Cut, save and outsource
A MARTA audit says the nation’s ninth largest public transit system’s economic model is unsustainable and if spending continues at the current rate the system will have exhausted its savings by 2018. Below are a few recommendations to fix MARTA’s finances.
Privatize. The audit pointed to several functions where MARTA would save money by privatizing. For example, MARTA pays $27.55 an hour for cleaning when the national average to pay a vendor to do the same job is $18.86 an hour, or 46 percent less.
Cut labor costs. MARTA pays more than its peers for health care, workers compensation and absenteeism. The audit cited absenteeism as a fixable employee cost by changing MARTA's policy. Right now, absenteeism costs MARTA more than $10 million annually.
Inventory control. MARTA’s spending on needed supplies, such as rail and bus parts, could be lower, according to the audit. A better inventory control system the better predicts supply needs could save MARTA up to $5 million a year.
To view the full audit, go to www.itsmarta.com
MARTA is spending $50 million above the national average for employee benefits, but if it revamped its health care, retirement and worker compensation plans, it could erase a projected $33 million operating deficit, an audit released Monday reveals.
The transit authority will have to cut services even more in a few years if it doesn’t control runaway costs, according to the KPMG audit, commissioned by the authority’s board of directors to give it a blueprint for stabilizing the troubled finances and to expand its services.
The audit said that, in addition to the labor and retirement savings, the authority could save between $60 million and $142 million over five years by outsourcing many functions. According to the audit, the five-years savings if cleaning services were privatized would be $29 million to $49.5 million.
Moreover, the report said, the high rate of employee absenteeism cost MARTA about $11 million a year, while worker compensation claims were costing $5.5 million more than the national average.
The report will undoubtedly provide ammunition to MARTA’s critics in the legislature, who have long contended that the authority’s finances were out of control. State Rep. Mike Jacobs, R-Atlanta, who chairs the legislative committee that monitors the quasi independent MARTA, has advocated privatization of some areas, such as payroll, human resources and cleaning.
“The amount of the savings is pretty staggering,” he said Monday. “I think it is pretty clear that there are things to be done.”
MARTA officials have argued the authority is unfairly hobbled by laws limiting its control over its revenues. Officials have also complained that MARTA, nation’s ninth-largest transit system, is the only system of its size that doesn’t get any state funding but instead receives most of its money on sales tax in Fulton and DeKalb counties.
In a MARTA statement, board Chairman Frederick Daniels said the audit is critical to preserving the $6.4 billion investment in infrastructure MARTA represents.
“I cannot overstate the importance of this report,” Daniels said. “This study is very important to all of us who are committed to ensuring that MARTA’s financial house is in order and transforming this agency for the benefit of customers.”
The auditors highlighted MARTA’s importance to the region, noting it employs 4,500 people, issued $288 million in contracts to private companies between 2010 and 2011, and its presence generates an estimated 25,000 jobs statewide. It also noted MARTA has taken tough steps to control costs — freezing employee wages for five years, cutting 700 positions and laying off 400 employees, steps that slowed but didn’t stop the flow of red ink.
The MARTA board has made it clear that the staff needs to find ways to make more money and to find savings through more competitive contracts and other strategies. On Monday after a presentation on potential strategies for MARTA to bolster its advertising sales revenues, director Adam Orkin showed his impatience.
“I get tired of coming down here and hearing briefings,” he said. “I want to see some execution.”
The audit comes just before the board is to chose a general manager to replace outgoing General Manager Beverly Scott. The board expects to vote next week on the two finalists — Keith Parker, who heads a transit authority in San Antonio, Texas, and Steve Bland, who heads the transit authority in Pittsburgh, Pa.
Scott was chosen Monday to head the larger Massachusetts Bay Transportation Authority but at a much reduced salary, the Associated Press reported. Scott, who makes more than $315000 a year at MARTA, received a three-year contract with an annual salary of $220,000, the wire service reported. Her total compensation last year was $371,000.
Whoever is chosen for the Atlanta job will be heading an agency with projected financial shortfalls of $114 million by fiscal 2016 and of $248 million by 2021, according to the audit. That could meanpotentially large service cuts. The audit also found that the authority needs another $6 billion to $7 billion for capital improvements by 2021.
“For long-term fiscal sustainability, MARTA must alter its revenue or funding sources or decrease its cost structure by a minimum of approximately $25 million annually,” the audit said.
Auditors examined various functions including administrative services, union contract, technology and para-transit service for disabled people to find savings recommendations. While auditors found that the authority did better with administrative staffing costs, such as legal services and marketing, than comparable companies, it far exceeded the nation average in areas such as information technology, revenue operations, training and contracts and procurement.
The auditors’ recommendation that the board privatize services likely to be opposed by the Amalgamated Transit Union, which represents 64 percent of the workers. Other recommendations likely to set up a union fight are recommendations that MARTA terminate its pension plan and move to an employee contribution plan and decrease retirement benefits.
“You may need to force some concessions from the union to get to where you need to go,” Jacobs said. “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.”
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