May 27, 2024

County Was Struggling Even Before the Storm

Even before the dark funnel clouds touched down, the heavily indebted county, which includes the city of Birmingham, was teetering on the edge of what could be the biggest municipal bankruptcy in American history. It is drowning under $3.2 billion in debt, the legacy of a giant sewer project and corrupt, risky bond deals that sent a former top official to prison. And it recently lost one of its main sources of revenue when the State Supreme Court struck down its tax on workers. County officials are worried that they could run out of money in late July or early August.

Now the strained county must struggle to perform a central role of government: protecting the lives and safety of its residents. So as county search and rescue workers sought the living and the dead, triage centers treated the injured and work crews struggled to clear the debris, the Jefferson County Commission met Thursday to make sure that some of the money-saving measures it had instituted would not impede the response to the disaster.

“The needs of the citizens will come first,” said Commissioner James A. Stephens, who oversees the county’s finances and whose district saw some of the worst destruction. “If we have to burn through this cash we’re attempting to preserve, in order to get us through this disaster, the County Commission most certainly will do so.”

People in Jefferson County have spoken about the sky falling, in a figurative sense, long before the clouds lowered this week and swirling winds leveled whole neighborhoods. For many residents, the tornadoes seemed like the latest in a long litany of woes.

“This is not a county that needed this,” said Lexis Bennett, 36, a paramedic who lives in Pleasant Grove, a Birmingham suburb among the hardest-hit places.

His house was destroyed. His dogs were killed. He barely survived by huddling in a closet with three other people and then crawling out of the rubble.

Asked about Jefferson County’s troubles, he shook his head and laughed. “Money?” he asked. “They ain’t got none. And now this tornado.”

County officials expect the federal government to cover much of the cost of the disaster, said Mark Kelly, a spokesman for the county’s Emergency Management Agency. He said the county’s response had not been constrained by its fiscal woes.

But a natural disaster was the last thing the county wanted to face as it sought to untangle itself from a series of man-made ones.

The county’s trouble began more than a decade ago. Its sewers were discharging raw sewage into local rivers during heavy rains, and a federal court ordered the county to refurbish the system. The county began borrowing money to pay for the upgrade. Then things went badly awry.

Local officials signed off on risky, and ultimately very expensive, exotic bond deals that they barely understood — some after they had been bribed.

Larry P. Langford, the former president of the county commission, was sentenced last year to 15 years in prison after he was found guilty of accepting more than $230,000 in cash, expensive clothing and jewelry in exchange for steering millions of dollars in bond business to a prominent investment banker. The Securities and Exchange Commission filed a lawsuit in 2009 charging that J. P. Morgan Securities had made unlawful payments to friends of the county commissioners to help it win bond business; J. P. Morgan settled the suit, agreeing to drop its claims for $647 million in fees it had been seeking, and to pay a $25 million penalty to the commission and $50 million to the county.

Those exotic deals backfired when the economy collapsed, and they sharply drove up the county’s costs instead of reducing them. The county defaulted on its bond payments; a court-appointed receiver is preparing a plan to help pay down the debt.

The Alabama Supreme Court dealt the county another blow in March, when it upheld a ruling striking down the county’s occupational tax — basically an income tax on people who work in the county — on the grounds that it was not properly advertised before the Legislature approved it in 2009. The tax netted the county $74 million a year, but the new Legislature — which, after November’s elections, is now in Republican hands — has been reluctant to approve a new tax.

The new sewer system suffered minor damage in the tornado, said John Young, the receiver who oversees it. But he said it should be quickly repaired.

Michael Cooper reported from New York, and Robbie Brown from Pleasant Grove, Ala.

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