A tale of market risk, false hope, and corruption

The impact of adjustable rate debt on the Jefferson County, Alabama Sewer Authority

Bibliographic Data

ID20201352
AuthorsDwight V Denison (University of Kentucky), James B Gibson (University of Tennessee at Martin), J Bryan Gibson (University of Kentucky)
Year2013
Volume25
Issue2
Pages311-345
Publication date2013-03-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Public Budgeting Accounting & Financial Management (JOURNAL)
Journal identifiersISSN: 1096-3367 • E-ISSN: 1945-1814
PublisherEmerald (PUBLISHER)
DOI10.1108/jpbafm-25-02-2013-b004
OpenAlexW4250684884
LanguageEN
Citations received2
References cited10

Jefferson County, Alabama undertook a series of risky financial maneuvers in 2003 that included issuing large amounts of variable rate and auction rate securities as well as engaging in numerous interest rate swaps in order to lower the burgeoning costs of repairing its sewer system to comply with federal regulations. These complex financial instruments, intended to lower debt service costs on the countyʼs $3 billion in outstanding sewer warrants, led the county to financial bankruptcy in the wake of the financial markets collapse. This paper explores the choice of securities by analyzing the risk of adjustable rate securities and interest rate swaps, examining the Jefferson County case in detail, and providing some lessons for future financial management within the context of unexpected events such as the current recession

Actuarial science · Bankruptcy · Business · Debt · Economics · Financial market · Financial system · Floating interest rate · Interest rate · Banking stability, regulation, efficiency · Credit Risk and Financial Regulations · Housing Market and Economics · Finance

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