4. The men are named in a 101-count indictment that included charges of conspiracy, bribery, fraud, money laundering, and filing false tax returns over the years in which Jefferson County refinanced its sewer-related debt.
Lawyers for the men filed a joint motion earlier this month seeking more time to prepare for trial, saying that the case was so complex that it would take several months to evaluate "hundreds of thousands of documents." The lawyers also said that they had been informed by prosecutors "of unindicted coconspirators who must be interviewed in the preparation of our defense."
