BRADENTON, Fla. — Jefferson County, Ala., commissioners decided Friday to take another 30 days to negotiate a settlement with creditors to restructure $3.14 billion of troubled sewer warrants.
After a public review of the creditor’s settlement offer, with board members citing many contingencies and objections, commissioners voted unanimously to reject the settlement and proceed with negotiations over the next month.
Since negotiations began in earnest more than a month ago, the court-appointed receiver over the sewer system, John Young, has acted as the go-between for the commission and creditors in negotiations.
Commission President David Carrington and Jimmie Stephens, who heads up the board’s finance committee, will now deal directly with creditors.
Commissioner Joe Knight, who is an attorney, said he hoped to resolve the crisis but bemoaned the fact that everyone except commissioners had been involved in negotiations.
He also said creditors demanded that commissioners sign confidentiality agreements that prevented them from speaking publicly about terms of the negotiations being discussed.
“We’re getting a lot of pressure to settle,” he said. “We’re going to get it done. We’re going to do the best thing for the people we represent.”
Commissioner Sandra Little Brown complained that the process, to date, had not been open to the public. She demanded “transparency” going forward.
“I want it all out in the open,” she said. “The citizens own Jefferson County. The citizens need to know.”
The board spent hours in public session going through an outline of the latest offer from creditors, point by point, citing many contingencies over which they said they had no power, such as a moral obligation pledge from Alabama in order to do $1 billion of refinanced debt that would lower interest costs by as much as 100 basis points.
Such a covenant would require legislative approval.
The outline also proposed sewer rate increases between 6.1% and 7.8% this October and again next year in April and October. After that, there would be annual increases of over 3% a year.
Commissioners found the creditors’ proposed rate hikes unreasonable, though a resolution adopted at the end of their meeting Friday said: “It appears that the proposed debt concessions reflected in the outline may result in sewer rates that might be acceptable to the commission.”
There were numerous contingencies in the latest offer, commissioners said, that were beyond their control.
And though they talked a lot about the objectionable portions of the outline, board members said they were called by Gov. Robert Bentley Friday morning ahead of the meeting.
Bentley urged commissioners to give him more time to assist in the process, which includes getting lawmakers on board to approve portions of the settlement as well as the moral obligation pledge to support the refinancing.
The creditors’ offer said the county would have to pay back $2.326 billion of the $3.14 billion of outstanding warrants, which includes a reserve of $233 million for debt service if sewer revenues are not enough to cover payments. The refinancing warrants would have maturities of 40 years and a portion of the debt would be insured.
A public benefits corporation would be created to take control of the sewer system — another element that requires lawmakers’ approval. The new corporation would be structured with the ability to file for bankruptcy but only with the governor’s consent.
A low-income assistance program of $20 million would be created to help pay for increases in sewer bill rates.
Creditors demanded mandatory sewer hookup for failed septic tanks systems and new development within certain boundaries.
Creditors offered to forfeit all remaining outstanding swap termination fees and to waive $9 million in due payments on $120 million of troubled variable-rate general obligation warrants as well as to reinstate the original amortization schedule.
