Small City in Alabama Files for Bankruptcy Amid Pandemic

May 20, 2020 Updated: May 20, 2020

A small city in Alabama, which for years has struggled to make ends meet and has seen several businesses close due to the pandemic, on Tuesday filed for bankruptcy.

Fairfield, which some 11,000 people call home, registered a Chapter 9 filing at the U.S. Bankruptcy Court for the Northern District of Alabama in Birmingham on Tuesday, Bloomberg reports.

It struggled for years to mend its ailing finances, with Bloomberg reporting that Fairfield authorities said in the filing that the city had “exhausted its options.”

“The city has faced a substantial decline in revenues in recent years due to economic forces beyond its control,” a resolution from the city reads, The Hill reports.

Mayor of Fairfield Eddie Penny told The Birmingham News that “our expenses greatly exceeded our revenues, so we’re just seeking a fresh start,” referring to the purpose of a Chapter 9 filing, which is to provide a financially distressed municipality protection from creditors while it develops a plan for restructuring its debts.

Fairfield has between 200 and 999 creditors with $1 million to $10 million in liabilities, according to The Birmingham News.

Typically, municipal debts are adjusted either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by getting a new loan. In the 60-plus years since Congress established a federal mechanism for the resolution of municipal debt, there have been fewer than 500 municipal bankruptcy petitions filed.

Epoch Times Photo
People attend a political rally at Miles College, in Fairfield, Ala., on Febr. 27, 2016. (Justin Sullivan/Getty Images)

While it is unclear what role virus-driven business closures had on the city’s finances, Fairfield’s mayor told The Birmingham News that several businesses in the city had shut down due to the outbreak of COVID-19, the disease caused by the Chinese Communist Party (CCP) virus, the novel coronavirus that emerged from Wuhan and spread rapidly across the globe.

The outbreak has battered economies worldwide. In the United States, a staggering 20.5 million people lost their jobs in April. After states began implementing stay-at-home orders in March, more than 36 million people have filed jobless claims, Labor Department figures show.

“This precipitous drop in economic activity has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future,” Federal Reserve Chair Jerome Powell said in prepared remarks ahead of a Senate hearing Tuesday about the government’s multi-trillion-dollar economic relief programs to help American businesses and families impacted by the pandemic.

Around 20 percent of Fairfield residents live below the poverty line, according to the U.S. Census Bureau and the city is located in Jefferson County, which itself went bankrupt in 2011.

A 2010 census cited on Fairfield’s official city website says that the per capita income for the city of Fairfield was $18,221, while about 22.2 percent of families and 24.2 percent of the population live below the poverty line. About 40.5 percent of that population is under age 18 and 21.7 percent is age 65 or over.

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