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Jefferson County bankruptcy affecting healthy Alabama cities

As most people are aware, the recession is taking its toll not just on individuals and families, but on cities and counties across the U.S. Jefferson County filed the largest municipal bankruptcy in U.S. history last year. The county has recently cut back on services as officials expect to run out of reserves by October. Cuts have taken place that affect services at its hospital for the poor, the roads department is no longer picking up road kill, and the county has skipped a debt payment to preserve cash.

The financial difficulty in Jefferson County is causing problems for Birmingham, its largest city, and the county seat. Birmingham is in a very different position and is trying to lure municipal-bond investors by highlighting the cities low jobless rate, high credit rating, and cash reserves. The cities location may result in higher interest rates than other credit-worthy cities and towns.

Birmingham officials are planning to sell $75 million in bonds to pave roads, install new street lights and want to replace an old auditorium that has gone into disrepair. City officials are trying to convince companies and corporate-relocation firms that Birmingham is in a much better financial situation than Jefferson County.

"We are not trying to sweep the bankruptcy under the rug," said a spokesman for the Birmingham Business Alliance. "But there are a lot of good things going on in Birmingham." Since Jefferson County's bankruptcy filing, other Alabama cities have sold debt without incurring steep increases in borrowing costs. It remains to be seen whether that will be the case for Birmingham.

Source: The Wall Street Journal, "Birmingham: That's Not Our Problem," Michael Corkery, June 25, 2012

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