KPMG, a highly respected consulting group, performed a management audit that contended MARTA, which runs an annual operating deficit of about $30 million, spent $50 million above the national average for employee benefits and could save between $60 million and $142 million over five years by outsourcing many functions.
Cherrington said the areas targeted at MARTA such as cleaning and payroll would be easier first steps for privatization, because the skills were interchangeable between industries.
She noted para-transit, a relatively expensive service for the disabled, is being outsourced nationwide to private providers by other financially-strapped public transit agencies.
“The first way a private sector can save money is through greater efficiency,” Cherrington said. “Obviously it means getting more done with the same number of people or getting the same thing done with fewer people.”
Finacially strapped MARTA is currently weighing privatization plans as a potential path to solvency. Both Parker and the MARTA board of directors have concluded that privatization of some services is necessary.
Parker said he didn’t expect that all the functions outlined by KPMG would be outsourced but MARTA may not have a choice. Currently, the state legislature is considering forcing MARTA to privatize the functions highlighted in the KPMG audit; MARTA officials have said the legislation could force them into privatization schemes that don’t save money or provide effective service.
Auditors examined various functions including administrative services, union contract, technology and para-transit service for disabled people to find savings recommendations. While auditors found the authority did better with administrative staffing costs, such as legal services and marketing, than comparable companies, it far exceeded the national average in areas such as information technology, revenue operations, training and contracts and procurement.
Curtis Howard, president of the local Amalgamated Transit Union, argued the savings outlined in the audit are suspect. He noted KPMG would not provide the raw data which it used to reach its conclusions on potential savings.”They want to talk about cost saving but they can’t provide the numbers,” Howard said. “MARTA has the right to outsource — MARTA outsources all the time…. but we have a right to know how much money privatization will save and how it will affect MARTA.”
Cherrington warned that mandating privatization is risky because it’s a complicated process that needs analysis on a case-by-case basis to see if it would benefit a particular transit agency.
“In general if you look at the research and the surveys that have been done, the agencies who have contracted out service said their greatest concern is to maintain quality,” she said . “Any agency especially as big as MARTA is well advised to evaluate all the costs…Local circumstances are unique and somebody has to carefully research it and put a sharp pencil to the numbers.”
The union engaged consultant Elliot Sclar, a Columbia University professor whose book “You Don’t Always Get What You Pay For: The Economics of Privatization” is a withering critique of what he contends are the shortcomings of outsourcing public-agency functions. Sclar argued the KPMG audit was biased in its use of data and designed to make a case for privatization rather than an honest critique of MARTA.
"The report's omissions are glaring," Sclar wrote in his report. "This has one obvious purpose: to provide a rationale for outsourcing regardless of the evidence."
MARTA directors have praised the KPMG report as a road map to financial solvency at an transit authority that unlike most its size gets no state funds, and largely relies on fares and sales tax in DeKalb and Fulton counties. Sclar contends that KPMG should have highlighted the absence of state assistance. Parker has noted that partial privatization is a way to persuade the legislature that MARTA deserves help.