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Jefferson County, Ala., Files For Bankruptcy


You're listening to ALL THINGS CONSIDERED from NPR News.

In Alabama today, the Jefferson County Commission voted to declare bankruptcy. The filing is estimated to be more than $4 billion, and it would be the largest municipal bankruptcy in U.S. history.

The county has been trying for three years to negotiate a settlement with creditors. Tanya Ott of member station WBHM joins us now from Birmingham for more. And, Tanya, I know this is complicated, but how did Jefferson County get into these troubles?

TANYA OTT, BYLINE: Well, Guy, Jefferson County is home to Birmingham, and it's the state's biggest county. More than 650,000 people live here. Now, many years ago, the county's aging sewer system needed to be replaced. The county took out some risky bonds to pay for that. There were some public corruption, which landed several county officials in prison, then, of course, it's ruined the down economy, and a budget shortfall. Even the governor of the legislature tried to intervene in recent months to broker a deal with Wall Street creditors. But the sides just couldn't agree, which led to today's decision to declare bankruptcy.

RAZ: And now, I understand that there have been months of negotiations between the county and creditors. Why did those break down?

OTT: You know, what no one knows at this point, the two sides had held marathon negotiating sessions. Even in recent days, the governor and state lawmakers had issued statements seeming to indicate a deal could be reached to avert the bankruptcy.

Now, under Alabama law, the state would have to sign off on any deal, and one of the plans would have sliced a billion dollars off what Jefferson County owed to Wall Street banks. It would have done that in exchange for higher sewer rates. Those talks broke down, though, because not all the region's lawmakers could agree on what to do.

RAZ: So what does this all mean for people living in Jefferson County and the rest of the state of Alabama?

OTT: Well, that's a really good question. At this point, no one really knows. The county already faces a massive budget shortfall because the court ruled that jobs tax was unconstitutional. That forced the county to lay off hundreds of workers, close some government offices. This is another blow to the region.

Now, late today, Alabama Governor Robert Bentley issued a statement saying that he's disappointed by the county's decision to file for bankruptcy because it would negatively hurt not only the Birmingham region but the entire state.

RAZ: Mm-hmm. So this is a done deal.

OTT: It appears that it is. The county actually follows through and filed bankruptcy, that means the county loses control of its financial affairs, and it goes straight into the hands of a federal bankruptcy judge. At that point, Guy, it's really anyone's guess how long this will take, how much it'll ultimately cost residents and how other folks around the country are going to view Alabama in light of what would be the largest municipal bankruptcy in U.S. history.

RAZ: Tanya, what about people who live in Jefferson County? I mean, you presumably are citizen of the county. What do people there saying about this? Presumably, it's embarrassing. But are people worried about what might happen?

OTT: You know, it is embarrassing, obviously. And people are concerned about what other folks across Alabama will think of Jefferson County and its residents, also what folks around the country will think of us. I think there's a little bit of fatigue, though. We've been hearing about this for, you know, three and a half years. This started back in 2008. And it seems like day in and day out, we've had newspaper articles and television reports and radio reports about sewer debt, about corruption, about bankruptcy.

This isn't the first time that we've come down to the wire on making a decision. This is actually the third or fourth time that we've come down to the wire in what we've called a bankruptcy watch here in Jefferson County. So, you know, I think for certain folks, at this point, it's a done deal. We know what's happened. And we're just going to let out a big sigh and figure it out from here.

RAZ: Tanya, thanks.

OTT: Thank you.

RAZ: That's Tanya Ott of member station WBHM reporting from Birmingham on the news that Jefferson County has declared bankruptcy, making it the largest municipal bankruptcy filing in U.S. history. Transcript provided by NPR, Copyright NPR.