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Atlanta sewer bonds take new hit

By TY TAGAMI
Atlanta Journal-Constitution

A third bond rating agency downgraded Atlanta's water and sewer bonds Thursday.

Standard & Poor's Ratings Service dropped Atlanta one notch, from A to A-. That's on par with what Fitch Ratings did two weeks ago but not as bad as the assessment given by Moody's Investors Services, which downgraded the bonds two notches last week.

A statement from Standard & Poor's attributed the downgrading of the Atlanta Water & Wastewater Revenue Bonds in part to the failure of the City Council and Mayor Shirley Franklin to reach an accord on water and sewer rate increases. The rates must go up to pay for work mandated by two federal court agreements.

"The negative outlook reflects the need to resolve the political stalemate," the statement said. It went on to say that the bonds could be downgraded again if the city fails to approve adequate rate increases "in an expedient manner."

Atlanta agreed in federal court in 1998 and 1999 to fix its sewers so they'll stop dumping raw sewage into the Chattahoochee and other rivers.

Standard & Poor's gave several other reasons for downgrading the bonds -- the weakened regional economy, the cost of resuming control of water service after eliminating the contract with private provider United Water, the cost of the looming overhaul and the mounting cost of existing debt. Annual debt service on bonds sold previously will rise from $69.6 million this year to $93.2 million next year, a 34 percent increase.

The company said it will maintain a "negative outlook" on Atlanta's water and sewer system bonds because of the impasse over sewer rate increases.