News Archive
Alabama sewage job drags county down the drain
Released on 25/08/2008
The largest county in Alabama is headed for the biggest municipal bankruptcy in US history, a US$3.2 billion mess caused by a corruption-riddled sewer construction project and the credit crunch.
Jefferson County, which has 658,000 residents and includes the state’s biggest city, Birmingham, got into trouble after the courts ordered a huge upgrade of its sewage system to meet federal water standards and stop raw waste being dumped into streams, the St Louis Post-Dispatch reported.
The county borrowed money on the bond market and when the mortgage crisis hit, the interest rates on the debt rocketed. The nearly completed sewer project, under construction since 1996, is now US$3.2 billion in debt.
To make matters worse, the financial crisis has come amid a federal bribery-and-kickback scandal involving contracts awarded on the project, says the St Louis Post-Dispatch. Twenty-one people have been convicted in the still-unfolding case, including contractors, engineers and two former county commissioners. Federal investigators say politicians are suspected of steering investment business on the project to friends for kickbacks.
Because of the project’s costs, water rates have gone up 329 per cent since 1997, with the average customer now paying about $65 a month, leaving taxpayers angry and distrustful.
“I’m just really disgusted with the incompetency of these officials,” Frank Denney, an engineering consultant, told the St Louis Post-Dispatch.
A bankruptcy filing by Jefferson County would shatter the previous record of US$1.7 billion, set by Orange County, California, in 1994. A Chapter 9 bankruptcy filing would put interest payments and lawsuits against the county on hold, giving it time to put its finances in order and negotiate more favourable terms with its creditors.
“The entire nation is watching to see how we handle this,” said Jeff Sewell, an assistant county attorney. “This is a question of character as well as one of finance.”
But it could also damage the county’s credit rating making it more expensive to borrow money and more difficult to finance the infrastructure improvements that can draw industries to Birmingham, a banking and medical-research centre.
