* Jefferson County commission meeting to last 90 minutes
* Municipal bankruptcy would be largest in U.S. history
* Commissioner welcomes some elements of creditors' offer
By Matthew Bigg and Melinda Dickinson
BIRMINGHAM, Ala., Aug 12 Officials from
Alabama's Jefferson County met on Friday to decide whether to
file for the largest municipal bankruptcy in U.S. history over
a $3.14 billion bond debt or pursue a deal with creditors.
The county's five commissioners and its attorneys went into
executive session behind closed doors at 9 a.m. local time
(1400 GMT) to consider whether to accept a proposal by
creditors that include JPMorgan Chase & Co (JPM.N) on
restructuring and reducing the debt.
The meeting was to last around 90 minutes, said County
Commission President David Carrington.
The commissioners, two Democrats and three Republicans,
gave no clear indication as to what they would decide, but one
hinted there might be some basis for at least the outline of a
deal with creditors.
"The numbers (in the creditors' offer) may be O.K. but the
conditions are still not good," Commissioner Sandra Little
Brown told Reuters as she entered the meeting at the county
Officials have confirmed the county wants roughly $1.3
billion shaved off its debt along with an agreement that sewer
rates be raised by no more than about 10 percent annually.
"I'm not happy with the low income assistance or the rate
increases," Brown said. At a public meeting in her district
late Thursday, Brown said she was split 50/50 on whether the
county should go bankrupt.
A Chapter Nine bankruptcy filing is viewed both by Governor
Robert Bentley and local leaders as a last resort because it
would negatively affect the county's capacity to attract
investment and could blight the state's reputation for fiscal
Jefferson County includes Birmingham, the southern state's
largest city and a key driver of its economy.
Bankruptcy could also rattle the $3.7 trillion U.S.
municipal bond market since a chapter nine filing would surpass
that declared by Orange County, California, in 1994.
Central Falls, Rhode Island, also declared bankruptcy this
month but that municipality is tiny by comparison.
Commissioners said Friday's meeting was key because they
will not renew a "standstill" agreement with creditors that
started in July to facilitate talks and was set to expire.
Jefferson County ran into debt trouble in the mid-2000s
when it refinanced an upgrade to its sewer system with auction
rate bonds and bond swaps. Interest on the deals spiraled in
2008, when bond insurers downgraded the county's debt.
Some 22 people have been convicted for corruption related
to the refinancing deals and some residents argue they should
not pay now for disastrous deals done by politicians and big
financial institutions years ago.
As a result, the level of sewer rate rises is an increasing
source of contention, not just between the county and
creditors, but within the commission itself.
(Editing by Pascal Fletcher and Jeffrey Benkoe)