Birmingham, Alabama: National Guard Needed After Budget Cuts?

National Guard in New OrleansThe sheriff of Birmingham, Alabama warns he may need to call the National Guard to maintain order after this week’s Circuit Court ruling that Jefferson County leaders can proceed with plans to slash $4.1 million from the sheriff’s budget.

Sheriff Hale, who unsuccessfully sued the County Commission to stop the cuts, warns the decision mean the loss of 188 deputies and 300 civilian employees — more than a dent in local law enforcement.

How did Jefferson County end up close to earning the title of “biggest municipal bankruptcy in U.S. history?”

To finance a $3.2 billion sewer cleanup, six years ago, after consluting with J.P. Morgan,  the county issued floating interest rate debt instead of the typical fixed interest rate debt. It was meant to save taxpayers money. But the collapse of the subprime mortgage market drove up variable rates and has left Jefferson County hemorrhaging red ink, with unexpected debt payments of $7 million a month.

Sadly, none of this was really necessary.

sewer001.JPGAs William Selway and Martin Braun writing at Bloomberg.com note, rather than use competitive bidding (or traditional fixed interest rate bonds) to build the sewers, Jeffco took J.P. Morgan’s advice, turning to pricey (banks collected $120 million in fees on the deal) and costly (the county is $277 million debt as a result) financial wizardry.

Now residents will being paying for their sewer system many times over, and in many ways. The sewer bonds are junk. Taxes will be hiked, sewer fees are rising, and now the city needs the National Guard?

There are other ways to build,  maintain, and pay for sewers. For more, see this 2000 report from the Reason Foundation.

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