Jefferson County Commissioners voted Friday 4-1 to reach for a settlement with Wall Street creditors. The move aims to try and avoid filing Chapter 9 bankruptcy, which is still a viable option if they cannot work out the details of the agreement with many working parts.
It would reduce the sewer debt by a billion dollars to about $2.05-billion. They would refinance that debt to a 40 year agreement to be managed by a new government agency called a “governmental utility service corporation.” That agency will manage refinancing the debt and operating the sewer system.
The legislature would need to create such an entity.
Sewer customers will shoulder the majority of the settlement. For the first three years, their sewer rates will jump each November by 8.2%. In subsequent years, the rates will rise no more than 3.25% until the debt is paid.
For a customer currently paying a $100 sewer bill those rate hikes will look something like this:
Date Rate Annual Increase
Nov 2011 $108.20 8.2% $8.20
Nov 2012 $117.07 8.2% $8.87
Nov 2013 $126.66 8.2% $9.60
Nov 2014 $130.77 3.25% $4.11
Nov 2015 $135.02 3.25% $4.25
Nov 2021 $163.66 3.35% $5.15
The terms of the agreement also stipulate the county will not try to collect payments from people not connected to the sewer system. And a special fund will be created to help those who cannot afford the ever increasing sewer rates.
“My main consideration is the impact on the ratepayers that I represent,” said Commissioner George Bowman before the vote. “And the impact of the ratepayers that I represent is that their rates will go up this year, next year, again the following year, and then again for perhaps another 30-or 40 years.”
Bowman cast the lone “No” vote.
The proposed agreement also calls on creditor banks to end any future interest rate swaps agreed upon in the past.
“There is no bright line delineating which path we should take because both paths are shrouded in grey,” Commissioner Joe Knight told the commission. He warned there will be plenty of who will second guess the decision.
Attorney General Luther Strange, who had promised to represent ratepayers during this crisis, issued a statement Friday praising the plan.
“I commend the Jefferson County Commission for its leadership and hard work for the people of the county,” Strange said in a statement release just minutes after the vote. “The job of the Attorney General’s Office is to represent the sewer system ratepayers, and we will diligently review the rate structure contained in the proposed settlement to ensure that rates are just and reasonable.”
Commission President David Carrington says the county is relying on the Governor and the state lawmakers to deliver on promises. He says Jefferson County will need about $40-to-$50-million to avoid bankruptcy. The settlement includes terms the Governor will call a special session of the legislature to help the county navigate the sewer debt and general fund crisis.
“I can support this resolution because the term sheet states that the foregoing approval is subject to the continued condition that no sewer rate increase shall be implemented prior to the Governor’s call of the special session of the Alabama Legislature to address the counties legislative needs,” Commissioner Sandra Little Brown told the chamber.
The Governor issued a statement after the vote commending the commissioners saying “I look forward to continuing to work with county commissioners and legislators in preparation for a special session of the Alabama Legislature so that we can pass laws necessary to move forward with the settlement and to address the county’s general fund budget issues.”
Brown also pointed out “I support it also because we as a commission still have the opportunity, should that fail and nothing happen, we can immediately file bankruptcy. And that’s out last option.”