May 042011
 

The economic impact of the tornado damage in cash-strapped Jefferson County, Ala., is much worse than local officials initially anticipated.

The county – which is fighting to avoid the largest municipal bankruptcy in U.S. history – was expected to run out of money by July, even before the tornadoes hit last week killing at least 19 people and destroying more than 5,000 homes.

Local officials initially believed that federal disaster relief would minimize the financial hit. But new estimates put the total cleanup at $400 million, the Birmingham News reports, 15% of which will come out of county coffers.

The county also expects a major decline in sewer revenue as a result of significant damage to a sewer treatment facility, Reuters reports. The sewer system has been a source of fiscal problems for the county since 2008, when interest rates skyrocketed on a $3.2 billion sewer bond debt. That debt must be repaid using sewer revenue.

As the largest county in Alabama, Jefferson County – home to Birmingham – is a key economic driver for the state. Because of its size and prolonged flirtation with Chapter 9 bankruptcy, bond markets are watching the county closely as a possible blueprint for the hundreds of U.S. municipalities struggling under heavy debt burdens.

Business Insider

Click here to see photos of the devastating tornado damage

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