MARTA’s fare hike planned in 2015, lack of state funding, noted by Fitch, one of big three credit rating agencies

By David Pendered

MARTA’s fare hike planned for 2015 – possibly to $2.75 per trip – and the possibility of zone pricing doesn’t offset the lack of state funding for the system, a bond rating house has determined.

MARTA union members and transit advocates helped ran a petition drive to help derail proposed state legislation intended to curb costs of MARTA. File/Credit: Rory Gordon

MARTA union members and transit advocates ran a petition drive to help derail proposed state legislation intended to curb MARTA’s costs. File/Credit: Rory Gordon

Fitch Ratings made its comments on MARTA’s fiscal situation in an advisory on MARTA’s planned sale this week of $26.3 million in sales tax revenue bonds.

MARTA’s entire revenue structure results in “thin financial margins,” the report states. Fitch took a look at MARTA’s financial projections and issued the following comment:

  • “Under these assumptions, system revenues would fail to cover operating expenses and debt service by fiscal 2015, with deficits widening rapidly through fiscal 2018.”

Fitch’s conclusions on MARTA’s financial situation are generally in line with those determined by KPMG in its management study of MARTA. MARTA requested and paid for both the Fitch and KPMG reviews.

Fitch gave MARTA’s pending bonds a rating of AA—, with a stable outlook. For Fitch, the rating represents the middle of the investment grade. Fitch’s highest rating is AAA, and its lowest investment grade is BBB—.

The rating is based on a host of factors, including the negative effect of fare hikes on ridership and metro Atlanta’s slow recovery from the recession.

One bright spot highlighted for potential investors is that Georgia doesn’t allow governments to declare bankruptcy. Fitch noted that this means bond holders won’t see the future sales taxes that were supposed to repay them being diverted to other government uses.

Fitch made several references to the lack of state funding for the nation’s ninth-largest transit system. Among the references:

  • “Challenged Financial Operations: The authority’s finances are pressured by a weak revenue base which lacks state financial support, and places excessive reliance upon sales taxes and fares to fund operations.
  • “Lack of Financial Flexibility: MARTA is burdened with a limited and restrictive revenue structure and little financial flexibility. The authority receives virtually no state support and a highly elastic demand structure renders it difficult to raise fares sufficiently to offset the state funding gap. Furthermore, the 50/50 rule hinders management discretion, although this restriction was temporarily suspended through state legislative action for three years from fiscal 2011 through the end of this fiscal year.
  • “Lack of state funding increases reliance on sales taxes: MARTA is the only major mass transit system in the nation that does not receive dedicated state funding, limiting the revenue base while increasing reliance upon sales taxes and fare revenues to support operations. In fiscal 2012, sales tax and fare revenues accounted for 83 percent of system funding. The authority does receive federal funding but it provides only 12 percent of revenues.”

Fitch analysts indicated they would like to see MARTA implement more fare hikes.

The report noted that fare increases in 2009 and 2011 raised the fare box recovery ratio to 32 percent, which Fitch said is “more in line with other mass transit systems.”

Fitch supports the idea of an additional fare hike and zone pricing to raise revenues. Incidentally, zone pricing became a possibility more than a decade ago – when MARTA began using the Breeze card. In zone pricing, passengers would be charged for the distance traveled.

Fitch observed:

  • “Management is planning on another fare rise in fiscal 2015, possibly up to $2.75 per ride and is considering instituting zone pricing which Fitch considers to be a viable option as a significant portion of rail ridership derives from outside of the immediate service area.”

That said, Fitch noted that the previous fare hikes coincided with a decrease in ridership – 15 percent on buses and almost 13 percent on trains – between 2009 and 2012. The report also noted the concurrent timing of the economic downturn.

Regarding the current bond package, MARTA intends to use the proceeds to pay off bonds sold in 2003. Those bonds carry a higher interest rate than expected in the pending sale.

 

About David Pendered

David Pendered, Managing Editor, is an Atlanta journalist with nearly 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.
This entry was posted in David Pendered and tagged , . Bookmark the permalink.
14 comments
brand
brand

I do not support Zone fares; However, I do support fare hikes for the rail portion in general.  Marta should have the current fare for buses at $2.50 and rail Fares at $3.25

The Last Democrat in Georgia
The Last Democrat in Georgia

{{"I’m all for zone based fares to make suburbanites headed to the airport pay extra"}}

...The implementation of a more properly priced distance-based fare structure should not and CANNOT be about attempting to 'sock-it' to higher-income suburbanites as part of some terribly-misguided and extremely-counterproductive, if not totally self-defeating, attempt to 'get even' with affluent residents of OTP Metro Atlanta.

Using our critically-needed transportation infrastructure as an attempt to settle old political scores or settle social and cultural slights, both real and perceived, serves to do nothing but to hurt us all very-severely in the long-run.

The implementation of a more properly priced distance-based fare structure IS about obtaining the proper amount of funding that is actually needed to be able construct, operate, maintain and expand as needed, the type of mass transit system that a supposedly international major city/metro region of six million like Atlanta needs to continue to function, survive, grow, thrive and remain an economically-viable place for people to want to live, work and play.

The implementation of a distance-based fare structure isn't about making one group of riders pay over another, it's about simply having a reliable system that people will actually want to ride (so much so that people will want to go out of their way to ride if they have to).

It's about having a highly-reliable transit system of superior quality that will ATTRACT riders by the thousands instead of repelling them by the thousands.

It's about having a highly-regarded and and highly-prosperous transit system that serves as an unquestioned asset to this city, metro, region and state instead of having a steeply-declining transit system that continues to become an increasing liability and embarrassment to this city, metro, region and state.

It's about having an extremely-popular transit system that is a major tourist attraction in its own right that makes the ENTIRE city, metro, region and state extremely tourist-friendly, a highly visually-appealing, clean, safe, secure, inviting and irresistable transit system that literally makes people want to ride it every opportunity they get.

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

And BART's ultra-high level of super-dependable regional heavy rail service (especially when compared to MARTA's steeply-declining level of inconsistently-dependable heavy rail service) is very-much indeed what you would call "socially-equitable service" as BART's trains run as frequently as every 2-3 minutes on many sections of track (as opposed to headways of 15-20 minutes for MARTA trains).

BART regional heavy rail also travels as far as 30 miles away from Oakland International Airport, 35 miles away from the Financial District in Downtown San Francisco, 50 miles away from San Francisco International Airport, and 55 miles between stations at the end of the line on the west side of the Bay in Millbrae and stations at the ends of lines on the east side of the Bay in Fremont, Dublin/Pleasanton and Pittsburg/Bay Point.

Nothing can be considered more "socially-equitable" than an exceedingly consistently-dependable regional heavy rail-anchored service that is consistently highly-regarded by its customers (passengers) as being clean, safe, ON-TIME and comprehensive in its geographical reach (meaning that the public that the transit agency serves think that the service goes everywhere that trains and buses should go in the metro region).

There is nothing more "socially-equitable" than an exceptionally-dependable transit service that gets people of ALL socioeconomic classes (from filthy-rich to dirt-poor) where they need and want to go because the governing transit agency chooses to collect the revenue that it actually needs to provide the ultra-high quality and level of service that is needed and desired in a major metropolitan population center.

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

It is quite remarkable to see people in Atlanta get upset over flat-rate fares of $2.50 for a one-way trip on MARTA when it just the discounted fare rate on a top-flight heavy rail system like BART is as much as $4.10 one-way ($8.20 round-trip) with a regular undiscounted trip fare being as much as $11.05 one-way ($22.10 round-trip).

Though with Northern California's BART having one-way trip fares that are as high as $11.05, it must be noted that BART offers ultra-high frequency regional heavy rail service with headways that are as low as 2 minutes between trains each way at stations that are served by multiple train lines (many BART stations are served by three or four separate heavy rail lines).

http://www.bart.gov/schedules/bystationresults.aspx?station=CIVC&date=4%2F12%2F2013&time=9%3A00+AM

Kip (@PirateOnPtree)
Kip (@PirateOnPtree)

You call yourself a Democrat? The goal of public transit is equity. I'm all for zone based fares to make suburbanites headed to the airport pay extra, but a purely distance based rate places the burden on people who actually depend on the system. And I highly doubt that farebox recovery is acually near 80%, that's unheard of in the US. APTA lists Amtrak's as ~71%. If it was that high, I certainly wouldn't think it would be an affordable or socially equitable service.

MARTA has never been in control of its financial destiny, and saying that it intentionally handicapped itself is ignorant.

The safety comment is asinine and uninformed as well.

As for the "quality of service" which usually translates to "why do I have to share this seat with anyone", (but I'll assume you mean frequency of service), the state should have kicked in for its own economic development engine decades ago and this is just what you get when you fall out of good repair.

The Last Democrat in Georgia
The Last Democrat in Georgia

It is a very good thing that MARTA finally has the implementation of zone-pricing under serious consideration.

But the hard and brutal truth of the matter is that MARTA's quality of customer service, MARTA's state of operational existence and MARTA's reputation in the community has deteriorated so much at this point that the long-overdue implementation of some type of distance-based fare-pricing system is likely too little, too late at this juncture.

And a new fare increase will only serve to make matters worse as the straightforward reality is that the current severely-declining quality of MARTA service, which is too-often undependable and inconsistent, is just simply all-too-often not worth paying the current flat one-way fare of $2.50 one-way, much less an increased flat one-way fare of $2.75 or a zone-priced fare that exceeds the current flat fare rate of $2.50.

It is often more practical just to drive and risk being stuck in traffic than it is to ride MARTA and risk being repeatedly late to work or other important functions when a connecting train or bus comes late, or even risk one's personal safety in an environment where there does not necessarily seem to be a strong and highly-visible law-enforcement presence.

With the current state of the system being so dismal compared to what now looks to be the system's heyday in the 1970's, '80's and '90's, a fare increase will likely lead to further declines in ridership, especially if MARTA's quality of transit service does not improve enough to justify a new fare increase.

For a distance-based fare structure or a zone-pricing fare structure to have had the greatest positive effect on MARTA's financial state, it would have had to have been implemented many years ago before the system fell into steep decline and caused whatever positive reputation the agency might've had to be almost completely irreversibly and irreparably damaged.

Unlike MARTA's one-way flat fare structure which only has a farebox recovery rate of between 27-32%, Northern California's BART's distance-based zone-pricing system has a farebox recovery rate of 78%.

BART's implementation of its distance-based zone-pricing system from its inception has paid dividends for that regional transit agency in helping to make it nearly completely self-sufficient in a very-tough economic environment where government funding is growing increasingly scarce.

BART's distance-based fare structure is also pegged to automatically rise with inflation so that the system's farebox recovery ratio always stays close to 80%.

If MARTA had made the decision to utilize an inflation-pegged distance-based zone-pricing fare structure with a very-high farebox recovery ratio much earlier on, preferably no later than the lead-up to the '96 Olympics, but most-preferably from the transit agency's inception, MARTA would likely be in much-better financial shape than the increasingly dire financial straits that it currently finds itself in.

Instead of basically handicapping itself by intentionally depressing its fare structure and sitting around waiting for state funding that is never coming, MARTA should have been diligently working to make itself financially self-sufficient its Northern California counterpart BART has done

The Last Democrat in Georgia
The Last Democrat in Georgia

@brand In fact, a better option for MARTA may be to actually LOWER some fares as an attempt to lure riders back to the system through the implementation of a distance-based fare pricing structure in which passengers pay roughly $0.30 per-mile to ride everywhere through the system with a minimum fare of roughly about $1.00.

With the implementation of a distance-based fare-pricing structure, passengers would actually pay less to ride within the system than they do now with the current $2.50 flat-rate one-way trip fare if they ride fewer than 9 miles.

Meaning that one would have to ride more than 9 miles within the system before they paid the current flat one-way trip fare of $2.50 with the implementation of a distance-based fare pricing structure.

The Last Democrat in Georgia
The Last Democrat in Georgia

@brand At this time, I would have to agree that selective zone pricing (in which selected stations have higher fares to enter/exit the transit system because they are used by more riders than other stations) may not necessarily be the best option for a transit agency that is hemmoraging customers (and the fare revenue each of those customers pay to use the system), such as MARTA is doing at the moment.

The Last Democrat in Georgia
The Last Democrat in Georgia

It should also be noted that the roughly 55-mile distance between the BART regional heavy rail transit station at Millbrae at the end of the BART system on the west side of the San Francisco Bay and the heavy rail stations at Fremont, Dublin/Pleasanton and Pittsburg/Bay Point at the ends of the BART system on the east side of the Bay are about equivalent to the distance in Metro Atlanta between Hartsfield-Jackson Atlanta International Airport (the current south end of the line on the MARTA Red (North-South) and Gold (Northeast-South) so-called "heavy rail" lines) and locations on the northside of Cartersville in Bartow County in the I-75, Ball Ground in Northern Cherokee County in the I-575 corridor, Northern Forsyth County along the GA 400 corridor, South Central Hall County in the I-85/I-985 corridor, and Winder in Barrow County in the GA 316 corridor.

In other words, if MARTA (or some other regional transit entity) provided regional heavy rail service to as far away as 55 miles away from the Atlanta Airport in the Atlanta region like its Northern California counterpart in BART does in the Bay Area, some of the outlying locations that would be getting heavy rail service in the Atlanta region would be Dallas, GA; Cartersville, Canton/Ball Ground, Cumming, Oakwood (south of Gainesville) and Winder, amongst others.

If MARTA or some other regional transit entity provided regional passenger rail service to as far as 55 miles away from the Atlanta Airport or Five Points in Downtown Atlanta, other outlying locations in the region like Villa Rica in the I-20 West corridor, Covington in the I-20 East corridor, Newnan in the I-85 South corridor and Locust Grove in the I-75 South corridor might be recipents of some type of comprehensive regional passenger rail service if the recommendations for regional passenger rail service were (competently) executed.

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

{{"the state should have kicked in for its own economic development engine decades ago"}}

The State of Georgia DID "kick in" for its own economic development decades ago when it passed the legislation that allowed for the creation of MARTA through regional referendum back in the 1960's.

The State of Georgia also "kicked in" for its own economic development in 1971 when it raised the amount of the sales tax that would collected in Fulton and DeKalb counties to fund the system from 0.5% to a full 1% to compensate for the state backing out of the original funding deal to provide up to 10% of the continued funding of the operations and maintenance of MARTA because the state was having trouble funding the maintenance of the road network at the time.

{{"and this is just what you get when you fall out of good repair."}}

MARTA did not just fall out of good repair because "the state did not kick in for its own economic development engine decades ago".

MARTA fell out of good repair as a result of the extremely-poor management decisions it has made during its 4 decades of existence (largely the decisions that the agency made very early-on to intentionally collect entirely too little in revenues from its fare-structure and entirely too little in revenues its physical assets in its real estate and capital holdings).

MARTA also fell out of good repair as a result of the internal misallocation of funds by its own management.

Even without the funding contribution of roughly 10% of operations and maintenance from the state and even without the funding contribution of a 1% sales tax from Cobb, Clayton and Gwinnett counties which all voted against joining MARTA back in the 1960's and even with the state-imposed restriction that 50% of sales tax must be put aside for capital improvements (a requirement, btw, that was requested by DeKalb County officials at the agency's inception to insure that MARTA put aside enough money to extend heavy rail lines beyond the city of Atlanta and into then-suburban DeKalb County), MARTA still could have easily raised enough money to be exceedingly solvent and viable on its own if the agency had competently taken advantage of all of the revenue streams and profit centers that were available to it throughout an existence whose days now appeared to be numbered because of the horrendously-poor decision-making of its past.

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

{{"As for the “quality of service” which usually translates to “why do I have to share this seat with anyone”, (but I’ll assume you mean frequency of service)"}}

...By "quality-of-service" I am not only referring to the frequency of trains and buses, but also the level of overall customer service which includes courteousness and kindliness of staff (Are the people at the ticket windows nice and courteous, can you ask them a question without getting a rude and/or nasty response? is the staff helpful? etc.).

By "quality-of-service" I am also referring to the level of visibility and vigilance of security and law enforcement on the transit system (Is security or the police around when you need them? Is law enforcement around when you REALLY need them? etc).

By "quality-of-service" I am also referring to the cleanliness and functionality of trains, buses, stations, etc (Are the trains, buses and stations clean? Does the heat work when it the weather is cold? Does the air conditioning work when the weather is hot? Will the buses continue operating when the weather is hot or will they break down or catch fire during a full rush hour ride on a major road full of traffic? Do the escalators and elevators work or will the escalators suddenly speed up and throw people off of them? Will the restrooms be unlocked and functional and will they be clean and well-stocked if they are?).

By "quality-of-service" I am also referring to the dependability of the transit service (Do the trains and buses come ON-TIME or do they consistently come late with ridiculously and unacceptably-long delays because of "single-tracking" during a busy time of day that makes passengers repeatedly late for their jobs and jeopardizes their livelihoods and financial well-being?).

And by "quality-of-service" I am also referring to the geographical reach of service (Does the network of trains and buses go everywhere in a metro region that the public deems the service is needed?).

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

{{"The safety comment is asinine and uninformed as well."}}

Kip, my friend, it does not matter how many times MARTA comes out and proclaims itself to be "one of the safest mass transit systems in the nation" if an all-too-common public perception in and around the metro area that MARTA is supposed to be serving is that people often don't feel quite as safe as they should feel or would like to feel when using it.

No matter how "safe" the agency's stats might say its trains and buses are, there have been entirely too many repeated reports of uncivil and rude behavior (mobs of unruly youths, aggressive beggars, loud and sometimes outbursts from people who are mentally ill) with too many repeated reports of very-spotty and inconsistently visible presence of law enforcement for one to say that MARTA does not have a problem with public safety.

Not to mention the repeated reports of broken and malfunctioning equipment at stations (elevators and the reports of unsafe and poorly-maintained escalators that have thrown people off of them).

And even if MARTA's numbers say that the transit agency does not have problem with public safety, the all-too-common and pervasive public perception is that MARTA DOES have a problem with public safety.

Despite MARTA's insistence that it is one of the safest large transit agencies in the nation, people clearly are not turning away from the system in droves because they wholeheartedly agree that it is safe to ride.

What is "asinine and uninformed", as well as disingenuous, is to claim or even imply that MARTA has few, if any, problems with public safety and security when the transit agency's plummeting ridership numbers say that the public overwhelmingly perceives otherwise.

Because if the public perceives that MARTA has a significant problem with public safety and security, then MARTA definitely has a problem with public safety and security, no matter how much the powers-that-be and the agency's apologists try to paper over, deny or distort it.

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

{{"MARTA has never been in control of its financial destiny, and saying that it intentionally handicapped itself is ignorant"}}

Despite MARTA not receiving direct funding from the State of Georgia and being required by the state to set aside 50% of its sales tax revenues for capital expenditures, and despite the prevalent (yet misguided) popular belief that the lack of funding from the state and the 50% sales tax revenue set-aside requirement has been the main cause of MARTA's continued crippling financial handicaps, MARTA HAS ALWAYS been in control of its financial destiny as the 50% revenue set-aside requirement ONLY applied to revenues collected from SALES TAXES.

The 50% revenue set-aside requirement has never and does NOT apply to farebox revenues, or revenues from Tax Increment Financing (property tax revenues from new development that pops up along its transit lines, particularly near its transit stations), or revenues from private investment (revenues collected from leasing the entire cost of operations and maintenance of individual transit lines out to private operators, for example) or revenues from real estate transactions (leasing out or even selling land around stations for the construction of system-sustaining Transit-Oriented Development).

Contrary to an almost-tragically pervasive and very-misguided seemingly popular belief, funding from state government and sales tax revenues are NOT the only revenue streams available to finance a large-scale urban transit operation like MARTA.

During its 41 years of operation, MARTA should NOT have been purposefully restricting itself to the severely-limited revenues of a sales tax and a flat-fare structure that was often intentionally-depressed so as to allow those with very-little or no income to easily ride and out of a well-intentioned but misguided ideological belief that transportation should be as close to free as possible.

Intentionally charging too little at the farebox and not utilizing all (or any) of its likely profit centers while sitting around waiting for additional funding from the state that was never going to materialize has served to do nothing but leave MARTA in a death-spiraling state of steep decline on the verge of total financial collapse.

Instead, MARTA could have (and SHOULD HAVE) been tapping into robust revenue streams from a properly and adequately-priced distance-based fare structure (fares charged by the mile instead of per-trip) that featured deep discounts for special groups and the indigent, Tax Increment Financing (property tax revenues from new Transit-Oriented Development along transit lines), private investment, and leasing and selling the land it owns around transit stations.

Intentionally not taking in the revenues that the transit agency needed to remain viable over the long-run and looking to someone else to pay their own bills that could they have EASILY paid many times over had they utilized all of the revenue streams and profit centers that were available and easily-accessible to them is what has been truly (and tragically) "ignorant" about MARTA's 41 years of an easily-avoidable increasingly-tortured existence, a tortured existence that now unfortunately threatens to completely cease.

And what is so bad is that it none of this operational malaise ever had to happen and likely never would have happened had MARTA been competently managed from its inception.

Watching MARTA, a system that could have realized so much potential if it only it had been run COMPETENTLY, collapse into total oblivion because of the type of pervasive and unapologetic "ignorance" that people like you gleefully display has been truly disappointing, completely tragic and even painfully heartbreaking.

That, my friend, is what is TRULY "ignorant".

The Last Democrat in Georgia
The Last Democrat in Georgia

Kip (@PirateOnPtree), April 11, 2013 at 7:23 pm-

{{"You call yourself a Democrat?"}}

...Ahhh, a demand for ideological purity on the issue of mass transit...I love it. With that statement, it looks as if you are implying that no one can even dare call themselves a "Democrat" unless they subscribe singularly to a narrow and incredibly-flawed mindset that transit must only be funded almost completely with flat-rate fares and believe that a highly transit-averse state government (which, btw, collects entirely too little in transportation revenues by way of the state's fuel tax just like MARTA has collected too little revenue at the farebox) should fund transit with the traditional means of sales tax revenues.

{{"The goal of public transit is equity."}}

...No, the goal of public transit is to provide a multimodal transportation network by giving people a dependable way to move around other than having to be overly-dependent on one single mode of transportation in single-occupant vehicles.

Saying that "the goal of public transit is equity" implies that the only purpose of mass transit is to make society more socioeconomically-equal by serving only those on the bottom rung of the income ladder.

If a public transit service is aiming only to serve people with little or no income, then that service is likely not doing a very-good job at serving those who are not lower-income and, as we are currently witnessing with MARTA, that transit service is often also not doing a very-good job at serving those with lower incomes as is demonstrated with MARTA's steeply-declining ridership numbers.

{{"I’m all for zone based fares to make suburbanites headed to the airport pay extra, but a purely distance based rate places the burden on people who actually depend on the system."}}

...No, a purely distance-based rate actually does NOT place the burden on people who actually depend on the system because the fares of those who might be solely dependent on the system because of financial circumstances or otherwise, can be discounted (deeply-discounted, if so desired) under a distance-based fare structure.

Instead of depressing the fare-structure and as a consequence, the revenues taken in from a depressed fare-structure to accommodate the transit-dependent, under a distance-based fare-structure, special groups who might be solely dependent upon public transit to get around (low-income passengers, students, disabled passengers, senior citizens, etc) can receive a special group discount and pay lower fare rates.

But there is no way that any transit agency, especially one in a very-large metro area that receives no state funding, should be intentionally depressing its fare structure and taking in too little in revenues for the level of service that it is attempting to provide by being overdependent on a depressed flat-fare structure.