BRADENTON, Fla. - The Jefferson County, Ala., residents appealing the county's bankruptcy settlement are also challenging a state law designed to provide the cash-strapped county with new revenue for capital projects.
The four plaintiffs are among 13 residents appealing Jefferson County's 2013 exit from Chapter 9 bankruptcy, who are also represented by Sullivan and other attorneys.
The county's bankruptcy appeal case is now before the 11th Circuit Court of Appeals in Atlanta.
The latest legal challenge centers on House Bill 573 signed by Gov. Robert Bentley in June. The law is designed to provide Jefferson County with a new source of capital funding for deferred repairs and new projects.
The law allows the county to refinance about $595 million of limited-obligation school warrants issued in 2004 and 2005 that are secured by a sales tax that is currently dedicated to public school projects and payment of school-related debt.
Currently, the school warrants are structured so that sales tax revenue in excess of debt service requirements is used for early redemptions.
The new law allows excess collections after the bond refunding to go toward various capital expenses.
The general fund would get a certain portion of the refinancing, while other proceeds would go for expenses outside the county's control such as the Birmingham-Jefferson County Transit Authority and the Birmingham Zoo.
The refinancing is expected to come to market in November or December.
It would be the county's first debt issuance since emerging from bankruptcy.
Depending on market conditions, the deal was expected to result in about $60 million of savings. Of that amount, $36 million would be transferred to the county's general fund and the rest will be used for expenses specified in the bill.
"We're going to use that to rebuild our infrastructure and do some of the deferred maintenance on our roads," County Commission President Jimmie Stephens said in a recent interview.
Stephens could not immediately be reached for comment on the July 20 lawsuit.
The lawsuit argues the law is unconstitutional because the sales tax implemented by the county and securing the warrants is dedicated only for use by schools.
The suit seeks class-action status.
"There is an existing controversy between plaintiffs and the members of the class and the county as to whether the county may constitutionally impose the sales and use taxes to be used for general purposes purportedly as authorized by Act 226 rather than exclusively for school purposes as required by general law," the suit said.
The lawsuit requests an injunction that would prevent the Jefferson County Commission from implementing the act, which involves the "improper use of local law to overrule a general law," according to the suit.
In Alabama, counties do not have home rule so new revenue sources must be approved by the Legislature. In most instances a statewide referendum is required to amend the constitution to become effective.
A successful legal challenge that struck down Jefferson County's legislatively approved occupational tax, and the loss of that revenue for the general fund, was a major factor that led to the county's bankruptcy filing in November 2011.
