The Two-Way
11:45 am
Fri September 16, 2011

Alabama's Largest County Takes Big Step To Avoid Bankruptcy

The Jefferson County Commission in Alabama approved a plan today that could mean the county will avoid having to declare bankruptcy because of a $3.1 billion debt.

The Birmingham News cautions, though, that "the agreement [with creditors] is only a framework or a concept to settle the crisis, and work remains toward crafting a definitive, binding deal."

As NPR's Russell Lewis has reported:

"Jefferson County, Alabama, is home to more than 650,000 people and it's where the city of Birmingham is located. There's no easy way to explain why the county's in trouble, but it's a combination of an aging sewer system that needed its pipes replaced, public corruption, a down economy, and some risky bonds the county took out to pay for the sewer improvements."

The News has a timeline on the county's troubles posted here. It explains the outlines of the deal here. According to the News, the plan:

"Would increase sewer rates as much as 8.2 percent a year for three years and 3.25 percent a year afterward until the debt is paid off. The proposed rate increases would take effect beginning in November and occur again in November 2012 and November 2013. ...

"Would also erase more than $1 billion in debt and the county would refinance $2.05 billion, which would be used to pay off old debts, contingent on an additional $30 million in future concessions from creditors."

The Associated Press adds that "state lawmakers now must get involved, and county commissioners say bankruptcy is still possible."

If the county does declare bankruptcy, it would be the largest such action by a municipality in U.S. history.

Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.