Jefferson Co. bankruptcy affects the whole state
Published 9:56 pm Friday, August 7, 2009
The Jefferson County Courthouse is more than 150 miles from the Demopolis City limits, but the bankruptcy proceedings that seem imminent for the state’s most populous county could have an impact locally.
As Gov. Bob Riley ponders calling a special legislative session to address the impending crisis, State Representative A.J. McCampbell (D-Demopolis) said the ill effects of Jefferson County’s financial woes would likely be felt across the state.
“The bond agencies, the people who score municipal bond ratings, kind of look at Jefferson County as the bell-cow,” he said. “If they have, say, an ‘A’ rating, for example, and they file for bankruptcy, their rating will decrease to, say, an ‘F’ rating.
“The bond agencies will look at that, and they may make adjustments downward on surrounding counties or every county and municipality in the state. It’s hard to tell.”
Such ratings will only affect counties who intend to float a bond issue in the near future. Demopolis mayor Mike Grayson said the city has no such plans.
“Now, we do have some things that, if they pan out like we hope, we may be looking at a bond issue,” he said. “So, in that case, (a lower bond rating) could be an inconvenience.”
Grayson explained that bond ratings are similar to personal credit scores: the better the bond rating, the lower the interest rate can be extended to the municipality.
“There are grants out there that require matching funds,” Grayson said. “Let’s say, for example, the City of Demopolis was awarded a grant with a 25-percent local matching funds. If the bond rating is decreased, it may not be in the city’s best interest to take out the bond — which is basically a loan — and be saddled with a higher payment. In those cases, we may have to take that funding out of capital reserve.”
McCampbell would have to return to Montgomery, should a special session be called to address this issue. He said it was unlikely he would launch a vote on the matter.
“I will go to ensure there is a quorum of legislators,” he said. “Typically, on local issues such as this, it’s left up to the local legislators to work this out for themselves. The rest of the lawmakers facilitate the debate and make sure they understand how a local issue may intrude or impact their respective districts.”
After a judge declared months ago that an occupational tax imposed to pay off a massive sewer bond was unconstitutional, Jefferson County officials were unable to take steps to avert the layoff of more than 25 percent of the county’s workers on Monday and is teetering on the brink of filing the largest municipal bankruptcy in history, nearly $3.9 billion or an indebtedness of more than $7,000 per resident.
On Friday, Riley said he is not sure he has enough support among legislators to call a special session to quickly pass a bill to re-enact Jefferson County’s occupational tax.