Jefferson County could be about to file the biggest municipal bankruptcy in US history

This article is more than 9 years old

This article is more than 9 years old

Once famous for civil rights marches, Jefferson County, Alabama, could be about to file the biggest municipal bankruptcy in US history, eclipsing the record set when California's Orange County went bust in 1994.

Amid concerns that many states and local councils could take the same route in the face of budgetary pressures, officials are poised to opt for bankruptcy, according to a meeting notice from the county commission seen by the Bloomberg news agency.

At the meeting on Thursday, the five-member commission may also vote on extending a negotiating period with creditors who bought $3bn (£1.8bn) of bonds used to fund an upgrade of the county's sewers. Councillors have come to the end of a 30-day "standstill period" designed to allow the county and creditors, led by JPMorgan Chase, time to negotiate a restructuring of the loans to end the three-year debt crisis.

The county, home to the city of Birmingham and with a population of more than 658,000, has been in fiscal distress after a refinancing of the bond collapsed during the credit crisis.

A plan to continue with an "occupational" tax on the local population was scuppered in March by a court ruling.

Officials had said that the tax, which generated about a quarter of Jefferson County's general fund revenue, was key to ending the solvency crisis.

The county has put more than 500 employees on unpaid leave.

County commissioners met last week with Kenneth Klee, one of the attorneys who represented Orange County after it filed for bankruptcy, at that time the largest ever municipal filing. The county may vote at the meeting on Thursday to hire Klee's firm, Klee, Tuchin, Bogdanoff & Stern, LLP, according to the notice.

• This article was amended on 27 July 2011 to remove an incorrect statement that Jefferson County could become the first US local authority to declare bankruptcy since Orange County went bust in 1994.