Good news on Atlanta’s water debt may raise support for bond referendumThe storm water pond at Historic Fourth Ward Park detains runoff in a sustainable storm water management program. It was built as part of the city's effort to upgrade its water and sewer system. File/Credit: Donita Pendered
By David Pendered
Atlanta’s upcoming $250 million bond referendum could get a political lift from positive credit rating actions on the city’s water bonds.
Moody’s Investors Service assigned a top investment grade rating to $1.25 billion in water bonds the city intends to sell Feb. 24. Atlanta will use the money to refinance existing debt at a lower cost.
The political implication of the positive credit rating is that it shows Atlanta is handling the water debt to the satisfaction of the big three credit rating agencies. Standard & Poors and Fitch Ratings joined Moody’s in providing positive ratings on the upcoming water bond package.
These rating actions provide a tailwind as the city continues its series of public information meetings about the proposed $250 million bond package. The referendum is March 17.
Mayor Kasim Reed took advantage of the ratings actions to release the following statement after the ratings actions were announced in late January:
“My administration remains committed to strengthening the city of Atlanta’s financial performance. The S&P and Fitch upgrades are another indication that we are taking the necessary steps to achieve financial growth and to provide responsible stewardship of ratepayer funds. I commend the Department of Watershed Management for their continued fiscal responsibility.”
Watershed Management Commissioner Jo Ann Macrina used the rating actions to commend Reed on his leadership:
“Mayor Reed has put us in a position of economic strength that allows the Department of Watershed Management to move forward on a $1 billion capital program of needed water infrastructure that includes the largest single project undertaken by the department; a new raw water tunnel and storage facility estimated at $280 million. Through this program, we will be able to provide a reliable water supply to the City of Atlanta customers for the next 100 years and maintain the value of the public’s water assets.”
Moody’s assigned an Aa3 rating to the $1.25 billon in bonds the city expects to sell Feb. 24 to refinance existing debt. Moody’s concurrently assigned the same rating to $3 billion in existing debt. The Aa3 rating is the fourth highest of 10 investment grade ratings issued by Moody’s.
Atlanta expects to reap 10.8 percent savings on the sum to be refunded. The city is not extending the maturities, according to Moody’s rating action.
Reed has paid close attention to public perception of the city’s fiscal management. The high-profile example is reform of the city’s pension program in 2011. As recently as his State of the City speech last week, Reed noted that the reform saved $270 million.
What Reed doesn’t typically observe is that credit rating agencies affirm his outlook on pension reform. S&P specifically cited pension reform as one of three reasons it raised Atlanta’s fiscal outlook to stable from negative in 2012.
Reed also points out that no tax hike will be needed to finance the proposed $250 million bond referendum. According to Reed’s prepared remarks for the State of the City speech:
“Atlanta currently faces a $900 million infrastructure backlog. And I didn’t want to put the burden for paying for it on the backs of taxpayers. I believe our citizens pay enough, so we will pay for these improvements without raising taxes.
“On March 17, we’ll put a bond referendum before the voters. We’ll ask if they want the City to raise up to $250 million to finance long-overdue projects.
“We want to replace streetlights to make neighborhoods safer. We want to repair and replace bridges to connect communities. And we want to synchronize traffic lights to ease commutes and get you home to your families faster.”