Ellis recalls Shelby County’s brush with bankruptcy

Published 5:36 pm Thursday, November 10, 2011

By BRAD GASKINS / Staff Writer

COLUMBIANA – Every few months, it seems, another report is released recognizing Shelby County for job creation and fiscal responsibility.

A report last summer from Alabama State University, for example, ranked Shelby County’s economy the best in the state.

That’s a far cry from nearly 20 years ago, when the county was sinking fast in a pool of red ink.

“We were in debt close to the maximum allowed under the constitution for debt limits for our county,” Shelby County Attorney Butch Ellis recalled Nov. 10, a day after Jefferson County filed for the largest municipal bankruptcy in the U.S.

“We were literally on the verge of bankruptcy,” Ellis said.

In 1993, Shelby County was broke and defaulting on numerous loans, including a $22.5 million sewer debt and liens on the county courthouse, among others.

Preliminary Chapter 9 papers were prepared, and “we were ready to go,” Ellis said.

Defaulting on the bonds would have destroyed the county’s credit rating “for a long, long time,” Ellis said, noting that the county ultimately “opted to find a more honorable solution” for its financial woes.

The Shelby County Commission in 1993 faced the problem head-on. Previous commissions had caused the debt problems, Ellis said, and the 1993 commission began digging out of the financial hole.

The commission enacted what amounted to a 1-cent sales tax to go specifically to pay off old debt, Ellis said. The tax was not to be imposed for more than 10 years. The commission that inherited the debt paid it off and cancelled the tax three years ahead of schedule.

“It reestablished Shelby County on the path to financial stability that it enjoys right now because of the wise, good management of Shelby County by the commission and by the staff,” Ellis said.

Would Shelby County be in the financial shape it is now if it had filed for bankruptcy?

“No,” Ellis said. “We would still be digging out from paying for the consequences of that.”

Ellis, as well as two other county officials, said Jefferson County’s current bankruptcy will not have much of a negative impact on Shelby County.