The bankruptcy of America continues. One question though… If you foreclose on a city…
Does everybody have to leave? Joking aside, this has to be frustrating as hell for the folks of Jefferson County.
Alabama’s Jefferson County filed for bankruptcy court protection on Wednesday in the biggest municipal bankruptcy in U.S. history.
Commissioners for the county, which is home to Birmingham, the state’s biggest city and economic powerhouse, voted 4-1 to declare bankruptcy after meeting behind closed doors for two days in a last ditch-attempt to restructure its debt out of court.
A tentative deal reached with creditors in September to settle $3.14 billion in red ink had been widely expected to avert bankruptcy. But the deal fell apart over what the commission described as creditors’ refusal to meet the terms of previously agreed economic concessions.
There was also frustration over the fact that the estimated savings from the September agreement had shrunk by about $140 million, commission sources said.
“In September 2011, the commission and receiver entered into a comprehensive term sheet setting forth a framework for the resolution of the sewer system crisis,” the commission said in a press release announcing the bankruptcy filing.
“Creditors ultimately were unwilling to make the economic concessions contemplated in the term sheet and the receiver made additional demands inconsistent with the term sheet that the commission was unwilling to accept.”
The commissioners, who are elected and not political appointees, are the final arbiters over much of the county’s business and day-to-day municipal affairs.
The bankruptcy filing by the southern U.S. county will add to concerns about the risks in the $3.7 trillion U.S. municipal bond market, which was hit recently by the high-profile debt crisis in Pennsylvania’s capital of Harrisburg.
In addition to Harrisburg, which filed for bankruptcy last month, just two other cities — Vallejo, California and tiny Central Falls, Rhode Island — have declared bankruptcy in recent years since the onset of the U.S. financial crisis.