By Verna Gates
BIRMINGHAM, Ala., Sept 13 (Reuters) - A federal judge on
Thursday turned aside a request by Wall Street creditors to set
a deadline for Alabama's Jefferson County to develop a workout
plan in America's biggest municipal bankruptcy.
Arguing that the county, which filed its $4.23 billion case
last November, was proceeding too slowly, some creditors in July
asked U.S. Bankruptcy Judge Thomas Bennett to set a deadline for
hammering out an exit plan.
Lawyers for the county, which has exclusive rights to
propose an adjustment plan that must win Bennett's approval,
said Jefferson County's finances were deeply tangled and
required more time to sort out.
"I still think it's premature," Bennett said during a short
hearing in Birmingham.
The creditors and Jefferson County, whose finances were
ravaged by massive sewer debts, political corruption and the
loss in 2011 of a local jobs tax worth $60 million a year to the
local government, are in negotiations on workout terms.
David Carrington, the county's top elected official, recently
said he hoped to have a roadmap for exiting bankruptcy court in
place by the end of this year, after previously saying a plan
might not be ready until late 2013.
Analysts have predicted Jefferson County, whose officials
have slashed county staff and are now working on eliminating a
$26 million shortfall in the fiscal 2013 general fund, might
need years to hammer out a plan.
Last week, a judge signed off on a Chapter 9 exit plan filed
by Rhode Island's Central Falls, a little more than a year after
the small city filed its case.
Some of Jefferson County's creditors argue that officials are
moving too slowly on pushing ahead with rate increases for
customers of the county sewer system. Much of the increase would
go to paying creditors.
"The general fund has its own set of problems that are very
complex. Those have to be resolved in their own right before we
file a plan," said Patrick Darby, a lawyer for the county.
"What we do with the general fund and the sewer are connected."
Jefferson County's workout plan, which must be judged fair
to creditors and reasonable in light of its finances and
obligations, can include reductions in bonds and other debt.
The bankruptcy was also driven by a 2011 court ruling that
killed a local payroll tax worth about $60 million a year to the
county and forced hundreds of layoffs and cuts in medical and
other government services.
Jefferson County -- whose seat of government is the city of
Birmingham -- on Nov. 9 filed for bankruptcy after a tentative
agreement with creditors fell apart. That deal might have
delivered a $1 billion reduction in the county's debts.
(Additional reporting by Michael Connor)
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