BIRMINGHAM, Ala. - Jefferson County as of yesterday afternoon was still seeking a new forbearance agreement with creditors as it continued to struggle to put together a sewer debt restructuring plan acceptable to all parties.
Failure to obtain a new forbearance agreement would set the stage for the county to default on about $100 million in payments otherwise due today to banks holding the county's variable-rate sewer warrants.
With the county's existing forbearance agreement due to expire yesterday, County Commission President Bettye Fine Collins early in the day said the county did not have the money to make the payment. She said negotiation with creditors continued.
"Attorneys are working on this," she said.
Jefferson County has slipped into a financial crisis because most of its $3.25 billion in sewer debt is in troubled variable- and auction-rate securities. The county has been working on a solution since February and finding an acceptable plan now hinges on decisions from a fractured county commission, Alabama lawmakers, and voters statewide.
Two commissioners did not appear at a special commission meeting yesterday that was originally called to pass a resolution asking Gov. Bob Riley to call a special session of the Legislature to deal with the county's financial crisis. The three commissioners who showed up at the special meeting - Collins, George Bowman, and Bobby Humphryes - delayed action on the resolution seeking a special legislative session until their regular meeting on Tuesday. Commissioners Jim Carns and Shelia Smoot did not attend yesterday's meeting.
The commission for the first time publicly revealed the basic strategy the county expects to pursue to restructure the county's troubled sewer debt. The restructuring plan has morphed by the hour as parties involved in negotiations have objected to various proposals.
The restructuring plan is ultimately designed to replace the troubled variable- and auction-rate securities with fixed-rate debt and position the sewer system with the best legal and credit structure going forward, said Guy Logan, a director with Citi, one of the county's three underwriters.
The latest plan relies on three revenue streams and is structured to obtain investment grade ratings. It would retire the bulk of the existing sewer debt, Logan said.
First, the plan would refund outstanding school warrants and use its one-cent sales tax to retire approximately $663 million of outstanding sewer warrants.
Second, an existing occupational tax would need legislative approval to repeal exemptions for professionals such as doctors, lawyers, architects, and accountants. The resulting uniform occupational tax would bring in enough revenue to refund approximately $719 million of sewer warrants.
Third, sewer system revenues and an existing sewer system property tax levy of 0.7 mils would be used to refund $1.87 billion of sewer warrants.
The plan unveiled yesterday eliminates a previously proposed increase in the sewer system property tax to 3.3 mils that was opposed by several commissioners and many local residents.
"It's still a long shot that it will pass," Humphryes said after the special meeting. "I am willing to look at it."
Collins said the plan would resolve the financial crisis and satisfy creditors.
Because Alabama does not give counties home rule powers, the restructuring plan must be approved by the Legislature and portions must be approved in a statewide referendum amending the state's constitution.
The hard part may be convincing the governor to call a special session of the Legislature, Bowman said yesterday. He believes the easy part will be convincing Alabama voters statewide how they will benefit from the restructuring plan.