Tuesday, September 25, 2012

Audit: MARTA should privatize some services, tinker with employees' benefits, possibly sell naming rights to stations

Posted By on Tue, Sep 25, 2012 at 9:12 AM

So there's good news and bad news.

We'll give you the bad news first. One of the country's top auditing firms says MARTA's current economic model is "structurally unsustainable" and in need of "significant and fundamental changes" to avoid additional cuts to an already skeletal transit system. Says MARTA about the report issued yesterday by KPMG, which the transit agency's board hired last year to examine its operations:

As part of its analysis, however, KPMG found that MARTA’s current economic model is “unsustainable” therefore requiring the agency to cut expenses by $25 million annually. Among the other key findings:

* MARTA is projected to exhaust its reserves by FY 2018, and will fall below its mandated reserve levels by FY 2016
* MARTA has an estimated $7.1 billion in unfunded capital needs through FY 2021
* High rates of employee absenteeism cost MARTA about $11 million annually in additional benefits
* MARTA’s annual retirement costs are $22 million more than the national average in the public and private sectors

In addition: KPMG says MARTA’s healthcare claim, retirement, and workers' compensation costs are $50 million higher than national averages. Moving away from legacy plans and reducing costs in those areas, the draft report says, could save up to $50 million each year.

So how does MARTA, which has laid off and furloughed employees, cut bus routes, increased headways between trains, hiked employee healthcare premiums, and probably even started working with the lights off cut even more from its budget and save itself from insolvency?

KPMG says the transit agency could hire third-party firms to perform specific services, including "payroll, computer support, customer service, recruiting, cleaning services and Mobility for paratransit customers." By doing so, KPMG says, MARTA could save anywhere from $60 million to $142 million over the next five years. Costs could also be contained by "making changes in its supply chain management, utilization of [its software], and procurement function."

In addition, the firm says MARTA could generate new revenues by wrapping more of its buses and trains with ads, installing billboards on its properties and facilities, offering more food and beverage concessions options, selling the naming rights to stations (!), leasing air rights, allowing alcohol advertisements, providing secure bicycle storage, and charging fees for reserved parking.

And the good news? The report notes the important role MARTA plays in the region — and why it's worth saving. According to KPMG, the transit system employs more than 4,500 people, inked approximately $288 million in contracts, often times with metro Atlanta firms between fiscal years 2010 and 2011, and generated approximately 25 000 jobs across the state.

And residents of Fulton and DeKalb counties who for years have suggested that the transit agency penalize suburban commuters who don't pay the 1-cent sales tax that helps fund the system — but who still park in MARTA's lots and ride its buses and trains — will be tickled to know KPMG floats the idea of charging non-residents to park. (We're sure there are some other bits of good news in the report. MARTA has been, in the past, called one of the country's most cost-effective transit systems. Please tell us what else you find.)

The transit agency's staff will now review KPMG's findings. Whether or not any of the recommendations are acted on depends on MARTA's board. MARTA says its audit committee was scheduled to discuss the report but postponed the meeting. We're sure the Amalgamated Transit Union will want to weigh in as well. State Rep. Mike Jacobs, R-Brookhaven, who chairs the Gold Dome committee that oversees MARTA and a proponent of privatizing some services, tells the AJC's Steve Visser: "You may need to force some concessions from the union to get to where you need to go... In the public sector, (the pension system) is not the model we see anymore and there is a reason for that. It has become a tried and true path to fiscal doom."

KPMG's report is filled with data and is worth a close read. We've embedded it below. If you'd prefer to download it, head here (PDF).

MARTA: 2012 KPMG Phase II Final Draft

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