New at Reason

Jeff Taylor reports on the bond-bailout bunglings of Jefferson County, Alabama, and what they should tell us about the credit crisis.

Comments

Franklin Harris | April 18, 2008, 12:32pm | #

It'll get worse as soon as Birmingham's batshit insane mayor gets his domed stadium in the middle of a demilitarized zone.

ChrisO | April 18, 2008, 12:33pm | #

As much as I favor federalism, the sad reality is that it is local governments doing most of the bungling--from financial shenanigans to no-knock stormtrooper raids.

Ultimately, local politicians have much to lose if they don't keep the streets paved, sewers operating, or parks functioning. But the problem is that those are not "sexy" issues on which to run for election. It's much easier to promise heaps of new projects while being vague on the financing.

tarran | April 18, 2008, 12:51pm | #

Here's a crazy idea.

Why not have people pay market rates for water? Why not have people pay for their kids' schooling?

The problem here is that we ant to divorce payments from consumption of services. Then we are surprised when people consume more than they are willing to pay for...

Caring Progressive. | April 18, 2008, 1:43pm | #

It's the evil lenders fault.

Or Warren's.

J sub D | April 18, 2008, 1:46pm | #

It'll get worse as soon as Birmingham's batshit insane mayor gets his domed stadium in the middle of a demilitarized zone.

Franklin Harris,

I'm warning you. Don't get me started on stadium welfare. It could get really ugly.

David McElroy | April 18, 2008, 2:04pm | #

As someone who lives in Jefferson County and has had to pay the insane sewer rates as they've gone up, I've watched this situation as it's unfolded. Jeff Taylor's article is good as far as it goes, but there's a lot more going on with the Jefferson County sewer situation, some of which is complicated and boring.

Environmentalists brought a federal lawsuit against the county to force the county to upgrade its sewer system. (I don't recall the details, but if I remember correctly, the county was still dumping some untreated sewage into a river somewhere.) As a result of the suit, the county had to agree to spend a ton on money on sewer construction. After fighting this for a long time, county politicians suddenly turned around and decided that it was a great idea to spend massively to modernize and upgrade the sewer system.

It later turned out that various county commissioners and other county employees were demanding and taking bribes from contractors who were getting the sewer work. Several of them have gone to prison since then. (There were others involved who the evidence didn't happen to lead to.) This explains, of course, why county officials suddenly developed a love for fixing the sewer -- while they could blame the problems on environmentalists instead of their own failure to maintain the system correctly.

The next chapter in the saga came when the county started refinancing the debt. The president of the county commission was a very crooked politician with a long history of failure and corruption behind him. But Larry Langford was a smooth-talking and confident black pol who had credibility among blacks and a sizable number of whites who just hadn't been paying attention to what he had actually DONE. Under his "leadership" (to use the term loosely), the county entered into the risky deals that were very profitable to the lenders. There was plenty of evidence that the legal work and the bond work was done by hand-picked friends of Langford, and there was every indication that the county was continuing to get ripped off while certain people's pockets were lined.

After Langford had made a major mess of the situation, he left the commission to run for mayor of Birmingham, where you'll find him today. If anybody is really interested in his past, this article in a local alternative paper does a good job of painting an interesting picture of how corrupt and arrogant he is:

http://www.bhamweekly.com/article.php?article_id=00474

The current county commission is stuck with the mess that was handed to them. They didn't cause the problems, but I honestly don't see what any sane person could do about it at this point. The latest solution involves taking money from a sales tax that was passed a few years ago and shift that money (currently earmarked for school construction) to paying sewer debt. People supported the tax for schools. They'd have never supported it to fix a debt crisis. There's more, but that's enough. It's a big mess.

LarryA | April 18, 2008, 2:51pm | #

In Charlotte's case, the shortfall was resolved—one that was induced by mandatory water usage limits enforced by the city under threat of fine, a wonderfully top-down response to drought—by hiking water rates by 16 percent.

The Goldilocks approach to government. Use too much, pay a fine. Use too little, pay higher rates. Use just the right amount, we’ll float another bond for “improvements.”

The finances are often complex and local media outlets seldom have reason to delve into the specifics.

A lot of the “local” media, particularly newspapers, fill most of their newshole with AP. That’s why we have a truly local weekly. But that’s one reporter (my wife) spending 60+ hours a week covering county government, two city councils, and four school boards.

I’m taking her to dinner tonight.

Not from Alabama | April 18, 2008, 3:01pm | #

"The latest sign of trouble in America's stressed credit system can be found not in some arcane Wall Street hedge fund, but deep in Alabama."


It's a picauyne point, but this preface makes it seem like Jefferson county is the podunk part of Alabama, rather than the largest county in the state (which also countains the largest city in the state.)

Alternatively, I guess your meaning is that Alabama en toto is a backwater, unworthy of participating in the larger issues of our time.

Kolohe | April 18, 2008, 3:16pm | #

This is particularly true when water and sewer service, or an airport, or some other revenue-generating unit of government is set up as a separate enterprise fund. Too often this confuses lines of responsibility and obscures total public obligations to pay for things.

In general though, the Birmingham example notwithstanding, I think it is much *better* to keep the streams completely seperate to the point of creating independent entitities.

This makes it so much harder to rob from Peter to pay Paul, and more obvious when they do in fact try to do it.

And the only thing worse in my mind than bureaucratic politically unresponsive public utilities are *fully politicized* public utilities. I'd rather not get my power cut off just because the mayor doesn't like me.

Of course, I'm willing to read some research that enterprise funds and independent authorities are always inferior to direct local executive management and funding.