Jefferson County’s sewer-bond credit rating was cut to junk tonight, increasing the odds of the largest bankruptcy filing ever by a governmental body.
Standard & Poor’s, which ranks the creditworthiness of borrowers, downgraded the county’s sewer bonds to junk status, citing “uncertainty” that the county can make its debt payments.
The downgrade intensifies pressure on the county’s finances and makes it possible for some of the county’s creditors to demand payment on $341 million of investment contracts called swaps.
Yep, we’re screwed.
Jefferson County’s sewer debt is going down the tubes.
Jefferson County told creditors in a filing Thursday night that it could offer no assurances it can meet its sewer debt obligations.
In two securities disclosure documents, the county said:
Soaring interest rates mean it may not be able to make payments on $3.2 billion in sewer bonds.
It may not be able to post $184 million in collateral required when credit-rating agencies lowered the grade for its interest-rate swap agreements.
Its sewer debt service reserve fund was now underfunded because of the credit downgrade, and the county could not guarantee it could properly fund or insure it.
…On the sewer debt, the county must come up with the $184 million as collateral on its swap agreements by March 7 or find a firm willing to insure that the cash-strapped county will pay its obligations, the documents said.
If the county cannot post that collateral or obtain insurance, or if the credit rating for its overall sewer debt is lowered by one more notch, investment banks that partnered with the county could move toward terminating those swap agreements.
It’s time to find a paddle and start using it. County sewer rates have increased 329% since 1997, and they’re only going higher. (No, that’s not a typo; it’s really three hundred twenty-nine percent.) Three former Commissioners have been convicted of corruption charges stemming from the sewer debacle, and it may very well take down Birmingham Mayor (and former County Commission President) Larry Langford as well. The county’s $1 billion school construction bonds have also come under scrutiny, having been downgraded from AAA to AA by one rating agency and placed on a watch list by the other two.
I don’t know what can be done in the short term, but I talked to Rep. Paul DeMarco (R-District 46) about a long-term improvement yesterday. He has proposed a bill that would allow the Jefferson County Commission to hire a county manager without going through the county’s personnel board. I’ve been told by those who have experienced it that navigating the personnel board’s hiring process is akin to trying to run a sprint through wet clay.
Paul believes, and I concur, that the citizens of Jefferson County would benefit greatly from the addition of a non-partisan, professional manager to oversee the day-to-day operations of county departments and facilitate communication within and between departments. Rep. Merika Coleman (D-District 57) added an amendment to the bill that would require a supermajority of the commission to approve a hire, which is a positive step toward assuring a less partisan selection process (the amendment is not reflected at the link, but Merika told me yesterday that it had been accepted). Rep. Patricia Todd (D-District 54), who blogs here at the Blues, is one of the co-sponsors of the bill.
The bill is currently awaiting action by the Jefferson County Legislation committee, and it does face opposition from some members of the Jefferson County delegation. I don’t know the details of those objections, although I hear some of it is based on the bill’s bypass of the personnel board and some on its inclusion of detailed educational and experience requirements that might be better determined on the local level. If you live in Jefferson County, I encourage you to contact your Representative to discuss the bill and express your opinion.
We’re in a mess, and even if it was not of our making, we’re going to have to exercise our civic responsibility and start cleaning it up.
Note to the Legislature: If we had a decent state Constitution, you wouldn’t have to spend time crafting and passing legislation that will only affect one locality. Support the convention bills (SB243 and HB308)!!!