Great leadership in Jefferson County

[Tigermike 3,053]

Jefferson County to pay millions on sewer, bond swap debt for nothing

Thursday, February 14, 2008

Imagine you had a nice house, and a corresponding mortgage payment of $1,150 a month.

What would you do if the bill rose unexpectedly to an ugly $1,840?

You'd freak, I expect. That 60 percent leap might just wreck your budget, if not your life.

That house wouldn't seem so nice, costing an extra $8,280 a year. It might look like the house of cards it is.

Now imagine you are Jefferson County, so multiply those numbers by 10,000.

With $3.2 billion in outstanding sewer debt and a further $2 billion in payments due for all those interest rate swaps, you expected monthly debt payments of more than $11.5 million.

Surprise, surprise.

The bill, as it now stands, reads more like $18.5 million a month, according to analysis of county bond payments and swap receipts. That's hard for anyone to take.

Let me say it again, clearly.

Jefferson County now faces unexpected debt payments of $7 million per month above and beyond the debt it expected to pay.

Thanks to changes in the market, the subprime mortgage crisis, fluctuating interest rates and some stupid deals in the first place, the county will pay an extra $84 million a year if the trend continues.

And what does the county get for it? What do you and I get from it?

Nothing.

No dome, no dog parks, no duh. Just a huge tab ticking on the already ridiculous cost of financing.

Folks at the county are perilously close to panic. And that means they've circled the wagons.

"I cannot discuss this with you on the advice of the attorneys and the financial advisers," Commission President Bettye Fine Collins said Wednesday. "This critical matter is before us. We acknowledge the situation and know there has to be disclosure."

Just not now.

So much for transparency.

To be fair, the $7 million a month - at its essence the difference between the total amount of money the county now pays for its bonds and the total it receives from interest rate swaps - is something of a snapshot.

Finance officials argue that it cannot fairly be carried forward to an $84 million year-end conclusion, or farther still, if for no other reason than the fact the county cannot continue to pay that bill.

Something, somehow, will have to change.

Unless Jefferson wants to replace Orange County, Calif., as the poster child for bankrupt American governments.

Those familiar with the county and the markets say these steps must be taken to avoid disaster.

The county must not panic. The worst that could happen would be for the financial markets - whatever that means - to sense panic, to see the county has no clue and no plan. It must develop a reasonable long-term strategy for getting out of its mess, and not from some back-room deal like those that brought us here.

From this point on, county leaders simply must demand genuinely transparent financial deals.

It's not just talk and pipe dreams anymore. It's the future of our county.

John Archibald's column appears Sundays, Tuesdays and Thursdays. Write him at jarchibald@bhamnews.com.

Birmingham News - AL.com