Jefferson County, Ala., mired in a $4.1- billion bankruptcy, has gotten one of its nine sewer treatment systems removed from federal court supervision and plans to have the remaining four plants out over the next three years.
The Leeds Complete Waste Treatment System, which had been operating under a U.S. Environmental Protection Agency consent decree since December 1996, was removed in an order signed on April 23 by U.S. District Judge J. Foy Guin Jr.
The Five Mile, Valley Creek, Village Creek and Cahaba systems are still operating under the consent decree. "We will probably do one or more a year over the next three years," says David Denard, Jefferson County director of environmental services.
Most of the infrastructure work and repairs required for compliance were done more than seven years ago, Denard said. That work, required under the consent decree, is part of what led the county into bankruptcy.
Massive cost overruns, coupled with bribery and corruption, inflated the costs to $3.2 billion. In the aftermath, 26 individuals and businesses were fined and some were sentenced to prison for up to 15 years.
The sewer debt and a general obligation debt, combined with a large loss of tax revenue, drove the county into bankruptcy on Nov. 9, 2011, after commissioners could not reach an agreement with creditors to refinance the debt (ENR 11/10/11). The filing earned the Alabama county the dubious distinction of entering into the largest municipal bankruptcy in U.S. history, surpassing Orange county, Calif.'s 1994 default, which totaled $1.7 million.
Since the consent decree, the plants have been in operation as performance is monitored and documented, especially after heavy rainfall, for the EPA.
Says Denard, "Whether we are in bankruptcy or not, the system continues to deteriorate, so we have to do routine maintenance."
Denard has a new collection-system program to more closely monitor the overall operation and needed project maintenance or repairs.
However, he has not seen any "direct evidence" that the bankruptcy is resulting in higher costs from contractors, likely because of the lagging construction economy.
The increased bids usually come "if you have a situation where pre-petition trade creditors are not being paid," says Kenneth Klee, a partner in Klee, Tuchin, Bogdanoff & Stern, a Los Angeles-based law firm representing the county in bankruptcy proceedings. "We don't have that situation."
The county still has to pay fines to the EPA, of about $1,000 per event, if water measures exceed specified limits.
That runs about $300,000 annually and is included in the budget, Denard says. "There is a great controversy whether the cost of compliance should be borne by raising sewer rates" or some other charge, Klee says. "The obligation [that] a county has to comply with environmental laws is a general obligation."
County commissioners will face this during hearings this summer, Klee adds.
John S. Young Jr., appointed as received to run the sewer system but dismissed after the bankruptcy, had advocated a fee hike. That approach met with widespread opposition.
The county will be faced with a $40-million shortfall if the state Legislature does not pass a bill allowing it to collect an occupation tax. That bill has been stalled in the Legislature, which must end its session by May 21.
Jefferson County Files for Bankruptcy After Talks With Creditors Break Down
