Atlanta water customers due $3.9M in refunds

And, rate hikes in 2008 were based on overestimates of how much sewer work the Department of Watershed Management could pull off and the actual cost for those projects.

These are among 83 findings from a $500,000 audit of the Watershed Management Department ordered by the city council last year and presented to the council Wednesday.

Council members, already worried about the city's low credit rating and ability to continue borrowing money to pay for Atlanta's ambitious $4 billion pipe overhaul, said little Wednesday during the six-hour presentation.

City officials had warned coming into the session that any drama surrounding the audit could derail Atlanta's ability to borrow money to continue the court-mandated pipe reconstruction.

"It's important now that we are in the bond market that support be visible," said Rob Hunter, watershed commissioner.

CFO Jim Glass, who's overseeing an up-to-$750-million bond issue approved by the council Monday, said Atlanta must continue to borrow if it is to complete the costly water and sewer work.

He said the city must borrow now because bankers have canceled a $600 million line of credit and because interest and other charges associated with the money already borrowed on it soon will skyrocket.

Atlanta also wants up to $223 million for new projects if the city's credit holds up. Watershed now hovers just one step above junk-bond status. The city has already borrowed more than $2.6 billion toward the project and made its water and sewer rates among the nation's most expensive to pay for it.

If Atlanta succeeds in borrowing up to $750 million next month, city officials hope to borrow another $500 million in 90 days. Glass said Atlanta must get rid of some variable rate bonds before rates jump.

Glass and Hunter fear the entire $4 billion project — about $3 billion of which is mandated by two federal consent decrees — will unravel if the financing falls apart.

"That's a worst-case scenario," Glass said Wednesday.

Of all the issues discussed Wednesday, council members seemed most concerned that the department owes Atlanta ratepayers millions in refunds.

Watershed, auditors noted, is required by city code to refund deposits after five years of service, but it routinely fails to do so. Auditors also said the department reset account start dates in 2007 when it began using a new billing system. That change meant that thousands of customers who began service in 2003 and 2004 and should have become eligible for refunds now won't be for years.

"I put a deposit down when I moved into my home," said Councilwoman Carla Smith, chair of the council's utility committee. "I don't think I ever got my deposit back. I'm going to call myself."

At the same time, they noted, watershed has $3.9 million in overpayments that should have been refunded to owners of about 30,000 accounts when accounts were terminated. Auditors said state law requires that money be sent to the state to be held in an account for unclaimed monies.

Watershed took over operation of the system following a disastrous privatization attempt by United Water ending in 2003.

Watershed leadership sat alongside auditors during Wednesday's presentation, noting they agreed or partially agreed with most of the findings. Hunter said many of the auditors' suggestions have been implemented and promised more will be.

Watershed, Hunter said, is "improving and will continue to get better."