Largest municipal bankruptcy in history looms for Jefferson Co.

BIRMINGHAM, AL (WBRC) - There are 48 hours until the Jefferson County Commission's big decision on whether to file bankruptcy, settle, or wait some more. But the county is already spending money to prepare for what would be the biggest Chapter 9 bankruptcy ever.

Tuesday the commission hired bankruptcy expert Kenneth Klee's L.A.-based law firm to consult with the county and represent it if bankruptcy is filed.

The county hasn't heard any response from its creditors to a plan to settle the sewer debt out of court, so they're preparing as if they'll be going into court as early as Thursday.

All 5 commissioners left no doubt they are prepared to file Chapter 9 bankruptcy if they don't see an agreeable settlement.

"Without any meaningful progress by the creditors, I believe this commission has the wherewithall, and the fortitude to do what's necessary and to go ahead and resolve this crisis," Commissioner Jimmie Stephens said.

Part of the reason? They want to protect customers from a 25% rate increase proposed by the receiver and keep $75 million in sewer funds over which the receiver wants control. Both of those could happen Friday if there's no agreement.

"The receiver is going to put a 25% rate increase, and our constituents can't take that," Commissioner Sandra Little-Brown said. "It's a burden on them and this will save them from that, they way to do that is to file bankruptcy."
Even the threat of bankruptcy is already costing taxpayers money. The county agreed to pay Klee $50,000 as a consulting fee. The county will owe his firm $500,000 if the county actually files for chapter 9, and Klee will collect $975 an hour while his partner Lee Bogdanoff collects $875 an hour.

That's why the county pulled $2 million out of reserves to pay legal fees and expects bankruptcy to cost $1 million a month.

"We have to find the money to do it," Commission President David Carrington said. "This county deserves a resolution to this problem, we cannot let this thing go on for another 3 years. We need closure one way or the other, and once this thing ends, we're gonna have closure."

"We cannot afford an open-ended engagement of $1 million a month," Stephens said. "We can afford $1 million a month to finally close this saga of Jefferson County."

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