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Jefferson County tax bill dies in Alabama senate

By Verna Gates

BIRMINGHAM, Alabama (Reuters) - Alabama's troubled Jefferson County suffered another financial blow as the state legislature failed to pass a bill overnight that would have allowed it to collect up to an additional $50 million a year in taxes and fees for its operating revenue.

The bill died in the state senate and never came up for a vote on the final day of the legislative session that ended at midnight, state representative Paul DeMarco, a Republican, told Reuters on Friday.

"It stayed contested in the Senate and never made it to the House," DeMarco said.

The county is struggling to ward off what would be the largest municipal bankruptcy in U.S. history over a $3.2 billion debt it owes on sewer bonds.

But it faces an immediate shortfall of $9 million per month in its operating fund. On Tuesday, the county said it would put one-third of its work force, or 967 people, on administrative leave without pay in a bid to recoup the deficit.

Republican state Senator Scott Beason had earlier said he would block a vote and county officials confirmed on Friday that this was the reason the bill never came for a vote.

Under Alabama's constitution, one senator can block a vote. The constitution also stipulates that counties cannot raise their own taxes unless they are granted "home rule" by the legislature.

Beason earlier told the Birmingham News newspaper the county could dip into its emergency fund and did not need the power to levy its own taxes -- an argument county officials and analysts dispute.

"Senator Beason referred to unearmarking as the best way to raise money. Unearmarking would (mean funds would) have to come from the indigent care fund, the Birmingham-Jefferson Convention Center and the Jefferson County public health department," said county finance commissioner Jimmie Stephens.

"That will never be allowed to happen," Stephens said, adding the county would start making cuts to recoup the shortfall.

Jefferson County's main city, Birmingham, is the largest in the state and a key driver of Alabama's economy.

The county's operating fund deficit would not directly affect its ability to keep up with its sewer bond repayment, said Andreas Rauterkus, a finance professor at the University of Alabama at Birmingham.

But Jefferson was in a worse situation overall than a few months ago because of a devastating tornado in April and a judge's decision in March to rule a key county tax unconstitutional, Rauterkus said.

"It seems in the case of Jefferson County that when it rains, it pours," he said.

(Additional reporting by Melinda Dickinson; Writing by Matthew Bigg; Editing by Kevin Gray and W Simon )