Jefferson County in Birmingham, Alabama, voted to file an estimated $4.1 billion bankruptcy on Wednesday, triggering the largest municipal bankruptcy in U.S. history, The Birmingham News reports.
The decision comes after more than three years of financial trouble. County officials said that interest rates on some of the county’s $3.2 billion sewer debt had soared in reaction to the nation’s subprime mortgage crisis and the county could no longer afford the payments.
The county has struggled to reach a settlement with its creditors, primarily Wall Street Banks led by JP Morgan & Chase, since 2008. The county owes money to bond investors, who lent cash to rehab its dilapidated sewer system. That failed construction program and accusations of political corruption led to convictions of four elected officials, 17 other people and five companies.
Aside from its massive sewer debt, the country earlier this year lost the use of an occupational tax that generated $66 million a year. In response, the county commission ordered layoffs of 547 workers along with other cuts in services.
Jefferson Country reports a 9.5 percent unemployment rate, which is just slightly above the national rate of 9 percent. Jefferson is Alabama’s most populous county with 658,000 residents, 42 percent of which are African-American, according to the U.S. Census Bureau. During the civil rights movement, Birmingham was a hotbed for social change and the setting for which Dr. Martin Luther King Jr. famously penned his “Letter from Birmingham Jail."
(Photo: Butch Dill/AP)