March 28, 2012 / 8:47 PM / 5 years ago

UPDATE 3-Bankrupt Alabama county to skip GO bond payments

* County halts GO payments made since bankruptcy

* County says needs cash to provide basics

* State legislator says move premature (Adds quotes saying other debt payments may be suspended)

By Verna Gates

BIRMINGHAM, Ala., March 28 (Reuters) - Alabama’s bankrupt Jefferson County will skip a $15 million general obligation bond payment due in April and will not resume the payouts while it is in bankruptcy, county commissioners unanimously agreed on W edn esday.

The county had defaulted on $3 billion of sewer system debt at the heart of its landmark municipal bankruptcy filing in November and must now protect its limited cash, skipping upcoming debt payments to provide police and basic government services, according to officials.

The five commissioners blamed the missed GO payments on state legislators, who have not restored a tax providing a critical source of revenue for the county and one that was killed by a 2011 court decision. The county has slashed staff and government services because of sharp revenue drops.

“If the money was there, we would make payments,” Commissioner Jimmie Stephens said in an interview. “We have been given only one tool to manage our finances, and that is to limit expenses. The only way we can move forward is to choose which bills to pay.”

Principal and interest payments would be skipped on Jefferson County Series 2001-B, Series 2003-A and Series 2004-A General Obligation Warrants and will not resume until a bankruptcy restructuring plan has been hammered out, according to a county news release.

The county, which cut its current year spending by $100 million and is now looking for an additional $40 million in savings, may halt other debt payments, according to Stephens.

“We might have to suspend other payments but will look at each on an individual basis,” Stephens said, adding the payment halts may sting the county for years. “We worried about our ability to borrow money when we filed for bankruptcy.”

One state senator, Republican Cam Ward of Jefferson County, said the commission had acted prematurely since the state legislature was still meeting and may yet reinstate the county’s job tax.

“We still have a month and a half to go in the session, which isn’t too long for the county to wait to get something resolved,” Ward said. “I think it is premature for the county to do that, but I agree we do need to act on something this session.”

Home to Birmingham, a business hub and Alabama’s largest city, Jefferson County filed the biggest-ever U.S. municipal bankruptcy case on November 9 after a tentative deal with creditors of its sewer system unwound.

Commission President David Carrington has said the county, which had $4.23 billion of debt in November, may emerge from bankruptcy court protection with a repayment plan in 2013 if the state legislature reinstates the jobs tax and makes other fiscal changes this year. (Additional reporting by Michael Connor in Miami; Editing by Padraic Cassidy, Dan Grebler and Bob Burgdorfer)

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