BIRMINGHAM, Ala.?? Leaders of Alabama's most populous county on Wednesday voted to declare an estimated $4.1 billion bankruptcy, the largest for a municipality in U.S. history.
The Birmingham News reported the Jefferson County Commission's action came after spending about six hours over two days meeting with its lawyers to discuss legal options. Those options included a Chapter 9 bankruptcy filing and a settlement with creditors on the county's $3.14 billion sewer debt.
Jefferson County has been trying since 2008 to avoid filing bankruptcy over the debt, which resulted from a mix of outdated sewer pipes, the lagging economy, court rulings and public corruption. At the same time, it faces a separate shortfall of as much as $50 million in its operating budget because courts struck down a major local tax as unconstitutional.
Commissioner Jimmie Stephens made the motion to file bankruptcy, saying it's time to resolve the issue.
The vote comes just two months after a preliminary deal was struck with Wall Street bankers that would have allowed the county to avoid the embarrassment of filing the largest municipal bankruptcy in the U.S. However, despite the deal providing a hopeful sign, there was still a possibility that bankruptcy would be necessary.
The deal was to have required state lawmakers to approve a mix of local tax hikes, budget changes and other legislation to resolve the billions in debt.
Jefferson County has about 658,000 residents and is home to both Alabama's largest city, Birmingham, and its medical and financial centers.
The settlement proposal with Wall Street investors led by JPMorgan Chase & Co included the lenders agreeing to forgive about $1 billion in debt, the county refinancing about $2 billion, and the a series of sewer rate increases.
If Jefferson County follows through in filing for bankruptcy, it would overshadow the one filed by record-holder Orange County, Calif., in 1994 over debts totaling $1.7 billion.
Pennsylvania's capital city of Harrisburg recently sought bankruptcy protection under similar circumstances as it struggled with about $300 million in debt from a trash incinerator that began operating in 1972.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Source: http://www.msnbc.msn.com/id/45230948/ns/business-us_business/
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