Federal Judge Thomas Bennett, who is overseeing Jefferson County’s bankruptcy case, said Monday that he may not make a decision about whether the receiver will remain in charge of the county’s sewer system until after Dec. 23.
Receiver John Young was appointed by a state court judge last year after the county defaulted on more than $3 billion of sewer warrants and failed to implement rate increases as promised to investors.
The county filed for bankruptcy on Nov. 9 with $4.23 billion of debt, including $3.14 billion of defaulted sewer warrants.
Bennett has been asked by the county to apply an automatic stay to the receiver, so that the sewer system and its finances can revert back to county control. The stay goes into effect when a bankruptcy case is filed, and prevents outside interference in a debtor’s affairs while a plan of reorganization is implemented. It also enables a debtor to stop paying bills.
Young and sewer warrant trustee Bank of New York Mellon have filed motions with the court asking that the receiver remain in place and pay debt service on the warrants while the case proceeds.
Until Bennett issues his final ruling about the receiver’s position, Young remains in charge of the sewer system.
Jefferson County’s case is believed to be the first municipal bankruptcy that was ever filed while a receiver was in place, according to legal experts.
