"These people are going to end up rioting about this," says Sheila Tyson, a community activist in Jefferson County, Ala. "If they let this stuff happen they are going to get the biggest riot the South has ever seen . . . I can see it coming."
That's a pretty serious prediction. What could possibly start a riot that big?
She's talking about the likelihood of Jefferson County increasing its water and sewage bill rates.
Oh. Is it really all that bad?
"If the sewer bill gets higher, my light might get cut off and if I try to catch up the light, my water might get cut off. So we're in between. We can't make it like this," says Tammy Lucas, a Birmingham resident who has been affected by a “financial and political scandal that has brought one of the most deprived communities in America's south to the point of what some local people believe is collapse,” reports the BBC.
Lucas' monthly water and sewage rate has managed to quadruple in the past 15 years. Currently, her bill is $150 a month, which she pays for by using her $600 social security check.
"We need to keep the water running because we're women," she says. "We need to take baths. I try to pay the sewer bill and the water bill together and then what little I got left I try to put on my lights. I got to have lights."
One of her Birmingham neighbors, who wished to remain anonymous, has already decided between lights and water: His home now has a porta-potty next to it.
“He says he finds it cheaper to buy drums of water from a [gas] station and pay a sanitation company about $14 a month to remove waste from his ‘porta-potty’ than pay the combined sewage and water rate bill, which some months can reach $300,” reports the BBC.
"Most people who live here are on social security," he said. "They can't spend this kind of money on sewerage. It's just outrageous. It's too high. I pay my sewerage bill, then I'm going to slack on my groceries. Then what am I going to eat?"
So how did this all start?
Sewage and water rates (on average) have increased faster than inflation because the federal government has demanded that cities replace their "worn-out" sewer facilities to meet federal clean-water standards.
When a federal judge forced Jefferson County to upgrade its outdated sewer system, officials decided to finance the project with bonds.
"Outside advisers suggested a series of complex deals with variable-rate interest . . . Loan payments rose quickly because of increasing interest rates as global credit markets struggled, and the county could no longer afford its payments," Bloomberg reports. That's why Jefferson County residents have seen a 329 percent increase in their rates over the past decade and a half--the county has been trying to finance these new facilities.
The sewage system was supposed to cost $300 million. However, since the project started in 1996, the costs have risen to $3.1 billion after various problems and a series of bond and derivatives deals fell through in 2008.
Not surprisingly, a large amount of corruption was involved.
JP Morgan Securities and two of its former directors have been fined for trying to bribe to Jefferson County employees and politicians in a bid to win business financing for the sewer project. Six former Jefferson County commissioners have been found guilty of accepting bribes, along with 15 other state officials.
As a result of the bad investments and government corruption, current county commissioners have been forced to file for Chapter 9 bankruptcy (which gives the county the right to stop paying some bills temporarily so that it can organize its finances), the largest municipal bankruptcy in U.S. history.
Of course, the county bondholders--who could lose as much as $4.5 million a month in repayments--are fighting the commissioner's attempt to file for bankruptcy. Creditors argue that state law doesn't allow the county to file for Chapter 9.
"Lenders claimed during a hearing and in court documents that Alabama law permits bankruptcy only for bond debt, and Jefferson County has a different type of debt called warrants," Bloomberg reports.
Thomas B. Bennett, a Birmingham bankruptcy judge, has said it was his “inclination” to seek guidance from the Alabama Supreme Court by sending the justices a number of technical questions about state law, according to the same report.
Tony Petelos, the county manager appointed by the new commissioners to deal with the county's financial woes, says it could take years to get the area back on stable footing.
"The public has lost confidence in Jefferson County over the last decade and a half, because of the mismanagement, because of the corruption. We have got to rebuild that confidence," he said.
This isn't the first time Petelos has come across this problem. When he was Republican mayor of Birmingham's neighboring city of Hoover, Petelos attended a presentation by a bank that was trying to sell the city on the exact same bonds Jefferson County later bought.
"I turned to my finance director and said, 'did you understand that?' He said, 'no I didn't'. So I said, 'we had better not buy it then'," Petelos said.
Unfortunately, Jefferson County bought the bonds and filing for bankruptcy may be its only hope in dealing with the massive debt.
This is where increases in the sewage and water rates come into play: before the county filed for Chapter 9, it had struck a deal with its creditors to have the combined water and sewage rates go up by 8.2 percent a year for the next three years. However, since filing for bankruptcy, the rate is probably going to go up by 10 percent or even as much as 25 percent, according to court appointed receiver John Young.
"When you look at the amount of debt, and you look at the revenue that is produced from the rate payers, there is no way it is going to come down," said Petelos.
The thought of water and sewage rates being increased has some Jefferson County residents infuriated.
Community activist Sheila Tyson, who was mentioned in the above, says soaring water and sewage rates have "traditionally hit the poorest parts of the county hardest" because "wealthier" county residents can afford to instal septic tanks on their property.
Pictured: Sheila Tyson (Source: BBC)
"This is not even a race issue, if I'm telling the truth," said Tyson. "It's just so happens that it's affecting black people. It's a class issue. They don't give a doo-doo about poor people period."
So what does the "community activist" think should be done to fix the problem?
"Somebody from Washington D.C. needs to come down here and take these sewer bills to where they are affordable for the people in these districts. Injustice - that's all this is. They need to come down here and fix it," Tyson said.
Because bureaucratic regulations and political corruption created this mess in the first place, Tyson's suggestion that D.C. intervene is probably the last thing Jefferson County needs.
(h/t Huffington Post)