BRADENTON, Fla. — Atlanta’s proposed 13-year extension to comply with the terms of a federal consent decree related to sewer overflows is a credit positive, Moody’s Investors Service said in a special report Monday.
Without an extension, completing the required projects in time could be costly for the city and ratepayers, Moody’s and city officials said.
The extension is still subject to final approval by the City Council and U.S. District Court overseeing the decree.
“With an additional 13 years, the city will be able to complete the required projects more frugally, while funding additional maintenance projects of other systems,” said Moody’s analyst Lauren Von Bargen.
Atlanta’s sewer system currently operates under two consent decrees. In 1998, a decree related to combined sewer and stormwater facilities was signed. The city has spent $759 million on repairs, and the decree is undergoing an evaluation to determine if federal government oversight will be terminated.
The decree signed in 1999 covers sewer overflows and so far the city has spent $802 million on repairs, according to Von Bargen.
The capital investments have resulted in a 97% decline in sewer spill volume and a 75% drop in the number of spills since 2004, she said.
“By extending the [sanitary sewer overflow] consent deadline to 2027 from 2014, the agreement gives the city more time to complete the remaining work needed to eliminate sewer overflows and make improvements to the drinking water system, spreading out the remaining costs over a longer period of time,” Von Bargen wrote in her report.
The system’s current capital improvement plan includes $445 million in pay-as-you-go capital projects for the consent decree.
No additional debt is contemplated because officials do not believe rate increases over the next four years are feasible, she said.
The city increased rates to pay for capital needs over the last four years, by 27.5% in 2009, 12.5% in 2010 and 2011, and by 12% this fiscal year.
The hikes “have brought the city’s water and wastewater rates to among the highest in the country,” Von Bargen said. The sewer system also benefits from a 1% local-option sales tax imposed in the city.
The consent decree improvements are overseen by the Atlanta Department of Watershed Management, an enterprise agency that has $3.3 billion of outstanding debt. The DWM’s bonds are rated A by Fitch Ratings and Standard & Poor’s, and A1 by Moody’s Investors Service.
The proposed extension will be considered by the City Utilities Committee on Tuesday.
If the panel passes it, the extension will be considered by the Atlanta City Council on Monday.
