City of Atlanta council members and staff reviewed proposed FY 2025–26 budget scenarios Wednesday, focusing on water-rate changes, loan and grant timing and options to protect the city’s debt-service covenant with the Water Development Board.

Council staff member Finley opened the discussion by distinguishing budget decisions from rate-setting: “your budget often reflects or assumes what some rate changes will do, but it doesn't but it's 2 separate actions,” and said staff’s preference was to “align rate increases when the expenses are incurred or anticipated.”

The discussion centered on a scenario (referred to as scenario 6) that phases a planned rate increase over two years rather than implementing the full increase in a single year. Staff financial analysis presented by Kara showed that the two-year scenario would reduce near-term revenue and put projected water program revenues about $235,000 lower in the first year but would bring the system to a debt-service coverage ratio “right at 1.1,” the level staff said it must meet under loan covenants.

Finley and Kara told the council the budget as presented already embeds some water-related items — including firm water-reservation costs, covenant compliance costs and foundation loan interest payments — and that the city is obligated to begin servicing certain loans this year. Finley said staff would continue to “run that to ground” to determine whether grant interest can be used to bridge near-term cash needs.

Council members asked staff to have Willdan, the city’s rate consultant, run additional scenarios. Finley said staff would seek “a few more scenarios” from Willdan and would package a budget for formal consideration with the council’s direction.

Council direction and next steps

- Staff will package the FY 2025–26 budget for formal consideration, incorporating council guidance on water-rate timing and the consultant scenarios and return the package at the next council meeting. (Direction)
- Staff was asked to request additional rate scenarios from Willdan, including phased (two-year) options to meet Water Development Board loan covenants while mitigating immediate residential impacts. (Direction)
- Staff will continue to investigate whether grant interest or other temporary funding sources can bridge near-term obligations while delaying rate increases until expenses are realized. (Discussion/direction)

Why this matters: the city's water program carries debt and compliance obligations tied to external loan covenants. The council’s choice — accelerate rate increases now or phase them as expenses materialize — affects utility customers, capital projects and the city’s compliance with lending requirements.

The council did not adopt an ordinance or take a formal vote on rates at the workshop. Staff repeatedly noted that rate adjustments are a separate formal step that would be brought back to council for consideration if the council wants to proceed after reviewing the additional scenarios and consultant input.

Background and context

Staff warned that the FY 2025–26 draft budget includes embedded water-related revenue assumptions tied to scenario 1 and said some capital items and obligations can be shifted or amended by council action in future sessions. Kara summarized that phasing increases would lower immediate revenue but keep the city in compliance with the water loan covenant while giving staff time to sequence capital spending.

Staff indicated they would present a packaged document for the council’s formal consideration at the next meeting and that further adjustments would be likely as the budget moves through the formal adoption process.