Alabama county says can cover lost tax revenue

By Verna Gates

MONTGOMERY, Alabama (Reuters) – Alabama’s Jefferson County is confident it can cover $70 million in revenue it lost when the state Supreme Court declared a key county tax illegal, the county commission president said on Wednesday.

The county is battling to stave off what would be the largest municipal bankruptcy in U.S. history over a $3.2 billion sewer bond debt. It also faces a separate general obligation bond debt.

“I am confident we can replace the revenue. We are not asking (taxpayers) for the $70 million. We are asking for between $40-$50 million. The commission promised to right-size government and provide quality services at a lower cost,” commission President David Carrington told Reuters.

Jefferson is one of several U.S. municipalities facing debt trouble, and bond markets watch it closely because of the size and protracted nature of its crisis. The county is key to the state’s economy because it includes Birmingham, the biggest city in Alabama and an economic engine for the state.

The county would seek to cover the revenue through a mix of changes to the tax code, efficiency savings and spending cuts, Carrington said.

Alabama’s highest court ruled this month that the county’s occupational tax was unconstitutional.

The tax, which was based solely on work performed in the county regardless of where an employee lived, provided around $70 million or at least one-third of its operating revenue as well as funds for the repayment of the general debt.

Losing that revenue was another financial blow to the troubled county, which hopes to reschedule its debts through negotiations with creditors.


The county seeks to change the tax code which allocates $300 million as earmarked funds for education, health, indigent care and Birmingham’s convention center, according to a report delivered to the county’s delegation to the state legislature.

Covering the lost revenue was an even more pressing issue than finding a solution to the sewer debt, Carrington said. Because of the court decision, the county says it has only enough funds to operate its budget until July.

The county’s five commissioners met state legislators at the state capitol in Montgomery on Wednesday.

(Writing by Matthew Bigg, Editing by Kenneth Barry)

Alabama county says can cover lost tax revenue