Perdue offers sewer money

By TY TAGAMI and JIM THARPE
The Atlanta Journal-Constitution

HOW THE BIG SEWER FIX WOULD WORK First, the state gives the city $500 million in low-interest loans over 10 years: • Gov. Sonny Perdue restructured the Georgia Environmental Facilities Authority so large cities can borrow up to $50 million annually for infrastructure improvements. • The Legislature would approve the sale of $170 million in low-interest bonds over much of the next decade. State taxpayers would pay back the bonds, and the proceeds from the bond sales would pour into a revolving loan fund managed by GEFA. The fund, which is augmented with federal loans, would grow as communities pay back what they borrowed, with interest. Atlanta would have 30 years to repay the loans. The catch: The Legislature has to approve the loans each year. With changing politics, no one can assure that will happen. • Second, the state allows Atlanta's voters to raise the city's sales tax by a penny: • The Legislature would approve a bill to permit any city to increase its sales tax to defray the cost of a court-ordered sewer repair. • Perdue would sign the legislation, which could help the city raise $70 million to $100 million a year for up to five years. • The City Council would authorize a referendum in which Atlanta voters would have to approve the penny increase. The catch: City residents already unhappy about a big water and sewer rate hike would also have to pay the additional sales tax. Officials say up to 30 percent of those who would pay it live outside the city.

Atlanta water and sewer customers got some good news Tuesday, when Gov. Sonny Perdue and Senate President Pro Tem Eric Johnson announced proposals that could generate nearly a third of the money required for the city's planned $3.2 billion plumbing overhaul.

The bad news is that most of the up to $1 billion in aid would come largely from city residents -- half from a series of low-interest loans that Atlanta water and sewer customers would have to repay, and another $350 million to $500 million from a proposed citywide sales tax increase.

Mayor Shirley Franklin, though supportive of the proposals, said they would not change how much she proposes to raise water and sewer rates in the near term. Franklin said she will still recommend to triple base rates to improve the crumbling sewer system, but the state assistance would eventually help offset the increases.

Perdue announced at a morning news conference that he will ask the Legislature to approve $50 million a year in low-interest loans to Atlanta over the next 10 years. The state has an impeccable credit rating and can borrow money at a lower interest rate than the city. That means Atlanta water and sewer customers would pay less interest when they repaid those loans.

"It's not just about the city of Atlanta, but the state as a whole," said Perdue. Other Republicans also said they recognized that Atlanta's financial health is crucial to the state's.

The loans would make only a small dent in the beginning. That is because the lower-interest loans would likely comprise about one-tenth of the overall debt over the next five years -- the period during which Franklin has proposed to triple the base rates. The city is planning to commit $2.5 billion to plumbing improvements by 2008, and under the best scenario the state would lend only $250 million by then.

The loans would have to be approved each year by the Legislature, even after Perdue leaves office. And they come with a string attached: The state board that lends the money would oversee how it is spent. Perdue, referring to a history of financial scandals at City Hall, named Georgia-Pacific President Lee Thomas to the oversight board.

Johnson proposes help

An hour after Perdue's announcement, his Republican ally Johnson, the leader of the state Senate, made news of his own. Johnson (R-Savannah) said he will back legislation allowing for a local referendum to raise the sales tax in Atlanta to 8 cents.

Johnson's proposal, which would require approval by the Legislature and city voters, would push Atlanta over the current 7-cent cap set by state law. City officials estimate it could raise $70 million to $100 million a year for the five years it would be in effect.

The increase would put Atlanta among the country's top-taxing cities. New Orleans levies a 9 percent sales tax; Seattle, 8.8; Chicago, 8.75; and New York City, 8.625.

Franklin, who attended Perdue's and Johnson's news conferences, said she was thrilled with both proposals.

She said 30 percent of the sales tax proceeds would be paid by tourists, commuters and others who live outside the city.

Franklin said the governor's backing would lend "support and credibility" to the overhaul plans, and would assist with efforts to lobby for aid in Washington -- which have so far met with little response. "It gives us the kind of push and oomph we need to get over the finish line," she said.

U.S. Sen. Zell Miller (D-Ga.) agreed Tuesday's announcements could serve as a catalyst to free federal funds for the massive public works project. "Anytime our congressional delegation can point to examples of how the city and state are working together to help solve this problem, it will help us make a stronger case for federal help," Miller said in a written statement. The Republican proposals will need to pass the Democratic-controlled state House, whose Speaker Terry Coleman (D-Eastman), gave the plan favorable marks. " I commend the governor for offering low-interest loans but it's going to take a combination of solutions to help the city of Atlanta and it's going to take some self-help, too," Coleman said.

State Rep. Bob Holmes (D-Atlanta), said he does not think a 1 percent sales tax hike would change shopping habits in the city much, and he predicted the proposal would get a warm reception from Atlanta's legislators.

"It will not hurt business in the city significantly," Holmes said. "If it would, members of the business community would not be behind it like they are."

Business backs plan

Sam Williams, president of the Metro Atlanta Chamber of Commerce, stood along with the governor when he announced the state loans. And Williams said in an interview that the chamber supports Johnson's sales tax proposal because business leaders fear the alternative: huge increases in water and sewer bills and a moratorium on development.

Environmental regulators have threatened to stop new water and sewer hook-ups should the city fail to make mandated improvements, and city officials have interpreted the warnings to mean that ongoing projects such as the Georgia Aquarium and Atlantic Station would be idled.

That would ruin Atlanta's reputation as a good place to do business, Williams said.

"Literally all of the goodwill created since winning the Olympics would be terribly damaged," Williams said.

The threat of a moratorium and other sanctions hangs heavy. Atlanta agreed in federal court to do $1.8 billion in improvements to its water and sewer system -- part of a $3.2 billion spending package to be completed by 2014.

Of that amount, $1.5 billion in court-ordered work would begin within the next five years, along with another $1 billion in projects that were not court-mandated, for a total of $2.5 billion in work by 2008.

The city must raise water and sewer rates to pay for the work. This month, the City Council, feeling pressure from residents who said they couldn't afford to pay triple rates, voted 8-7 for a smaller increase. Franklin vetoed those lower rates.

'It won't impact' plan

Franklin said in an interview Tuesday that increases in the base rates could be scaled back as the revenue from the state loans and the sales tax materializes.

"It won't impact our rate proposal for 2004. It may begin to impact it in '05, '06 and '07," Franklin said.

City Councilman C.T. Martin, who was among the eight council members who voted against Franklin, wasn't happy with that.

"I think we can thank the governor and all the people who stepped up to the table, but the ratepayers still don't want 45," Martin said, referring to the 45 percent increase in the water and sewer rates that Franklin proposed for next year and again in 2005.

But Franklin only needs one of the eight council members to have a change of heart. And one of them, Councilman H. Lamar Willis, stood with the mayor and the governor at the news conference Tuesday.

Asked if the state loans had influenced his position on rate increases, he responded: "We do understand a rate increase is necessary."

-- Staff writers Robert Luke, Tony Wilbert and Rhonda Cook contributed to this article.