An Alabama City Wants to Leave Bankruptcy, Even as It Owes Millions

When U.S. Army Col. Gregory Parker returned home to Alabama from the war in Iraq in 2017, he expected to retire.

Instead, the former Fairfield police officer found himself looking for a job. It turned out Fairfield had not paid into his pension and retirement during the 13 years he served the Army in Iraq, Afghanistan and at Camp Shelby in Mississippi, he said.

“I was under the impression that they were paying into my retirement,” Parker, 57, told AL.com. “Next thing I know, I found out they filed for bankruptcy. They didn’t tell me.

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Parker is one of nine former employees, companies, government agencies and other creditors trying to get back millions of dollars they say Fairfield owes.

The city of just under 10,000 people west of Birmingham filed for bankruptcy in 2020, with just 26 of its 210 creditors reporting $28 million in unpaid debts.

But signs of Fairfield’s economic decline began at least five years before, long before the Covid pandemic, when the city couldn’t keep up with its bills for employee payroll and other public services. Fairfield rationed gasoline for city vehicles and even let people out of the city jail because they couldn’t afford to feed them. Then, in late 2015, U.S. Steel laid off 1,100 workers. Three months later, Walmart left town, laying off 300 employees and leaving the city as a food desert when the Supercenter closed.

In February 2015, Fairfield reported $1 million in the bank and $8 million of debt.

With the old Western Hills Mall now near empty, the city’s main retailers today are Home Depot and Dollar Tree.

More than 90% of Fairfield residents are Black, one-fifth live in poverty, and 15% are seniors. {snip}

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And in July, just over three years after filing for bankruptcy, the city said in court filings that its financial conditions have improved. Fairfield asked U.S. District Judge Tamara O. Mitchell to dismiss the bankruptcy case.

“The cloud of bankruptcy has impaired the debtor’s ability to receive third party assistance towards the advancement of city planning and economic development,” the city wrote in its motion to dismiss.

It’s rare for local governments to file for bankruptcy. A report by Pew Charitable Trusts counted just 29 filings between 2001 and 2018.

The city also said that since filing for bankruptcy it lost revenue sources and hasn’t resolved its unpaid bills with creditors, including Parker.

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When Fairfield filed for bankruptcy, it said in court records that it had “exhausted its options” to find financial stability. Since then, nine creditors have filed claims to receive a total of nearly $2 million.

At the time, its largest creditor was U.S. Bank, which reported an $18 million secured claim in court records. Other creditors included Fairfield Board of Education, Alabama Power, Birmingham Water Works and Regions Bank.

The IRS filed a claim in the bankruptcy case, saying Fairfield owed more than $780,000 in unpaid federal taxes and interest as of this April. The Jefferson County Sheriff’s Office, which started providing law enforcement services to Fairfield after it struggled to keep its own police force in 2019, said in court records that the city owes nearly $490,000. Another former employee filed a claim for $110,538.

Several other creditors, including the Birmingham-Jefferson County Transit Authority and First Insurance Funding Corp., sued the city several years ago over unpaid services, court records show. The results have been mixed; in some cases, judges dismissed them, ordered the city to pay up or put the case on hold until the bankruptcy proceedings get resolved.

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How Fairfield plans to chart a path to financial viability in the face of millions of dollars of debt is unclear. At its City Council meeting on Sept. 18, a city official reported $1,653,862.35 in the bank, 65% of which has restricted uses.

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