Alabama's Largest County May Declare Bankruptcy

Commissioners in Jefferson County, Ala., are expected to vote Thursday on whether to declare the largest municipal bankruptcy in U.S. history. The county, which is home to Birmingham — Alabama's largest city — owes more than $3 billion in debt taken out to upgrade its sewer system.

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STEVE INSKEEP, host:

Throughout our program this morning we're reporting on the debt crisis here in Washington. Around the country, at the same time, many cities and counties are struggling to pay their bills. In Alabama, the state's largest county may declare bankruptcy today. As NPR's Russell Lewis reports, it would be the largest municipal bankruptcy in American history.

RUSSELL LEWIS: Jefferson County, Alabama is home to more than 650,000 people and it's where the city of Birmingham is located. There's no easy way to explain why the county's in trouble, but it's a combination of an aging sewer system that needed its pipes replaced, public corruption, a down economy, and some risky bonds the county took out to pay for the sewer improvements. For three years the county and its creditors have tussled over paying back more than $3 billion.

Mr. DAVID CARRINGTON (Chairman, Jefferson County Commission): They want closure. That's my word right now.

LEWIS: That's Jefferson County Commission Chairman David Carrington. For years, people in this community have lived under the specter of bankruptcy and the possibility of even more double-digit sewer rate increases.

Mr. CARRINGTON: They want us to go ahead and make a decision and start moving forward. And that's what this commission is. And it's time it's time for us to have closure.

LEWIS: Orange County, California holds the previous record for a municipal bankruptcy with its more than $1 billion filing in 1994. Now the faltering economy threatens other communities, and Commissioner Sandra Little Brown says it's an opportunity for Alabama to help show the way.

Ms. SANDRA LITTLE BROWN (Commissioner, Jefferson County): Well, we want to get it right so that when other counties and other cities are met with this type of issue, they can learn from where we were, what we went through.

LEWIS: And bankruptcy isn't Jefferson County's only financial problem. The county has already fired a quarter of its workforce and slashed government services because of an unrelated court ruling that struck down an occupational tax. So regardless whether the commission decides to file for bankruptcy today, the financial outlook for Alabama's largest metropolitan area remains bleak.

Russell Lewis, NPR News, Birmingham.

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