Balla said he is not worried about the decrease in reserves because watershed management has $1.3 billion in cash on hand, which could be tapped in an emergency, he said. Peer cities also have a similar reserve requirement, he added.

Before submitting the legislation to the council, city officials also asked credit rating agencies if this move would downgrade Atlanta’s rating. Balla said the city was told it would not.

“We thought that having this mechanism and releasing this cash is in the best interest of the ratepayers,” Balla said. Otherwise, watershed management may have had to raise rates, which the department has not done since 2012.

From 2002 to 2012, water and sewer rates increased by 252% to be able to pay for the consent decree sewer improvements, according to court documents.

But if Atlanta defaults on a payment, it could damage the city’s credit rating, which in turn could make it more expensive to borrow money in the future, and rates could be increased to cover higher debt payments.

Balla said he doesn’t think a credit downgrade just because of the reserve fund change is likely unless there was also “significant revenue decrease, astronomical cash depletion, things that went haywire from an infrastructure perspective.”

But as Atlanta comes out from a recent water crisis and looks at upgrading more of its system, it needs to find the funding to make it happen.

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