Alabama Raises a Question: When Is a GO Not a GO?

General obligation bonds, long considered the gold standard for safety, have become increasingly tarnished as the nation’s largest municipal bankruptcy plays out in Alabama. After the state Legislature ended its regular session refusing to provide fiscal relief to Jefferson County, commissioners last week redirected money that might have paid GO warrants to the general fund for operations. Without financial help from lawmakers to pay for essential public services, Alabama’s most populous county is poised to pursue a rare repudiation of some, or all, of its $200.5 million of outstanding GOs through its bankruptcy restructuring plan. The county lacks authority to impose taxes without state approval. In muni shops across the country, Alabama’s political unwillingness to pay what many used to covet as a secure investment is a hot topic centered on different types of GOs and proper disclosure of risks.

Bond Buyer

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