The perfect dung storm: Part 4, scraping the bottom of the barrel

September 15, 2011 | Birmingham, Jefferson County, Municipal finance, Sovereign bankruptcy, Subprime, Theory, US News, Water and sanitation, Workouts

[Continued from yesterday’s Part 3 and the preceding Part 2 and Part 1.]


By:David A. Smith


Wife’s named Mary

But she’s called Marie

We live in a three room house

With a pepper tree


Randy Newman, Birmingham


Three days into our grim tale (only two to go to finish the post and find out if the county files the largest municipal bankruptcy ever), many corrupt Jefferson County officials have gone to jail, a receiver has been appointed, the state government has been drawn into the muck, and the state legislative delegation is fractured every which way to Sunday.


Principal sources for this post are (distinguished by different fonts):


New York Times (July 30, 2011), Debt Crisis? Bankruptcy Fears?

Wall Street Journal (August 11, 2011), Impact on Poor Bedevils Deal

Bloomberg News (August 18, 2011), Jefferson County Needs Hostile Legislature’s Help for Deal

The Birmingham News (August 22, 2011), Jefferson County Officials to Meet with Creditors


Pressing the county and state are the grim reaper: unless a settlement is worked out, the county will have to file for municipal bankruptcy under Chapter 9, and even then the results will be grim. 


You have one … last … chance!


4. The political end game


Though the final, final deadline (a time-honored negotiating tactic) has been repeatedly extended, the converging spirals suggest we are, in fact, at the political endgame.


It will be bloody, because the fissures run right through all levels of government: local, county, and state.


Disunited from top to bottom


A settlement that would let Jefferson County, Alabama, avoid the largest municipal bankruptcy in U.S. history hinges on help from a legislature that so far hasn’t been willing or able to offer it.


To begin with, the state constitution quite understandably imposes a high standard for any laws that are too targeted to benefit one entity.


Just one local lawmaker can derail a deal, according to rules for county-specific bills. It happened most recently in June, when Republican Senator Scott Beason of Gardendale killed a measure that would have let Jefferson replace a wage tax that a court struck down, gutting its general fund.


In my experience, any system that requires unanimity of more than about twenty people does not get it:


State Rep. John Rogers, D-Birmingham, said he doesn’t see how a special session will work when the Jefferson County legislative delegation is divided.


Though Sun Tzu said “do not fight a war if the country has to fight on two or more fronts“, that is precisely the situation confronting the Alabama delegation. 


“Also, never go against a Sicilian when death is on the line.”


Even as they seek to present a united position to the creditors, the state and the county will be wrestling over just how much of Jefferson County’s mess can be backwashed upstream to the state.


The goodwill of Alabama’s Legislature is an unknown as the county tries once more to settle with creditors including JPMorgan Chase & Co. (JPM) Poised to file bankruptcy last week [Meaning August 15, 2011 – Ed.], the five-member commission agreed to negotiate 34 more days at [Alabama Governor Robert] Bentley’s request.


Bentley bought five more weeks


The five weeks’ delay was expensively purchased:


Bentley promised to call a special session and to lobby legislators for help.


Hence, presumably, if there is no comprehensive agreement by September 15, then the County will have to file bankruptcy.


That means the county and its creditors must rely on a body traditionally hostile to and envious of the Birmingham area, according to William Stewart, emeritus professor of political science at the University of Alabama in Tuscaloosa.


Contributors to the tension are Alabama’s fraught racial history, a divide between country and city and the area’s economic dominance, he said.


“In terms of their sympathy with the problems of Jefferson County, I don’t think they have any,” Stewart said of the Legislature. “We used to call it the imperial county.”


Well, we are better


That’s the thing about arrogance: you never know when fate will reshuffle the deck, and leave you wishing you’d accumulated more goodwill with those you thought were beneath you.


Some want to remove provisions that earmark existing taxes for indigent care and the health department. Others would support giving the County Commission authority to increase or impose other taxes.


Ultimately, the earmarks and restructuring of cash flows are a battle over political priorities.  What is a ‘necessity’?  Are social programs necessities?  Some think so.


(Once again, these disagreements prefigure larger debates that both the Eurozone and the US will be having or are having now.)


“The Democrats will not go along with any un-earmarking at all, and if we don’t go along with un-earmarking, the Republicans won’t go with a new occupational tax,” Rogers said.


Surely we can find a grand compromise


There it is, a microcosm of the grand political bargain: Democrats agree to cut costs, Republicans agree to raise taxes.  Something along these lines will have to happen, if only because the political equations must be balanced.


“I don’t think our delegation is together on anything right now,” said Rogers.  “It’s a Jefferson County problem, and we have problems among ourselves.”


I think I am not being listened to right now!


In effect, Jefferson County shows the clash between two philosophies of government, an argument made the more contentious because everyone is dealing with too little – too little money, too little time, too little options.  At some basic level, do you want clean water and clean streams/ lakes/ rivers, or don’t you? 


A clear enough message


State Rep. Arthur Payne, R-Trussville, said he’s concerned that lawmakers will be asked to pass replacement revenue in the form of taxes, which he opposes.


“I don’t think there is going to be any desire to raise any more taxes on the people,” Payne said. “Not in these times when you have high unemployment, high gas, people paying more at the grocery store and people without jobs. It’s not a time to be raising taxes.”


Understandable enough, but then, what do you cut?


State Sen. Jabo Waggoner, R-Vestavia Hills, said reaching a consensus on controversial issues among members of the local delegation is not easy.


It should be little surprise that the members opposing new taxes mainly represent districts that do not use the Jefferson County system, and that those opposing rate hikes do use it.


One heckuva of nickname: Jabo


“We have 26 human beings that make up the Jefferson County delegation — eight in the Senate and 18 in the House,” Waggoner said. “There are a lot of different opinions, different agendas, different backgrounds, different constituencies … It’s difficult to corner that many people sometimes on a very controversial issue like this is.”


Self-interest is politically legitimate, but it is also politically predictable, and can be politically static – and static politics will take down not just the county, but potentially the state.


But Waggoner said the current financial problem is different from most that have confronted local lawmakers. If the problem is not fixed, “this county will go into bankruptcy, which will be a black eye not only on the county but the state,” he said. “All 26 of us in the delegation need to be concerned, and all 26 of us need to work together to try to find some reasonable solution.”



Stephens said the commission rejected so many of the terms and conditions in the creditors’ proposal that “we may have to go up there with a blank sheet.”


“I do not want the creditors to take any terms of the previous agreement for granted,” Stephens said. “We have to reach a deal that will leave the citizens of Jefferson County with some hope for a future of economic and residential development.”


That leaves only one group that we can be certain will be losers out of all this:


Voters want to know, who’s going to be the losers?


[Concluded tomorrow in Part 5.]