Jefferson Official Urges Bankruptcy

BRADENTON, Fla. - Jefferson County, Ala., commissioner Jim Carns said yesterday that the county should immediately file for bankruptcy to foreclose the possibility of a federal court-appointed receiver for the county's heavily indebted sewer system.

Carns, a Republican, issued a two-page statement critical of a special masters' report released Tuesday saying it "greatly disappoints me." The report recommended sewer rate increases, revenue enhancements, and other measures to deal with the sewer system's financial problems. Carns also criticized the federal court process in which the special masters were appointed and said their selection and performance has "occurred behind closed doors."

The special masters - John Young, president of American Water Services Co., and John Ames, a tax, finance, and bankruptcy attorney with Greenbaum Doll & McDonald PLLC - released a 65-page report that is part of a federal lawsuit seeking a receiver for the sewer system.

The report details why the special masters believe sewer rate increases as high as 25% are reasonable and they review the sewer system's operations, inefficiencies, and billing practices. A hearing in the case is scheduled for Feb. 25.

Carns said the special masters fail to support their recommendations with "adequate economic, legal, or public policy analysis, and the recommendations conflict with the conclusions of other respected experts."

"The implementation of these recommendations would be disastrous to low income sewer users in particular and the economy of Jefferson County in general," he said.

Among the reasons Carns said the special master's report was not credible was an allegation that Young is not an independent or unbiased special master. Carns said Young's company inquired about purchasing the county's sewer system last summer and that he believed the company was still interested.

Young declined to comment. Because he has been retained by a federal judge he is precluded from providing any comment, a spokesperson for his company said yesterday.

"The only thing I want to say is that this does not help Jefferson County," said commissioner Shelia Smoot, one of two Democrats on the board. "We are being viewed by not just the citizens of this county, but - because of this financial situation - by the world."

Smoot disputed Carns' allegations about American Water and said his statement in response to the special masters' report was purposely inaccurate, and filled with innuendo. She also claimed Carns used similar tactics recently to undermine the hiring of a Washington lobbying firm that would have helped the county obtain federal assistance necessary to restructure the sewer debt.

"Mr. Carns is thoroughly out of order and out of line," said Smoot, referring to his criticism of the federal court. "It makes me wonder if he really cares about the wellbeing of the county."

The county needs help from the Alabama Legislature to pass a bill to use a portion of a locally collected sales tax toward restructuring its $3.2 billion of sewer debt. The annual legislative session began 11 days ago, but no bills have been filed allowing the sales tax proceeds to be redirected.

"The fact that they don't have a unanimous opinion on what needs to be done could be one reason why you haven't seen legislation [filed]," said Todd Stacey, spokesman for Gov. Bob Riley, who is facilitating the negotiations with Jefferson County's creditors.

Riley, in an interview with the Birmingham News yesterday, said that the divisive nature of the county commission could prevent it from obtaining the state legislation and the federal assistance necessary.

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