Moody's Investors Service, one of the world’s leading credit rating agencies, affirmed Atlanta’s A1 rating on the city’s $3.2 billion water and wastewater revenue bonds.
Here's what it means to Atlanta’s and the region:
The rating: To satisfy a federal consent decree, Atlanta is in the midst of the largest capital project in its history with a $4 billion upgrade to its sewer and drinking water systems. The sewer program was once envisioned to be paid for by $1 billion contributions each from the federal government, the state and city taxpayers. But the overhaul grew to include water repairs and other work that pushed the total cost to $4 billion. Now, virtually the entire program is expected to be paid for by borrowing and repaid through a sales tax and rate increases on the system's customer accounts. Moody's assigned an A1 rating to the bonds for the project. An A1 Moody's rating means that the bonds are at an ""upper-medium grade," and subject to a "low credit risk." AA and AAA are higher ratings. Last week, Moody's reaffirmed Gwinnett County's AAA rating. The ratings have an overall impact on how easily municipalities are able to borrow money.
The reason: Moody's noted Atlanta's large metropolitan service area and diverse customer base, a demonstrated willingness to raise rates and ample system capacity. The agency also noted timely rate increases and sound budget management.
Challenges: The service also cited several key problems that the city still has to deal with, including the use of a voter-approved sales tax to maintain sufficient coverage; mounting capital needs to fund the federal consent decree; and an above-average debt ratio.
How to improve: In its report, Moody's indicated that Atlanta could possibly upgrade its rating by improving debt service coverage, lowering the debt ratio and terminating the consent decree.
What can cause Atlanta's debt rating to drop: Among other things would be the city's failure to renew the Municipal Option Water and Sewer Sales Tax (MOST) -- a penny sales tax on goods purchased in Atlanta in 2012 or 2016 -- could lead to the city getting downgraded.
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