By Verna Gates and Melinda Dickinson
BIRMINGHAM, Alabama, Nov 6 (Reuters) - Alabama's Jefferson
County on Tuesday approved a sewer-system rate hike of about $2
a month for most customers that the county's top official
described as a key step toward emerging from its $4.23 billion
The rate hike will be the first since 2008 and equals a rise
of about 5.2 percent over five years, based on the county's
average monthly sewer bill of $38 for about 126,000 customers.
"This is the first step in the process" of emerging from
bankruptcy, Commission President David Carrington said after the
vote. "The next step will be a plan of adjustment. We hope to
file the plan sometime this winter. We are actively working on
Wall Street creditors, in a motion filed ahead of the county
commissioners' unanimous vote, denounced the rate hike as
trivial and asked the judge overseeing what is America's biggest
municipal bankruptcy to give them a new shot at getting sharply
higher customer rates.
Former sewer system receiver John Young, who ran the
long-troubled system until early 2012 under a state court order
won by creditors, last year recommended much larger, but
politically unpopular, 25 percent annual increases in rates for
Bondholders-trustee Bank of New York Mellon said in a
filing made late on Monday that the fee hikes - effective next
March and hammered out after public hearings - lagged inflation
and hurt bondholders.
Bondholders, including some who still draw some payments
from the system's revenues after expenses, argued that the
county's rate hike badly trailed national trends that increased
by more than 26 over five years.
The trustee lawyers asked U.S. Bankruptcy Judge Thomas
Bennett to lift a stay under the county's Chapter 9 bankruptcy.
The stay blocks most legal claims and prevents creditors from
pushing for higher rate hikes in a state court.
Creditors argued in the filing that the county's method for
setting its pending rates fell well short of including all
actual costs, did little to repay the systems more than $3
billion of debt, and trailed increases at other utilities.
"Stated simply, every day that goes by without implementing
an appropriate rate increase constitutes a diminution in the
trustee and warrant holders' interest," David Lemke, Larry
Childs and other creditor lawyers said in the filing.
The creditor lawyers also asked the judge, if he does not
allow the creditors to file in state court, to require Jefferson
County to implement higher rates capable of paying back debts as
a condition of keeping the Chapter 9 stay in place.
Nearly a year ago, Jefferson County -- whose seat of
government is Birmingham, Alabama's biggest city -- filed for
Chapter 9 bankruptcy after a tentative agreement with creditors
fell apart. That deal might have delivered a $1 billion
reduction in the county's debts.
The creditors and Jefferson County, whose finances were
ravaged by the sewer-system debt, 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 that must
ultimately be approved by Bennett.
(Additional reporting By Michael Connor)
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