Comments on: Bronner Presentation to Area Elected Officials

By: Paul

Paul — Tue, 19 Aug 2008 17:23:31 +0000

Here’s an investor’s perspective.
There is a huge difference between default and bankruptcy.
Orange County did not really default. It restructured terms on some short-term notes with institutions. Then it sued the dealers that got them into the mess. Orange County was able to borrow shortly thereafter, but debt had to be secured by a sales-tax pledge. (same as NY City and other muni borrowers when in crisis).
Bottom line (in my opinion)- the market will understand if bankruptcy is used by Jefferson County to fix flawed capital structure. The market expects the County to extract a significant settlement from bankers. The market, however, will not like a bankruptcy that results in default on the scale suggested by Bronner. That would cost Alabama municipalities for many, many years.

By: Kathy

Kathy — Mon, 18 Aug 2008 14:16:21 +0000

Jennifer, come on! You’re supposed to make me laugh, not hang my head in shame.

By: Jennifer

Jennifer — Mon, 18 Aug 2008 13:40:54 +0000

“The public does have a short attention span….” Filing for bankruptcy will become completely irrelevant when the next racy pictures of Britney Spears pop up! Bankruptcy Shmankruptcy!!!!!!! Is Lindsay Lohan still kissing on that girl??? Now that’s REAL NEWS!!!

By: kayman

kayman — Sun, 17 Aug 2008 18:59:46 +0000

Bankruptcy is the only answer for Jefferson County at this point because defaulting on the bonds would have a much worse outcome for the taxpayers. This is primary reason why that Jefferson County needs an administrative branch that is totally independent of politics.

By: Dystopos

Dystopos — Sat, 16 Aug 2008 15:24:41 +0000

I’m tending to agree. Filing for bankruptcy protection would be a huge disaster, but not nearly as huge or disastrous as NOT filing for bankruptcy. We don’t have any good choices, so the best one is the one that’s not as terrible.

By: Kathy

Kathy — Sat, 16 Aug 2008 01:44:46 +0000

Thanks, Lisa and Jim. I can’t get excited about bankruptcy, but it does appear to be inevitable at this point.

By: Jim

Jim — Fri, 15 Aug 2008 23:14:26 +0000

Great job!

A few points:

1.Neither the Alabama Constitution nor the Code specifically states that a County can sell something like a sewer system to a private entity. A County is granted all of the powers of a corporation, however, and a corporation can legally sell its assets to whomever it please.

The Jefferson County Commission’s current legal team does question, apparently, whether the delegation of general corporate powers to a County actually includes the power to sell County assets. While the answer seems fairly obvious, it is a point of dispute that could require resolution by a court.

If presented to a court, the Judge would likely try to discern if the legislature intended to grant a County the ability to sell its assets and would look to other portions of Alabama law for guidance. Chapter 88 and Chapter 89 of Title 11, for example, make it clear that a County may transfer, sell, or give a sewer system to either an Authority or a District. Both an Authority and a District are political subdivisions of the State, so a Court could infer that transfer of the sewer system to another political subdivision of the state, like the RSA, is within the legislative intent.

Bottom-line, it seems likely that the County can sell the sewer system.

2. Because Chapter 9 delegates the vast majority of decision-making to the debtor, Jefferson County will have a strong argument that it can nix the sale of the sewer system to any entity that it views as “bad for taxpayers.” Because of 10th amendment concerns, a Bankruptcy Judge will think twice before authorizing the sell of the sewer system to any entity over the objection of the Commission.

3. A plan can be approved by the bankruptcy court even if the majority of creditors are against the plan - so long as one creditor, of the same class as the objecting creditors, supports the confirmation of the plan.

By: Lisa in Hoover

Lisa in Hoover — Fri, 15 Aug 2008 19:15:33 +0000

Commissioner Bowman made an interesting comment after the meeting. He said that the “first team” that was working on the finance plan included a bankruptcy lawyer. He said that at the time they were threatening bankruptcy, that it was “on the table.” He said that it made no difference in the end. He then said that passing a resolution “authorizing” Chapter 9 as a way to bring people back to the table was “playing chicken with an elephant.”

I think he has an interesting point, that in reality we might have already tried the bankruptcy threat, and it was us who blinked. Bowman is still against bankruptcy, but it seems clear that only actual filing will bring results.