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Date: 2024-07-16 Page is: DBtxt001.php txt00001724

Corruption, Banking, Society and Economy
The bankrupting of Jefferson County, Alabama

The scandal of the Alabama poor cut off from water ... and the incompetence, irresponsibility and corruption of both bankers and politicians

This story reflects a whole series of societal issues and makes my blood boil. The Occupy Movement talks about the rich 1%, but it is an evil 1% that needs to be identified and sorted out. In this story there have been unethical practices on the part of the banks and the financial community, the political community and the technical people associated with the water and sanitation operations. The fact that society seems incapable of stopping this sort of systemic failure should be a matter of great concern ... and at some level this is what the Occupy Movement wants to see fixed.
Peter Burgess

The scandal of the Alabama poor cut off from water

IMAGE Sheila Tyson, a community activist in the deprived West End area of Birmingham, tells the BBC how her community has been affected

Banks stand to lose millions of dollars in debt repayments if the biggest municipal bankruptcy in American history is allowed to proceed.

But the real victims of the financial collapse in the US state of Alabama's most populous county are its poorest residents - forced to bathe in bottled water and use portable toilets after being cut off from the mains supply.

And there is widespread anger in Jefferson County that swingeing sewerage rate hikes could have been avoided but for the greed, corruption and incompetence of local politicians, government officials and Wall Street financiers.

Tammy Lucas is the human face of a financial and political scandal that has brought one of the most deprived communities in America's south to the point of what some local people believe is collapse.

She says: 'If the sewer bill gets higher, my light might get cut off and if I try to catch up the light, my water might get cut off. So we're in between. We can't make it like this.'

Mrs Lucas's monthly sewerage rate bills - the amount levied by the county to flush away waste and provide water for baths and showers - has quadrupled in the past 15 years. She says it is currently running at $150 (£97) a month, which leaves little left out of her $600 social security cheque for food and electricity.

'We need to keep the water running because we're women,' she says. 'We need to take baths. I try to pay the sewer bill and the water bill together and then what little I got left I try to put on my lights. I got to have lights.'

'Just outrageous'

Her neighbour in one of the poorest districts of Jefferson County's largest city, Birmingham, a father of four who asked not to be named, has already made that choice.

QUOTE The poorest citizens in Birmingham, Alabama, say they can no longer afford running water

His modest rented home, next to a busy freight train line, is one of a growing number in the area that now has a blue portable toilet next to it.

He says he finds it cheaper to buy drums of water from a petrol station and pay a sanitation company about $14 a month to remove waste from his 'porta-potty' than pay the combined sewer and water rate bill, which some months can reach $300.

'Most people who live here are on social security,' he said.

'They can't spend this kind of money on sewerage. It's just outrageous. It's too high.

'I pay my sewerage bill, then I'm going to slack on my groceries. Then what am I going to eat?'

Sewerage rates and water rates, which are levied on drinkable water, vary widely across the United States.

But they are generally rising faster than inflation as cities are forced by federal government to replace worn-out sewerage facilities.

The two rates have been combined into a single bill in Jefferson County, which has increased by 329% over the past 15 years, making it among the highest in America, as the county has struggled to service the mountain of debt it took on to pay for a new sewer system.

Corruption scandal

The facility, which has been under construction since 1996, was meant to cost about $300m.

But the bill soared to $3.1bn after construction problems and a series of bond and derivatives deals that went sour in the financial meltdown of 2008.

If they let this stuff happen they are going to get the biggest riot the South has seen”
Sheila Tyson Community activist
Investment bank JP Morgan Securities and two of its former directors have been fined for offering bribes to Jefferson County workers and politicians to win business financing the sewer upgrade.

Six of Jefferson County's former commissioners have been found guilty of corruption for accepting the bribes, along with 15 other officials.

New county commissioners, struggling to service the debt they inherited from their crooked predecessors, took the decision to file for Chapter 9 bankruptcy last month.

But the county's bondholders, who stand to lose about $4.5m a month in repayments if the bankruptcy is allowed to proceed, are contesting it in court.

A Birmingham bankruptcy judge, Thomas B Bennett, has yet to make a final ruling.

Breaking point

Prior to the bankruptcy filing, the county's sewer rates had been due to go up by a further 8.2% a year for the next three years in a deal with the county's creditors, to the dismay of local residents.

Now that is more likely to be 10% a year or even, according to the court appointed receiver John S Young, as much as 25%.

Sheila Tyson, a community activist in the deprived West End district of Birmingham, says people in the city are reaching breaking point.

'These people are going to end up rioting about this,' she says. 'If they let this stuff happen they are going to get the biggest riot the South has ever seen. Over this sewer business. I can see it coming.'

She says soaring sewer-rate bills have traditionally hit the poorest parts of the county hardest, as better-off people in the suburbs installed septic tanks at their properties.

But the people affected are embarrassed to speak out about living in such unsanitary conditions, she tells BBC News.

'This is not even a race issue, if I'm telling the truth,' says Ms Tyson. 'It's just so happens that it's affecting black people. It's a class issue. They don't give a doo-doo about poor people period.'

Budget shortfall

And she adds: 'Somebody from Washington DC needs to come down here and take these sewer bills to where they are affordable for the people in these districts. Injustice - that's all this is. They need to come down here and fix it.'

When you look at the amount of debt, and you look at the revenue that is produced from the rate payers, there is no way it is going to come down”
Tony Petelos, Jefferson County manager
To add further to Jefferson County's woes, it faces a budget shortfall next year of $40m after a local tax was declared illegal.

The county is appealing to the Alabama state legislature for financial aid, but there are still likely to be cuts to public services.

More than 500 county workers were laid off over the summer and are having to get by on unemployment benefit, while their jobs hang in the balance.

Tony Petelos, the county manager appointed by the new commissioners to sort the mess out, admits it could take years to get the area back on its feet.

'The public has lost confidence in Jefferson County over the last decade and a half, because of the mismanagement, because of the corruption. We have got to rebuild that confidence,' he says.

He insists there is 'light at the end of the tunnel' and that some of residents' worst fears about looming public service cuts are groundless, with most savings likely to be made through efficiencies and property sales.

Troubled project

But he can offer few assurances to citizens struggling with soaring sewer and water rate bills.

The decision is in the hands of the bankruptcy court, he stresses, but even if the judge decides to hand control of sewer rates back to the county - and Mr Petelos has offered to manage the troubled project himself - there is no prospect of the bills being reduced.

'When you look at the amount of debt, and you look at the revenue that is produced from the rate payers, there is no way it is going to come down,' says Mr Petelos.

When he was Republican mayor of Birmingham's neighbouring city of Hoover, Mr Petelos recalls attending a presentation by a Wall Street bank about the same kind of bonds that would later prove to be the downfall of Jefferson County.

He says: 'I turned to my finance director and said, 'did you understand that?' He said, 'no I didn't'. So I said, 'we had better not buy it then'.'

Perhaps if Jefferson County's previous commissioners had made the same decision, some of their poorest residents would not be facing daily life without basic sanitation and running water.

By Brian Wheeler BBC News, Alabama
14 December 2011 Last updated at 08:34 ET
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