Citizens of Alabama county demand action over debt

BIRMINGHAM, Alabama (Reuters) - Alabama should use a sales tax for schools in troubled Jefferson County to start paying off the county's massive debt, local business leaders said on Tuesday.

The intervention of the leaders represents a rare organized response by citizens of Jefferson County, which includes the state's largest city Birmingham, to a multibillion-dollar debt crisis that has dragged on for nearly two years.

Jefferson County accumulated its debt earlier this decade as it refinanced an upgrade to its sewer system. If the county goes bankrupt it will represent the largest municipal bankruptcy in U.S. history.

Under Alabama law, the one-cent sales tax can only be used to upgrade Jefferson County's schools. But the business leaders said state legislators should revive attempts, which failed last year, to change its designation.

"We need a money solution and this is the only money on the table that does not involve raising taxes or rates," said former county commissioner George Bowman, who supports raising the issue at January's legislative session.

The tax has "over-performed" since its inception four years ago, generating up to $27 million in revenue for the county, according to Slade Blackwell of Inkana, a real estate development firm.

"This situation (the debt) blew up because of politics. It is time for the community to step up and take a bold action," Blackwell told a group of business leaders.

The appeal by business people follows the fraud conviction of former Birmingham mayor Larry Langford last month related to his time as president of Jefferson County's commission when it was raising funds for the sewer system.

Business leaders said the prolonged debt crisis was hurting the state's economy.

"It impacts our ability to go to the bond market and raise money for projects," said Bill Morton of Robins & Morton Construction, one of the nation's leading healthcare construction firms.

"This is having an impact on development. A resolution is critical," added Alex Krumdieck, an architect.

The county should also establish an independent sewer board to oversee operations and aim to generate up to $20 million in efficiency savings, according to Blackwell.

It should also speed up talks on restructuring the debt and promoting transparency and accountability.

(Writing by Matthew Bigg, editing by Jim Loney and Andrew Hay)