Sewer Insolvency: Possible Alabama bankruptcy filing largest in history

BIRMINGHAM, Alabama – Jefferson, the state’s most populous county, is considering filing for bankruptcy to alleviate its $3.2 billion sewer debt. Governor Bob Riley is currently talking with creditors, AP reports. If Jefferson does file, it would “double the previous record for a municipal bankruptcy.”

According to bankruptcy expert Jack F. Williams, when a county seeks bankruptcy protection “layoffs, tax and sewer rate increases and service reductions all are possible.” The county ran into trouble when courts forced it to upgrade its sewer system — a system that did not meet federal standards and was polluting nearby water bodies.

The county borrowed money from the bond market to pay for the project. As the mortgage crisis materialized and interest rates skyrocketed, the county’s interest on the debt increased dramatically.

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Source: AP