Up Sh*t Creek

UPDATE:

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.

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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.

Kyle is undertaking the job of analyzing the county’s second material event notice in as many weeks and will post updates as he “translate[s] from the original Greek.”

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.

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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)!!!

12 Responses to “Up Sh*t Creek”

  1. K. Whitmire says:

    I’ve always been lukewarm on the issue of a county manager. I think it works well for smaller counties, but I’m not sure what good adding another layer of bureaucracy to Jefferson County will achieve. In fact, much of the fraud and corruption here has been perpetrated by bureaucrats — just look at Jack Swann, Harry Chandler, etc.

    The best thing that could happen to Jefferson County politics is for the County Commission president to be elected at-large. Have four districts still — two black, two white; two Democrat, two Republican; two urban, two rural and suburban. But then have everyone vote for the commission president. This would steer the county toward the political middle, and might even be a backdoor into regional government, like they have in Nashville, and Charlotte, and all the other cities our size that have been successful.

    Congressman Artur Davis proposed the idea again in recent months, but it takes someone to push the idea in the legislature to make a difference.

  2. Kathy says:

    Thanks, Kyle. Actually, Merika told me yesterday that she is planning to propose a bill that would do just what you’re suggesting re: the JeffCo Commission president, and it sounds like an excellent idea.

    Paul is looking at Shelby County and hoping to replicate its results. I don’t know if he’ll make any headway with his bill; it’s hard to tell just from a couple of conversations how entrenched the opposition is.

  3. Remember back to the Supersewer? Can you imagine what the debt would be if we had not stopped that thing? It should also be noted that Mayor LaLa wants to issue bonds to pay for all his castles in the sky; the market may not be there.

    I have to agree with KW above – these complicated bond swaps might have been presented to the commission, but it was staff like Steve Sayler who actually sold them on the concept. An awful lot of our elected officials are pretty easy to fool.

  4. Jim says:

    Folks:
    I want to know when the Commission will go after the folks that got the sewer system in such a mess. The bond swaps might not have been the result of improper actions, but there are enough red flags to warrant a civil investigation into whether LeCroy, J.P. Morgan, Langford, et. al. got their hands dirty. While Langford places much blame on Steve Sayers in his deposition to the SEC, I wonder about LeCroy and company. BTW, only the District Attorney and Commission have solid standing to bring a civil lawsuit to recover any money damages resulting from improper actions. Barber and the Commission would be wise to get the wheels of Justice moving – We can’t expect the SEC to solve our problems.
    As for the fear of bankruptcy, the sewer bonds are not general obligations of the County. Bankruptcy, therefore, should not impact the general operations of the County. ‘Course, our sewer rates will likely sky rocket if bankruptcy is filed and a receiver is appointed to ensure the sewer system generates enough profit to pay its bond debt.

  5. Bridgette says:

    If the county files for bankruptcy, it will no longer matter whether we have a county manager. In that event, a federal bankruptcy judge will be calling all the shots.

  6. Kathy says:

    Lisa, I guess we can hope this will slow Larry down just a bit – and he has only himself to blame, given the financial troubles that seem to follow him everywhere he goes.

    Jim, I haven’t heard anything about civil action. Do you think people are waiting to see what the SEC does? And is there any money left to be recovered?

    Bridgette, good point!

  7. Jennifer says:

    Thank God I live in Shelby county!!

  8. Kathy says:

    Now, Jennifer, don’t rub it in! :)

  9. Jennifer says:

    Well, but if it’s any consolation, we have that squirrel problem in Shelby!

  10. Kathy says:

    Yeah, and the mating crepe myrtle and side mirror in your neighbor’s yard. ;)

  11. Jim says:

    Kathy:
    Based on what I have read from Kyle’s summary of the Langford deposition, it looks like Charles LeCroy, Bill Blount, Al LaP; and Larry had a too close for comfort relationship. LeCroy was employed, as I understand it, by JP Morgan. JP Morgan served as Jeffco’s banker and made massive dollars from the sewer swaps, etc. LeCroy pled guilty in 2005 to a kick-back scheme involving muni bonds, so that is another big red flag. Because the statue of limitations is ticking, Jeffco would be wise to get some good lawyers and investigators working on possible claims agaisnt the above mentioned folks. I suspect Jeffco and David Barber can have its pick of any number of good lawyers more than willing to investigate the transactions at no cost.

  12. Curtis says:

    It’s as if LaLa is only smart enough to make sure he gets what he considers a satisfactory cut from all his schemes and allows people to use him and his influence to enrich themselves at taxpayer/bondholder expense. LaLa’s potential take is only limited by his hallucinations that lead to his Big Rock Candy Mountain like proposals for Birmingham/JeffCo.
    http://www.bluegrasslyrics.com/all_song.cfm-recordID=s29253.htm

    His entire political career, beginning in Fairfield, appears to have been conducted this way and it just helps feed his seemingly insatiable personal spending habits.

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