Jeffco commissioners prepare for crucial closed door meetings with ...

BIRMINGHAM, Alabama -- Jefferson County will meet behind closed doors Thursday with lawyers to discuss next steps to exit Chapter 9 bankruptcy by the end of this year.

Following the executive session the commission will meet in a finance committee meeting to most likely approve deals with liquidity banks, the last remaining known group of sewer creditors who hold nearly $138 million in debt.

Commissioners are hoping to meet a Sunday deadline to have a plan before Chief U.S. Bankruptcy Judge Thomas Bennett.

The liquidity agreements with The Bank of Nova Scotia; State Street Bank & Trust and Bank of New York Mellon leaves approximately $534.1 million holders of Jefferson County sewer debt that the county has not been able to identify.

Commissioners spent parts of Tuesday and Wednesday being prepped by bankruptcy lawyers on Thursday's executive session, which is expected to last most of the day.

There could be some discussion in the meeting on how bonds will be issued as part of the new deal and steps reviewed? to make sure that the underwriters are properly selected.

Already, calls are being made to county officials from people who want in on the deal.

The county's plan to emerge from bankruptcy depends on the sale of $1.9 billion of new debt this fall to refinance debt tied to the sewer system.

Earlier this month the county signed planned support agreements with JPMorgan Chase & Co.; seven hedge funds and bond insurers to end the largest government bankruptcy in U.S. history.

There is also a possibility that the county could take another look at proposed sewer rates increases as part of the deal. Commissioner Joe Knight has said some tweaking or adjusting could be made to the rates to account for rising interest rates.

Sewer rates in the settlement proposal are 7.41 percent for four years and 3.49 percent afterwards for the "foreseeable" future.

The deals come as county officials continue to defend the use of capital appreciation bonds (CABs) which they say are appropriate and can defer debt service payments to match anticipated receipt of expected revenues or taxes.Critics say the financing is a debt burden for future generations that costs ratepayers more in the long run.

California Treasurer Bill Lockyer called "capital-appreciation bonds "the equivalent of payday loans," in a Wall Street Journal report. He proposed a statewide moratorium this year.

Robert Brooks, professor of financial management at the University of Alabama, has said he was extremely concerned that "Jefferson County will be right back to where we are today when those debt payments start ballooning down the road. Would you go for a mortgage with a payment structure that looks like this? The answer is no."

Commission President David Carrington said CABs are a common financing practice and have been used by numerous issuers in Alabama including the cities of Birmingham, Mobile, Huntsville and Homewood.

The county's financial advisers continue to evaluate the mix of CABs in the financing mix, he said.

"Simply put, minimizing the use of CABs decreases the total amount of debt principal and interest payable over the 40-year term, but requires higher up-front sewer rates increases," Carrington said.

"The sewer rate increases contemplated to support this plan are not just to pay off the sewer debt . . . capital investment projections have already been embedded in the sewer rate plan for the foreseeable future," he said.

Commission Jimmie Stephens said the CAB's are no more complicated "than the principle of the time value of money. If you liken a CAB to a savings bond . . . which everyone here knows how it works. You buy a $1,000 savings bond at the bank and you give $500 for it. And then the interest accrues and appreciates over time and you get your $1,000 back at maturity. That is very similar to the way a CAB works. It is a very common occurrence and is utilized often in the capital market," Stephens said.

Source: http://blog.al.com/spotnews/2013/06/jeffco_commissioners_prepare_f.html

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