Ala. county votes to declare $4B bankruptcy

Leaders of Alabama's most populous county voted Wednesday to declare an estimated $4.1-billion bankruptcy.

The commissioners took the action two months after it seemed Jefferson County had struck a deal to settle the debt. The vote came after commissioners spent about six hours over two days meeting with lawyers to discuss legal options.

If Jefferson County follows through in filing for bankruptcy, it would overshadow the one filed by record-holder Orange County, Calif., in 1994 over debts totaling $1.7 billion.

Jefferson County has been trying since 2008 to avoid filing for bankruptcy over its debt, which resulted from a mix of outdated sewer pipes, the lagging economy, court rulings and public corruption. At the same time, it faces a separate shortfall of as much as $50 million in its operating budget because courts struck down a major local tax as unconstitutional.

Commissioner Jimmie Stephens made the motion to file for bankruptcy. He said the commission and creditors never could complete the tentative agreement they reached in September and remained about $140 million apart.

"Despite our best efforts, the negotiations had not produced any decision that fairly treats the county and our citizens. And it did not appear that further negotiations would produce that," he said.

He said filing the largest municipal bankruptcy ever will create an initial shock, but it will be good to start resolving a financial problem that has hindered the county for too long.

Jefferson County has about 658,000 residents and is home to Alabama's largest city, Birmingham, and its medical and financial centers.