By Melinda Dickinson
BIRMINGHAM, Alabama (Reuters) - Alabama's governor on Tuesday will present state legislators from Jefferson County with newly negotiated proposals to restructure the county's $3.2 billion of troubled sewer debt and possibly avoid a municipal bankruptcy, according to a county official.
Jefferson County Commissioner Bettye Fine Collins said at a news conference that Gov. Bob Riley had told her by telephone Tuesday morning that he will discuss with legislators possible elements of an agreement with creditors, including an extension of a local sales tax due to expire shortly.
Other proposals include a rate hike for the sewer system's customers, a possible $1 billion reduction of the money owed bondholders and counterparties to interest rate swaps, and creation of an oversight panel for the sewer system.
The swaps, which were meant to lower interest costs for the county but backfired due to the global credit crisis, are the root of a financial crisis that has included threats by the county to file what could be the biggest municipal bankruptcy.
"Governor Riley is addressing the Jefferson County legislative delegation today to present a plan which will prevent the county from having to declare bankruptcy," Collins told reporters.
The 26 state legislators from Jefferson County must sign off on the terms before a full plan is presented to the state legislature for approval, according to Collins. The state legislators have been divided over the crisis that has dominated local affairs since February.
"They represent the same people the commission does, and they need to step up to the plate," said Collins, referring to the legislators. Collins is a key swing vote on the Jefferson County Commission that has been divided 3-2 against filing for Chapter 9 bankruptcy.
Another commissioner who favors a bankruptcy filing, Jim Carns, said on Tuesday that state legislators meeting with the governor were unlikely to favor the restructuring proposals.
Collins also said she expected a standstill agreement allowing the restructuring negotiations to be extended. The current standstill, or forbearance agreement, is scheduled to run out on Wednesday.
(Writing and additional reporting by Michael Connor in Miami; Editing by Dan Grebler)
