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Or at least, its sewer debt.
Jefferson County, Alabama is one of the most indebted municipalities in the US, with $4.6bn owed to creditors, and it incurred most of that debt during an expensive overhaul of its sewer system.

In June, the county hired Merrill Lynch to help restructure its $3.2bn in sewer-related debt, and to help it stave off a bankruptcy that would dwarf even Orange County’s in scope. Now, just over a month later, the county’s commissioners have voted to fire Mother Merrill in favour of a couple of regional firms and possibly, Goldman Sachs.

Goldman is due to conduct an internal review to ensure the investment bank has no conflicts before it signs up to the task, Commission president Bettye Fine Collins told Bloomberg.

Jefferson has until August 1 to to meet an interest payment of around $184m, but if the county doesn’t pay up or is forced to declare bankruptcy, the real pain will be felt by a pair of bond insurers: FGIC and XL Capital, which guarantee around $2.8bn of the county’s sewer debt.

At least some of Jefferson County’s problems are directly related to that very same insurance, since when FGIC and XL were first downgraded back in February, investors started demanding higher interest payments on any bonds bearing their insignia.

It’s always about the bond insurers, these days.
Related links:

JPMorgan, 11 Others Sued Over Jefferson County Crisis - Bloomberg

Alabama mayor charged over municipal bond scheme - FT

Jefferson County struggles against debt - FT