MSD: THE COMPARISON CONTINUES

As most any reader on this site knows by now I have written many times about MSD and the potential financial crisis looming. In July I started with a simple comparison. Louisville News and Politics: EPA Consent decree: Bankruptcy near for Jefferson County

In the beginning of the MSD series of open public meetings our efforts were compared repeatedly by Bud Shardein to the efforts of Birmingham, Alabama.

They were mentioned as a City we were modeling ourselves after through the EPA consent decree etc. Thanks to the exposure of this "model" Birmingham was dropped from discussion from all subsequent public meetings.

Wonder why.

I have reported about the crisis facing Jefferson County Alabama, Birmingham, because of the financial risks and severe debt they are in due to lack of oversight, greed, and corruption by officials. Louisville News and Politics: MSD: DISASTER LOOMING?

There is now more to the story. According to a CNN report, FBI arrests Birmingham, Alabama, mayor - CNN.com , the Mayor of Birmingham has been indicted on federal charges including conspiracy, bribery, fraud, money laundering and filing false income tax returns. According to US attorney Alice Martin "Our investigation has revealed, and the indictment alleges, that Langford sold his public office to his friends and political supporters," Martin said.

The allegations go back to a 1996 consent decree entered into by the commission to bring Jefferson County into compliance with the Clean Water Act, which required authorizing billions of dollars in transactions.

Though the financing was set up by then-big financial institutions -- including J.P. Morgan, Goldman Sachs, Lehman Brothers and Bank of America -- "Langford used his position to make it a condition that those financial institutions include Blount Parrish in the financing deals and paid Blount Parrish a fee in order to get the county financing business," Martin said.

She cited an October 2003 financial transaction that included Bank of America and Lehman Special Financing Corp. that required Lehman to pay an "arrangement fee" of $35,000 to Blount's company.

She added, "Through a web of financing agreements, Langford required many institutions to use Blount as a consultant so Blount would make fees and in turn pay off Langford. It was a classic pay-to-play scheme."

Interesting.

Rumors have abounded for years from many business owners locally, who prefer to remain anonymous for fear of retribution, that this "pay to play" scheme is alive and well here in Louisville when seeking City business. Though many of you may not want to believe this it does make one wonder why we consistently use out of town labor for local projects when we have our own pool of qualified people locally to do the jobs.

Could it be because they won't pay to play? Is the cost of paying to play too high?

You can judge that one but back to the story.

Jefferson County Alabama got in major financial trouble due to a series of financing gimmicks such as debt swaps, interest rate swaps etc. No one knew the costs of such a project associated with the consent decree in the beginning.

No one knows the final costs associated with one now.

MSD last year used a 32% rate hike for new revenue and yet we still have major sewer problems. Consider this. Interest rate swaps and other gimmicks have been discussed here as well. This led to major problems for Birmingham Alabama, what will it do to us?

The current $20 million budget shortfall Abramson continues to try and convince us we have in this year's budget is a drop in the bucket when compared to what will happen if MSD has problems with hundreds of millions.