The recent spate of ruptured water lines and sewer breaks in Broward County underscores the challenge of replacing, upgrading and ultimately financing our aging sewer infrastructure in the midst of a recession. Jefferson County, Alabama filed for protection under chapter 9 of the United States Bankruptcy Code in November. Listing $4.15 billion in debt, it is the largest municipal bankruptcy filing in U.S. History. The catalyst was its inability to address a staggering $3 billion in sewer financing obligations. The Wall Street banks on the debt are not amused. Soon after the filing they objected and are seeking dismissal of the bankruptcy. While the Northern District of Alabama Bankruptcy Court ruled Jefferson County is otherwise qualified to proceed with the reorganization, it has not decided how it will determine a key state statutory issue determining the county’s eligibility to file for bankruptcy. Lenders argue Alabama law permits bankruptcy only for “bond” debt. Jefferson County’s sewer financing issues stem technically from “warrants.” While this qualification issue remains undecided, the bankruptcy court continues to administer the case. The interpretation of Alabama state law in a municipal bankruptcy may not be of interest to Florida, but local municipalities should take heed of the same issue that brought Jefferson County to the bankruptcy courthouse steps.
Author(s): Aleida Martínez Molina
