Jefferson County Bankruptcy a Blow to Long-Suffering Birmingham

Birmingham, Alabama, the most prominent industrial center in the Southeast before the civil- rights era, has been on a long losing streak that just got longer.

In 1997, Daimler AG opened a Mercedes-Benz factory in Vance, one county west of the state’s biggest city. Honda Motor Co. put a plant to the east, Toyota Motor Corp. to the north and Hyundai Motor Co. to the south. Birmingham lost its minor-league baseball team to a suburb in 1987, and the Iron Bowl football game in 2000. Plans for an entertainment district foundered. The city’s population plummeted almost 13 percent since 2000, even as the state grew.

Birmingham is also the seat of Jefferson County, which filed the biggest municipal bankruptcy in U.S. history under the burden of more than $3 billion of sewer-system debt. The so- called Magic City may need a big trick to persuade residents and businesses that its days of losing are over.

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Birmingham was once a manufacturing center whose steel furnaces lit the night sky. A 56-foot statue of Vulcan, the Roman god of the forge, looks down on the city from a 124-foot pedestal that rises from Red Mountain, where he holds aloft the tip of a newly hammered spear.

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The slide to bankruptcy began in 1996, when the county was forced to rebuild its sewer system after pollution was found spewing into rivers. Risky derivative financing for the project backfired beginning in early 2008, leading the county to become one of the biggest casualties of Wall Street’s credit crisis.

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Birmingham, with 4,160 employees and a $371 million general-fund budget for 2011, carries Moody’s Investors Service’s third-highest bond rating at Aa2.

Jefferson County’s bonds are rated 14 levels lower: Caa1, below investment grade.

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Residents are torn as to what bankruptcy will mean.

“It’s a sad day for Birmingham and for Jefferson County,” said Sophia Faulk, owner of Sophia’s Deli and Catering across the street from the county’s offices. “I’ve never seen people so unhappy.”

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Hilson of the Business Alliance said the city, which has weathered so much, will outlast this storm.

“All of the positive attributes of the community in time will overshadow what has happened and is happening now, but that’s going to take some time,” he said. “It’s certainly not going to be an overnight fix.”