Sunday, August 02, 2009

alabama area reeling

NYTimes | “Outside of the city of Detroit,” said Robert A. Kurrter, a managing director with Moody’s Investors Service, “it’s fair to say we haven’t seen any place in America with the severity of problems that they’re experiencing in Jefferson County.” Moody’s rates Jefferson County’s credit lower than any other municipality in the country.

In July, the county asked Gov. Bob Riley, a Republican, to declare a state of emergency. Mr. Riley declined, delicately explaining that his authority extended to tornadoes but not to tsunamis of red ink.

Jefferson County, which includes Birmingham, could be compared to a person who has lost his job, watched his retirement investments evaporate and is stuck with a house that is worth less than what he owes the bank. Some of the county’s woes stem from the financial crisis that has pounded so many communities: its sales and property tax revenues are down by $40 million, and it borrowed billions in a sewer bond boondoggle that is the municipal equivalent of a subprime mortgage, using failed exotic bond deals and swaps concocted by investment bankers.

But the county has additional troubles: the sewer project was riddled with corruption, and in January a court ruled that a tax the county relied on for more than a quarter of its general fund was illegal because the Legislature repealed it in 1999.