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. Privitazation could save MARTA up to $142 million over five years, the audit estimates.
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 chairman Frederick Daniels said Friday the transit authority is committed to privatization, reviewing employee benefits and enacting other cost-saving measures designed to keep it from fiscal collapse.
“Fiscally, we can’t sustain where we are,” he said after meeting with auditors,. “MARTA’s economic model is broken.”
MARTA is running a $33 million operating deficit and balancing its finances by dipping into reserves it built up during good times. If nothing corrects that situation, in about three years, the reserve pool will dry up and the transit authority will be forced to either cut service substantially, raise fares again or both.
Daniels wouldn’t be specific about what demands MARTA management would make of the the Amalgamated Transit Union during contract negotiations next spring, but he made it clear management would use a recent management audit to shape MARTA’s future.
The audit by KPMG, a top national firm, gave MARTA a blueprint for solving the financial problem: revamp the entire organization. It noted that the transit authority is spending $50 million annually above the national average on health care, retirement and workers’ compensation plans.
The board voted this week to offer a contract to Keith Parker, who heads the San Antonio transit authority, to become the next general manager of MARTA. He will replace Beverly Scott, who is schedule to leave at the end of the year and head transit in Boston.
Parker’s legacy will be whether he can put MARTA on a sound financial footing — or not.
“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.
The audit found $60 million to $142 million in savings over five years by privatizing many functions — from payroll to the cleaning services for trains, buses and stations. Cleaning services alone could save from $29 to $49.5 million, the audit said.
But it’s those findings that are likely to lead to a confrontation with the Amalgamated Transit Union, which represents 64 percent of the workers. Curtis Howard, president of ATU local at MARTA, called the KPMG audit an assault on the union. He said the board and management would likely try to use the audit for leverage in labor-contract negotiations.
“It is being used to misrepresent what is really happening,” Howard said. “The MARTA board of directors is not labor friendly.”
He said MARTA had tried in the past to privatize the para-transit service and the cleaning service to dismal results. Cleaning, he said, was a tough entry-level job that required scrambling up and and down rails cars.
The private contractor paid too little to get good employees for the service, Howard said
“The cleaning service was contracted out years ago, and they had to bring it back in,” he said. “They couldn’t get employees to come to work. MARTA stations started to look like a mess. They had to bring up the salary to make it where people would stay because the work is so hard.”
Howard said the union has made $90 million in health-care concessions over the last three contracts while not receiving a wage increase since 2006. “We’re almost at the bottom in wages,” he said, alluding to other transit agencies. “We’ve taken more concessions than anybody else around the country,” he said.
Daniels and MARTA officials contend the KPMG audit it not an attack on the union and that privatizing some functions needs to be done judiciously.
“Outsourcing is not the end game,” Daniels said. “It needs to be managed and strategically implemented. We want to make sure we do it the right way.”
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