Reuters: Bankruptcy News: Alabama lawmakers spurn jobs tax for bankrupt county

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Alabama lawmakers spurn jobs tax for bankrupt county May 17th 2012, 00:53 Wed May 16, 2012 8:53pm EDT * Job tax is key to pay creditor back * More staff cuts, default seen if not approved * Special session could reconsider it By Melinda Dickinson May 16(Reuters) - Alabama state lawmakers on Wednesday spurned a bid by bankrupt Jefferson County to restore a local jobs tax that county leaders say is needed to pay Wall Street banks that are owed $4.23 billion. The jobs tax is estimated to bring about $60 million in yearly revenue to Alabama's most populous county, which in 2011 filed the largest U.S. municipal bankruptcy case. Without the revenue, Jefferson County officials may have to cut more government staff and default on a $10 million general-obligation warrant payment due Oct. 1. The bill, already passed by the State Senate and a House committee was "taken off the special order calendar today, which effectively kills it for this session," Jefferson County Manager Tony Petelos said on the last working day of the legislature's regular annual session. For a second year in a row, the legislature has failed to reinstate the jobs tax, a small tax on the salary of workers in the county. A court struck down the tax as unconstitutional in 2011. Alabama Governor Robert Bentley has said he would possibly consider a jobs-tax bill at a special legislative session as early as next week but only if Jefferson County's split delegation of state legislators agrees on the proposal. A spokeswoman for Bentley was not available to comment. Petelos, who has said he would recommend the county skip a $10 million general-obligation payment due Oct. 1 if a new jobs tax was not in place, said on Wednesday that he hoped the legislature may act on a jobs bill in the special session. "Whatever happens is in the hands of the legislature in Montgomery, but we hope that, sometime over the summer, something will be done," Petelos said. NO WORKOUT PLAN WITHOUT JOB TAX Jefferson County already missed a $15 million payment due on April 1, with officials saying the cash-strapped county needed to conserve money to sustain basic government services. The county defaulted in 2008 on the sewer debt at the heart of its bankruptcy but had been current on its fixed-rate general-obligation warrants until last month. Jefferson County has already cut about 800 jobs and faces a revenue gap of $40 million that may require cuts at a Birmingham hospital and other pullbacks in services. Hobbled by massive sewer-system debt of about $3 billion, Jefferson County filed for bankruptcy after the unwinding of a tentative agreement with JPMorgan Chase and other creditors that might have cut the county's debt load by $1 billion. County finances had been also been damaged by political corruption and the loss of the occupational tax. The county, whose Chapter 9 bankruptcy filing won a federal judge's permission to proceed on March 5, can now develop a plan to restructure the sewer debt. But a plan must include details on paying back creditors and has to be approved by a bankruptcy court judge. And the jobs tax is central to developing a workout plan, according to county officials. Link this Share this Digg this Email Reprints

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