(Image Source: Bloomberg)

BY SAMANTHA SUNNE

ANCHOR ANA COMPAIN-ROMERO

Jefferson County, Alabama, set a record for the the largest municipal bankruptcy ever filed in U.S. history. Bloomberg reports that the county owes more than $3 billion (with a B), topping a bankruptcy record set by Orange County, California, in 1994.

“‘We’ve reached that last resort,’ Commissioner Joe Knight said yesterday at the meeting before the 4-1 bankruptcy vote. ‘We could continue and keep kicking this can down the road, but I think the people of Jefferson County have had enough.’”

County commissioners tried to shave $1 billion off that debt, but were unable to strike a deal with the county’s lenders. Much of the municipal debt stems from a corruption-plagued sewer project that went billions over budget. WIAT in Birmingham spoke with the commission president.

“We just, after good faith efforts, decided that an acceptable solution wasn’t in the cards, so we moved to the next step.”

A few other municipalities have sought court protection from their lenders in the last few months, but they have not actually filed for bankruptcy, Other municipalities have come closed to filing Chapter 9, but in the end never moved to the ‘next step’. Why? CBS News says its the road to recovery looming over the county and its residents.

“Municipal bankruptcy pushes up borrowing cost, pushes down property values, drives away business investment, and requires years for a full recovery.”
 

So was this a necessary evil? Alabama Live talked with a former Jefferson County Commission member Shelia Smoot, who called the bankruptcy vote “the biggest mistake in Alabama history.”
 

“I know personally they did not have to do that. I left office one year ago. I am utterly shocked, disappointed and hurt ... Jefferson County is too big to throw in the towel.”
 

Jefferson County residents are now face $40 million in service cuts. Local leaders say the government will operate as normal while it waits to go before a federal judge.