In his regular weekly sit-down with the press last week, Jefferson County Commission President David Carrington recited a Chinese proverb: “The best time to plant a tree is 20 years ago. The second best time is right now.”
Carrington wasn’t referring to a Jefferson County bankruptcy filing, but he should have been.
The best time for Jefferson County to have filed for Chapter 9 bankruptcy protection was two years ago.
The second best time is right now.
Outside of Alabama, analysts and the national press have almost moved on from the financial crisis here. When the Harrisburg, Penn., City Council voted last week to file for Chapter 9 municipal bankruptcy, the paragraphs deep in most stories referred to Jefferson County’s near-miss. The outsiders have yet to figure out that the “deal” Jefferson County reached with its creditors was dead the day the commission approved it, but like some Weekend at Bernie’s necromancy, Alabama politicos and Wall Street agents have pretended the bargain was a living, breathing thing.
Political observers in Alabama knew better. For the deal with Wall Street to work, it had to have the approval of the Alabama Legislature. The county and Wall Street needed three things from the state.
- First, they needed the state to approve a government utilities service commission, an agency of political appointees to manage the sewer system;
- Second, they needed the state to fix the county’s revenue problems through unearmarking existing revenue, raising taxes for new revenue, or most likely a combination of the two;
- Third, they needed the state to give its “moral obligation” to pay Jefferson County’s debts if the county defaulted again.
Virtually the moment the deal was struck with Wall Street, Gov. Robert Bentley assured media from other parts of the state that the rest of Alabama would never have to pay for another Jefferson County default. If Jefferson County could not pay, the money to meet the county’s obligations would come from the county’s taxpayers, Bentley told the Montgomery Advertiser. In essence, if the county can’t pay, the county would have to pay, and the moral obligation of the state would mean as much as the bond insurance the county once bought to cover its debts in the event of its last default — absolutely empty.
It was the kind of uninformed political bumbling the governor has been prone to since being elected to office. It’s tempting to label the new governor as Guy Hunt M.D., but Gov. Hunt showed more political aptitude than Bentley, at least judging by how the governor has handled this crisis. For several months during the summer, the county commission was close to filing Chapter 9, but at the governor’s insistance, the county continued negotiating with Wall Street. The implicit message to the county was that the governor’s office would take care of the next steps in Montgomery, or at least offer substantial assistance. That the governor could not extrapolate what would happen once a Wall Street bargain reached Goat Hill should give Alabamians cause to worry about the state’s future.
While Bentley didn’t seem to care much for giving Wall Street a true “moral obligation,” the Legislature was never going to fix the county’s revenue problem. Many members of Jefferson County’s own delegation would rather burn the county courthouse and collect the insurance first. The grudges some legislators hold against the county are so old and so deep that many can’t even remember why they hold those grudges at all — but logic doesn’t matter, when emotions are in the way. In particular, Rep. Arthur Payne, who sponsored the bill to repeal the county’s original occupational tax, has been the most vocal opponent of any deal with Wall Street. Rep. John Rogers has followed closely behind, saying he’d fight any deal that would raise sewer rates. Sen. Scott Beason, who blocked a bill earlier this year to give the county commission authority to raise taxes, said he’d do the same if a similar bill came his way.
When Beason and Rogers are on the same side, the likelihood of success drops to nearly zero.
But Beason, Rogers and Payne are not alone. While most members of the county’s delegation seem to understand the county’s problems are real, few are ready to carry the deal with Wall Street through to fruition.
The governor’s chief of staff, David Perry, told the Birmingham News that the county’s local delegation could be side-stepped, but the state Republican leadership, which sits opposite the GOP rift from the governor, showed any interest in overturning the protocols for local delegations.
On Thursday, Jefferson County lawmakers met again with the county commission and the county’s $900-an-hour bankruptcy lawyer, Kenneth Klee. The commissioners and Klee tried to explain that the deal with Wall Street would accomplish as much as, if not more than, bankruptcy would, but the delegation would not listen. Payne even told the commissioners they needed a new lawyer.
After the meeting, Gov. Bentley told the Birmingham News that a special session to fix Jefferson County’s problems was unlikely if the delegation could not reach a consensus. While everyone on the sidelines knew the game was over months ago, it was close as anyone in favor of the Wall Street deal had come to saying hope is lost.
Carrington has insisted that the commission’s job is to educate lawmakers about the realities of the county’s problem, but if lawmakers don’t understand by now, then their ignorance is indicative of their interest and intentions.
At the insistence of a misguided governor, the county reluctantly prolonged its own agony, spending millions from its reserves to buy more time for the Legislature to have a Road to Damascus moment, but the only consensus the county will find is at the guidance of a federal bankruptcy judge. The commission made an admirable effort to avoid a bankruptcy filing, but it is time for them to admit the truth. The deal is dead. It always was, and everyone needs to quit pretending otherwise.
Now is the second best time for Jefferson County to file for Chapter 9 bankruptcy protection.
Because there is another Chinese proverb at play here: The man who makes a mistake and does not correct it makes another.