BIRMINGHAM, Ala. — The biggest civic bankruptcy in American history could leave residents of Alabama’s most populous county paying astronomical rates for public services performed by a skeleton crew of county workers. Or it could mean tightening the belt another few notches, depending on how much of Jefferson County’s $4.15 billion debt will have to be paid.
It’s even possible that, just as companies have benefited from bankruptcy, the county surrounding Birmingham will emerge stronger for it.
For now, much is uncertain following the county’s Chapter 9 filing Wednesday. The full impact on its 658,000 residents won’t be clear until after a judge approves the move at a hearing next month and local officials negotiate a plan with creditors for adjusting its debts. The outlook among some officials was grim a day after the filing, while others defended the move.
The receiver appointed to run the sewer system’s finances said he expects residents to see significantly higher sewer rates, while the lone county commissioner to vote against the bankruptcy predicted that damage to the county’s image could drive away businesses and residents, lowering its tax base. In the short term, the filing will mean legal fees further sapping the coffers of a government that was in the process of cutting hundreds of jobs and considering curtailing services.
Municipal bankruptcy filings elsewhere have also led to higher taxes, pension reductions for public workers and spending cuts on schools, roads and other infrastructure.
“We are in uncharted territory. Nobody has ever done anything like this on this level,” said Jefferson County Commissioner George Bowman, who opposed his four fellow commissioners in the vote.
Because of the past layoffs and office closings, residents already face hours-long lines for services such as renewing car tags. Bowman said the county has already cut 500 jobs through layoffs and attrition in the last six months was likely to get rid of 1,000 regardless of the bankruptcy.
Some were already beginning to worry about how the bankruptcy could affect their wallets. Lifelong Birmingham resident Charlie Bell said his monthly sewer bill recently went up to $27, and he’s fearful for what’s next.
“I’ve never quite seen it this bad, as long as I’ve been alive,” the 56-year-old said of the county’s fiscal woes.
The size of Jefferson County’s bankruptcy overshadows the one filed by record-holder Orange County, Calif., in 1994 over debts totaling $1.7 billion. Harrisburg, Pa., recently sought bankruptcy protection under similar circumstances in a federal filing that listed $458 million in creditors and claims.
