Jefferson County (Ala.) Seeks to Avoid Bankruptcy
Oct 12, 2011
Jefferson County, Ala., mired in a financial crisis that could lead to bankruptcy proceedings, came one step closer to a resolution on Sept. 16 when the County Commission approved an agreement that included debt concessions and sewer rate hikes. Now, however, the agreement faces approval by state legislators before it can move forward.
According to a USA Today article, Wall Street agreed to forgive about $1.1 billion of Jefferson County’s $3.1 billion, with JP Morgan Chase, which arranged most of the debt, absorbing $750 million of the total. The County would refinance the remaining debt and raise sewer rates to cover costs. Additionally, a special commission would need to be created to oversee the water and sewer department. Rates would increase as much 8.2 percent for three years, which hikes of no more than 3.25 percent afterward. According to Business Week, average sewer bills would increase from $600 to $800 annually after the initial three years of rate hikes.
The agreement faces opposition from parties resistant to increasing sewer rates. Additionally, the County must resolve a $40 million shortfall in the general fund.
Troubles started in Jefferson County, which is home to Birmingham, Alabama’s largest city, as it began financing a 1996 consent decree to update its sewer system. According to a report in Water World, the County began re-financing its debt in 2002-03 with a combination of auction-rate securities, interest rate swaps and variable rate bonds that imploded in the financial crisis in 2008, leaving the County saddled with debt.
Jefferson County is hoping to avoid the largest municipal bankruptcy in U.S. history. Orange County, Calif.’s $1.7 billion in debts led to a 1994 bankruptcy that current holds the dubious distinction. Elsewhere in the country, other cities and counties are facing financial hardships. Elsewhere in the county, the City of Central Falls, R.I., recently landed in bankruptcy court, although, unlike Jefferson County, the issues were not related to sewer or water infrastructure. In that case, improperly funded pensions to retired police and firemen were cited as the primary culprit.
Private-Side Construction Rises, Public Falls
Construction employment increased in 146 out of 337 metropolitan areas between August 2010 and August 2011, declined in 145 and stayed level in 46, according to a new analysis of federal employment data released today by the Associated General Contractors of America. Association officials noted that the local employment data remains relatively split as private sector demand increased and public sector activity declined more rapidly during the past year.
“The construction market is caught between increases in private sector demand and even larger decreases in public sector construction investments,” said Ken Simonson, the association’s chief economist, noting that private sector spending on construction has grown by 5.5 percent since July 2010 while public sector demand declined by 8.8 percent during the same time period. “Construction employment continues to be stuck in a pattern where there are just as many hot spots as there are slow spots.”
Houston-Sugar Land-Baytown, Texas, added more construction jobs (10,400 jobs, 6 percent) than any other metro area during the past year while Lake County-Kenosha County, Ill.-Wis., added the highest percentage (22 percent, 2,900 jobs). Other areas adding a large number of jobs included the Chicago-Joliet-Naperville area (7,100 jobs, 5 percent); Warren-Troy-Farmington Hills, Mich. (3,800 jobs, 10 percent); Edison-New Brunswick, N.J. (3,500 jobs, 9 percent) and the Detroit -Dearborn-Livonia area (3,400 jobs, 18 percent).
The largest job losses were in the Los Angeles-Long Beach-Glendale area (-7,000 jobs, -7 percent); followed by Atlanta-Sandy Springs-Marietta, Ga. (-5,500 jobs, -6 percent); Las Vegas-Paradise, Nev. (-4,400, -10 percent); Philadelphia (-3,800 jobs, -6 percent); and New York City (-3,400 jobs, -3 percent). Redding, Calif. (-19 percent, -600 jobs) lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Wilmington, N.C. (-17 percent, -1,600 jobs); Montgomery, Ala. (-16 percent, -1,100 jobs) and Panama City-Lynn Haven-Panama City Beach, Fla. (-16 percent, -800 jobs).
Association officials said the two most important steps Washington officials could take to boost construction employment are passing long-term infrastructure bills and reconsidering many of the costly regulatory obstacles that have been put in place. They noted that even as highway and transit legislation has languished, state and local officials are being forced to spend billions of limited transportation funds on butterfly bridges and bat-safe highway lighting.
“It’s like we are trying to rebuild our economy with two hands tied behind our back,” said the association’s chief executive officer Stephen E. Sandherr. “We’re penny pinching on infrastructure even as we allow entitlement spending to spiral out of control, while we are doing a lot of things to inflate the cost and delay the completion of infrastructure projects.”