Citing MARTA's dwindling reserves and need for an additional subsidy, a major bond rating firm said Friday it is less sure of MARTA's ability to pay back some of its loans.
Moody's Investors Service downgrade of its rating on some MARTA debt might cost the transit agency in higher interest rates in the future. But MARTA's treasurer said it would not cost anything additional right now.
"Aa3 is still a very good rating," the treasurer, Kevin Hurley, said. "This is like a little chink in the armor. If it starts going further, to me that’s an issue."
Hurley said the impact of the rating downgrade would come if MARTA tries to take out long-term fixed-rate loans, such as those for building big capital projects. MARTA doesn't have any of those projects scheduled for three years, because there's no money available for them, MARTA CEO Beverly Scott said. After that, MARTA hopes to get a piece of a transportation funding referendum, if voters approve it.
The poor economy has dealt MARTA a double blow: Sales tax revenue it depends on from Fulton and DeKalb counties has fallen, as have fares as fewer people with jobs means fewer people riding transit. MARTA plans to empty its reserves by the fiscal year 2013 and, in the meantime, is cutting service by more than 10 percent -- a move that will decrease fares further.
The downgrade from Aa2 to Aa3 on part of MARTA's debt still leaves it "high-grade," according to Moody's investment scale. But the outlook for all long-term MARTA debt is now changed from stable to negative.
Moody's praised MARTA's "conservative budgeting and cost containment measures," but noted that its credit future hinges on some factors that are not all in its control. "A lack of additional external financial support" could make things worse, Moody's said, as could "sustained declines in ridership." That's more of an issue now that service is being cut.
"The chickens are coming home to roost," Scott said. "The fact of this agency as well as the others not having long-term financial sustainability, this has been known."
Scott cited a combination of reasons for the lack of sustainability. MARTA is unusual among large transit agencies in having no significant, sustained funding from the state. In addition the federal government stopped subsidizing the operations of the largest transit systems in 1998, an act that Scott called "significant" for MARTA.
Scott also said that without its reserves, MARTA might have had to cut service as much as 50 percent to balance its budget.
The Atlanta Journal-Constitution will have an in-depth look at MARTA's spending history in Sunday's paper.
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