Finance Professor Larry Harper from Samford University’s Brock School of Business said Monday that bankruptcy for Jefferson County in connection with its 3 billion dollar sewer debt is not the county’s most desirable option for resolving its loan payments.
The county can’t afford its current sewer debt bills and has extended a deadline for a one hundred million dollar payment multiple times since February.
A majority of Jefferson County Commissioners currently support a plan that uses the expansion of sales and occupational taxes along with regular sewer payment collections restructure and payoff its debt requirements.
The plan also requires a vote of the state legislature, but Governor Bob Riley says he won’t call a special session of the legislature to consider the measure, because the commission is split on the plan.
With no special session, the county only alternative to resolve its debt is bankruptcy.
“Certainly corporations, counties normally are seen by investors as turning a new leaf, and the troubles of the county are not going to be repeated, because hopefully the county has learned a lesson,” Harper said in explaining how bankruptcy could offer the county a clean slate after being unable to payoff its sewer debts.
But Harper says bankruptcy may not be the county’s best option, because a judge would ultimately rule on how much money the county would have to pay back to creditors and would also decide on whether higher taxes or sewer fees could be used to generate the money for those payouts.
“One of the concerns of bankruptcy is that we might have a judicially mandated tax increase. Bankruptcy doesn't relieve the tax payers of their obligations, and the tax payers’ obligation will be controlled by the judge rather than commissioners themselves,” Harper said.
But bankruptcy is becoming increasingly likely, especially if the debt refinancing plan expected to be passed by a spilt commission vote Tuesday is stalled in the state legislature.
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