Reuters: Bankruptcy News: Alabama lawmakers added a year to Jeffco bankruptcy-lawyer

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Alabama lawmakers added a year to Jeffco bankruptcy-lawyer May 17th 2012, 18:49 By Melinda Dickinson BIRMINGHAM, Ala. | Thu May 17, 2012 2:49pm EDT BIRMINGHAM, Ala. May 17 (Reuters) - Alabama's bankrupt Jefferson County and creditors owed $4.23 billion will spend a t least an extra year battling in court, the county's lead bankruptcy lawyer said, because state lawmakers killed a bill providing the county with much needed revenue. Alabama's House lawmakers on Wednesday skipped a vote on a bill that would have restored Jefferson County's occupational tax, effectively preventing enactment of a local tax worth $60 million annually to the county for a second year in a row. The small tax on wages earned in the county had provided about a quarter of the budget for the county, Alabama's most populous, but was declared unconstitutional in 2011. The lost revenue was a driver of Jefferson County's Chapter 9 filing, the biggest municipal bankruptcy in U.S. history. "The state legislature doesn't realize the severity of its inaction," Kenneth Klee, the county's top bankruptcy lawyer, o n Thursday t old a meeting of the Jefferson County Commission. "It will add at least a year to the bankruptcy proceedings." No timetable exists for negotiating a workout plan with creditors and ending the case, filed on Nov. 9, but analysts have said the complex proceedings, involving financial giants such as JPMorgan Chase and local suppliers, could run for years. The lost jobs-tax revenues would leave the county with much less money to offer creditors and provide basic services, Klee said. The county last month defaulted on a $15 million payment owed on $205 million of outstanding general obligation warrants. "Without a stable stream of revenue, the county will have to engage in full-blown negotiations with GO warrantholders," Klee said. "Without a steady revenue stream, you cannot present a feasible plan to the court." Klee also said creditors may very well sue state legislators, arguing that their failure to reauthorize the jobs tax caused April 1 default on the GO debt. Jefferson County had been current on its GO debt, even after defaulting in 2008 on the $3 billion of sewer debt at the heart of its bankruptcy. County officials said at a meeting they can expect no relief from Alabama's state government and must brace for cuts in line with its reduced $178 million revenue forecast. The county has already laid off 800 workers and may now consider reductions in court hours, hospital care and senior services. "The only help we will get is from the people at this table: five commissioners and the county manager," Jefferson County President David Carrington said at the commission meeting in Birmingham. Hobbled by massive sewer-system debt, Jefferson County filed for bankruptcy after the unwinding of a tentative agreement with 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 jobs tax. Link this Share this Digg this Email Reprints

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