Jefferson Co. faces costly climb from woes

BIRMINGHAM, Ala., Nov. 10 (UPI) -- The unprecedented municipal bankruptcy filing by Jefferson County, Ala., will lead to higher borrowing costs, one of the county's legal advisers said.

University of California Los Angeles law Professor Kenneth Klee, who is part of Jefferson County's legal team, said the county, which is seeking relief from more than $4 billion in debt, would have to face higher borrowing costs but had no other choice but to file for court protection, The Birmingham Business Journal reported Thursday.

The filing, approved by county commissioners in a 4-1 vote Wednesday, "puts a cloud of hope on the county," Klee said.

"It's a step that the county will take now to right its financial problems."

In a hearing in the case Thursday before U.S. Bankruptcy Judge Thomas Bennett, the county was seeking the dismissal of the court-appointed receiver John Young, who has been authorized to run the county's sewer system.

Young is seeking to raise sewer rates. The county's financial problems are largely related to its failure to make payments on a $3.1 billion debt tied to a sewer project, The Birmingham News said.

County commissioners voted 4-1 Wednesday to file for Chapter 9 protection after creditors and the county could not reach an agreement on the overdue debt.

It is by far the largest municipal bankruptcy filling in U.S. history. Orange County, Calif., filed for bankruptcy on $1.7 billion in debts in 1994.

On top of higher borrowing costs, the county's 2012 general fund budget is expected to show a $39.7 million shortfall, which means services will be cut.

"We're looking at all of these services that are not mandated by the constitution and, from there, we will begin the reductions and take it as far as we need to, keeping in mind the services that the citizens need," said County Commissioner Jimmie Stephens.