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Alabama Country Tries to Avoid Record Municipal Bankruptcy

September 28, 2011

By: John Clark

After months of speculation and negotiation, state legislators in Alabama recentlyrejected a revenue plan aimed at keeping Alabama's largest county from filingbankruptcy.

If Jefferson County is unable to solve a $50 million annual budget shortfall, the countymay have to file for the largest municipal bankruptcy in United States history.

According to a report in the Houston Chronicle, a plan recently proposed in the AlabamaState Legislature called for a dramatic hike in sewer taxes over the next 40 years. Theplan would have eventually raised $3 billion for the insolvent county.

Legislators from Jefferson County, however, dismissed the proposed tax hikes as"inhumane" and refused to support the bill. A previous tax increase on county workers'incomes was also recently dismissed by a state court, and state legislators have nointention of reintroducing a similar measure.

This decision has left the Jefferson County Commission scrambling to find an alternativerevenue source. Reports indicate that the commission has sought a major loan from aWall Street lender, which might help the county avoid fiscal disaster.

Of course, while the county has yet to file bankruptcy, the burden of excessive debt hasforced local officials to trim vital public services. According to sources, government

workers have faced layoffs, and county residents are forced to wait in long lines at thecounty courthouse when seeking basic services.

The county's severe financial troubles were caused in part by a public scandal thatreportedly saw 21 public officials indicted on corruption charges. This incident, combinedwith the recent recession, took a heavy toll on Jefferson County's financial health.

While town members are reportedly upset that they may be forced to pay higher taxes trepair the damage left by corrupt public officials, some recognize that increased taxesmay be the only way to revive the economy of a county with almost 700,000 residents.

If the legislators are unable to agree on a comprehensive revenue package, and thecounty is unable to secure a reasonable loan from a major lender, Jefferson County mayfind itself facing the largest municipal bankruptcy filing in United States history.

For the beleaguered citizens of Jefferson County, bankruptcy may ultimately provide thesafest route away from financial ruin.

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