By Melinda Dickinson

BIRMINGHAM, Alabama (Reuters) - Alabama's Jefferson County made progress during direct talks in New York with creditors over its $3.14 billion debt but more work is needed, the county commission president said on Friday.

The county, which is seeking to avoid what would be the largest municipal bankruptcy in U.S. history, held its first ever direct talks with creditors in a bid to resolve a crisis that has run for three and a half years.

"Some liquidity bank creditors felt that their hands were clean and they shouldn't have to make any concessions. In spite of this, they had already made some in advance of our meetings but made it clear there would be no more from them," said Commission President David Carrington.

"These concessions were not at the level we would have anticipated, based on their probable bad debt write-down," Carrington told Reuters, adding: "There was some progress but there's more work to be done."

Jefferson County's debt escalated in the mid-2000s when it refinanced a bond debt incurred as it upgraded its sewer system through a series of auction and interest rate swaps. Its creditors include JPMorgan Chase.

In all, county officials met 15-20 liquidity bank creditors and bond insurers including JPMorgan at meetings in New York this week.

They also met Assured Guaranty, Financial Guaranty Insurance Company, Syncora, Bank of America, CitiCorp, Bank of Nova Scotia, Lloyd's Bank, Bank of New York Mellon, Societe Generale and State Street Bank, said Carrington.

Jefferson County this month authorized Carrington and Finance Commissioner Jimmie Stephens to hold the talks in a bid to break a deadlock in negotiations after the county rejected what was on offer from creditors.

Bank of America told them at the meeting it had made a final offer in a concession offered in advance of the New York visit, according to Stephens, who gave no details of the concession.

"This is the final and best offer and the county will miss a huge opportunity if it does not complete the deal," Bank of America said, according to notes of the meeting obtained by Reuters.

Bond insurer Syncora also said it had no more concessions to make, according to the notes.

The county has now set September 16 as the date on which it will decide whether to pursue a negotiated settlement or bankruptcy.

Jefferson County is Alabama's largest and bankruptcy could make it harder for the county to attract investment, put a stain on the state's fiscal reputation and could also potentially rock the $3.7 trillion U.S. municipal debt market.

(Writing by Matthew Bigg, Editing by James Dalgleish)