Commission double-cross repeats old mistakes
When three Jefferson County Commissioners decided to replace the county's financial team two weeks ago, the county wasn't changing horses mid-stream. Rather, it was ditching a transatlantic cruise 50 miles from shore, trusting the rest of the trip to a ship of sea pirates, instead.
When the former financial advisers began negotiating with the county's creditors in March, Jefferson County appeared on an irreversible path to bankruptcy. When the commission fired its financial team this month, the county was very close to a reasonable deal with investment banks and bond insurers that would cobble together enough revenue to pay most of its sewer debts and keep the county solvent.
The plan would have combined excess sales taxes collected by the county with an annual 2.8 percent increase in sewer rates to make the county's debt service on sewer bonds. While the county's sewer rates are high already, an annual increase of 2.8 percent would have been below the rate of inflation.
The deal also proposed an oversight committee, a component Commissioner Jim Carns disagreed with but reluctantly accepted. According to Carns, virtually every other municipal debt crisis has used an oversight committee in its rescue plan. While he didn't see the purpose of having one, the county's creditors insisted on it.
The oversight requirement is the given reason some commissioners balked at the plan - and ultimately the whole financial advisory team. But don't be too quick to believe them. Something else is happening here.
With another deadline approaching, three of the five county commissioners voted to fire the county's financial team - Merrill Lynch; Porter, White & Co and Bradley Arant Rose & White.
"With seven days to go, we pushed Humpty Dumpty off the wall," Carns said last week.
In the same swift stroke the new commission majority - Bettye Fine Collins, Shelia Smoot and George Bowman - hired a new team of financial advisers. That new team consisted of some familiar names: Goldman Sachs, Morgan Keegan and Haskell Slaughter.
Morgan Keegan is the investment arm of Regions bank. If you want to know how they've been doing lately, open a newspaper.
Haskell Slaughter has assisted the county before. The firm served as bond counsel on many of the deals that landed the county in the mess it is in.
When J.P. Morgan wasn't duping the county with any of its proposed bond swaps, Goldman Sachs was taking up the slack. In its lawsuit against Larry Langford, Bill Blount and Al LaPierre, the Securities and Exchange Commission accuses Blount and Langford of directing business to Goldman Sachs. At the time, Blount was serving as a consultant to Goldman Sachs. This was around the same time when Blount was paying off then-Commission President Langford's debts for clothes and dental work and cars and whatnot.
To be fair, Haskell Slaughter was a small part of the former financial advisory team, too. However, they were included for the knowledge of one attorney who helped structure all the bond deals that got the county into its current mess, Carns said. Without that knowledge, it would have taken months more to reverse engineer the county's previous mistakes.
The firm will have a much larger role now, Carns said. He believes Haskell Slaughter is behind the idea of using gambling to pay off the sewer debts.
"Slaughter has always worked with Milton McGregor to get what McGregor wanted done," Carns said. "I guess he saw a win-win for two of his clients."
No matter, gambling is a dead-end issue for solving the county's debt crisis. To restructure its debt, the county will likely need Governor Bob Riley to convene a special session of the Alabama Legislature. He wouldn't do that if the plan included gambling, he said last week.
Commission President Collins claims gambling is a wedge issue invented by Carns and his commission ally Bobby Humphryes.
"I didn't need to see the governor on my television screen to know he would never call a special session for something that included gambling," Collins said last week.
Collins' vote last week double crossed her fellow Republicans on the commission - a significant break from the group that campaigned on "No debt, no Democrats, no dome."
Carns denied that a rift had been forming among the commission Republicans, but even the blind in the county courthouse could have seen it coming. Increasingly, the financial team had worked with Carns, leaving Collins out of the loop. Collins reasserted her control of the commission.
However there is something even more disconcerting here than Collins' petty politics. The commission president said some things in a press conference last week that show a willful ignorance of the county's financial situation.
In that press conference, Collins said that the county must make sure there is money for sewer expansion in north Jefferson County. The commission president still dreams of suburban sprawl along a new I-459 beltline.
The county's financial disaster was a group effort - no one person could have done this alone. A major component of that disaster was a suburban Republican notion of growth - the belief that the world would be a better place if only we had more strip malls filled with Cato Fashions and Payless shoe stores. At the peak of its county's sewer construction, The Birmingham News discovered that nearly a third of the county's so-called rehab work was in fact sewer expansion. Collins still thinks that is a good idea.
And to carry out her plan to fix the county's problems, she has helped hire many of the same people who helped create it.
When I asked Collins about the new financial team's role in the financial crisis, she pled ignorance.
"I have no knowledge of that," she said. "I don't remember them working for the county."
Now she has joined forces with Commissioner Smoot, who until February claimed the county's financial straights were a Republican fabrication to make the Democrats look bad.
The commissioners have wondered aloud why the county's creditors would want an oversight committee. Now they have answered their own question.
War on Dumb is a column about political culture. Write to kyle@bhamweekly.com
Gast
