In by far the largest bankruptcy and municipal debt default in U. S. history, Jefferson County, Alabama, has officially gone bust.  Birmingham is the county seat of Jefferson County, and the Wednesday filing comes after years of heavy municipal debt and extremely poor – to put it politely – financial advice, planning and conduct.  County Commissioners voted 4-1 in favor of defaulting on its public debt, i.e., stiffing those who loaned it money by buying its bonds

The Reuters News article on the subject is here, and the New York Times version is here.  A notable paragraph from the NYT article is:

According to bankruptcy lawyers from Fort Lauderdale, at $4 billion, Jefferson County’s bankruptcy eclipses the $1.7 billion bankruptcy filing by Orange County, Calif., in December 1994, the previous record. Jefferson County’s debt grew out of poorly conceived efforts to finance a court-ordered rebuilding of its decrepit sewer system. The county used a complicated combination of debt instruments and derivatives that was supposed to save money, but it failed in 2008, leaving it with more debt than it could repay.

Jefferson County, with a 2010 Census population of 658,466, has 2.5-times the Caddo Parish population of 254,969, and 3.3-times the population of Shreveport.  However, comparative municipal debt by a generally used measurement is notable:

Shreveport residents owe more debt-per-person than those in bankrupt Jefferson County.

…  on the reported $4.0 billion debt, Jefferson County’s debt-per-person before bankruptcy was $6,075

and with $1.3 billion in total debt including pension liabilities, Shreveport’s debt-per-person is over $6,500.

These facts will be quickly attacked and disputed, of course, by the city administration.  The administration will assert all manner of reasons that “Shreveport is different.”  In fact, Shreveport may actually be different, but who would believe any such assertion from our City Hall?  Is there public confidence in any such assertions from our city officials, especially given that the mayor and his finance department and consultants / advisers are so hell-bent on incurring more debt?

In context, it is downright scary that the city administration is fighting so hard to prevent an independent, external audit into all matters pertaining to the professional advice upon which it bases management of the city’s finances, and never-ending attempts to incur even more debt.

For the record, and as is always the case, this work has been done strictly in the public interest.  No compensation of any kind has been solicited, offered or accepted for this work.

Elliott Stonecipher

(For more detail about Shreveport’s debt, this Shreveport Times article with side-bars is helpful.)

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