Wall Street affirms MARTA, warns of system’s continuing fiscal dangers

By David Pendered

A Wall Street credit rating agency has raised MARTA’s rating in advance of the system’s plan to sell $96 million in bonds on June 26.

MARTA's Lindbergh City Center

MARTA’s improved credit rating arrives as MARTA is renewing its push for development at stations, such as this mixture at Lindbergh City Center that combines low-rise retail space and mid-rise office buildings. File/Credit: David Pendered

The rating action states MARTA’s reliance on sales tax revenues as both an asset and a liability. Moody’s Investors Service cited as an asset MARTA’s gross pledge of its 1 percent sales tax, and as a liability the historic volatility of sales tax revenues – revenues that recent Georgia laws have reduced.

While any upgrade in credit is positive, Moody’s warned investors of the danger that MARTA could again raid its savings account to keep the system afloat – as was the case during the depth of the great recession.

MARTA still faces:

  • “The ongoing need for careful management to avoid a return to past operating pressure that resulted in significantly narrow cash margins and plans to deplete its reserves.”

As recently as June 2012, MARTA had adopted a management plan that envisioned burning through more than $100 million in reserve funds and running out of operating reserves in 2018.

Another danger Moody’s cited is that MARTA may seek to increase its borrowing in the future. Such a move would reduce the amount of money available to cover its current debt, particularly if sales tax revenues decline:

  • “Weakening of the pledge revenues or increased leverage that results in materially lower debt service coverage.”
In 2012, MARTA was on track to burn through more than $100 million in reserve funds by 2018. Credit: MARTA

In 2012, MARTA was on track to burn through more than $100 million in reserve funds by 2018. Click on image for larger version. Credit: MARTA

Gov. Nathan Deal’s latest state revenue report noted that Georgia’s sales tax collections are entering untrodden territory because of changes in state tax law.

In a report issued June 9, Deal observed that Georgia has eliminated the auto sales tax, reduced the sales tax on energy used in manufacturing, implemented an agricultural tax exemption and reinstated the sales tax holiday.

These fiscal decisions are evident in state figures on sales tax revenues: Gross collections were up 4.5 percent in May, compared to May 2013; however, net collections were up 2.5 percent for the period.

MARTA executives have portrayed the credit rating increase as a validation.

“The upgrade in our bond rating conveys to the public that MARTA is getting its financial house in order,” Keith Parker, MARTA’s GM/CEO said in a statement. “We’re here because we were able to balance the budget, spend less, and reduce overhead and positions.”

MARTA's budget for the fiscal year that begins July 1 predicts a fairly bright future for revenue collections. Credit: MARTA

MARTA’s budget for the fiscal year that begins July 1 predicts a fairly bright future for revenue collections. Click on the image for a larger version. Credit: MARTA

MARTA board Chairman Robert Ashe said in the statement: “This is great news for MARTA. Moody’s positive response to the changes we’ve made to become fiscally sustainable confirms the Authority is moving in the right direction.”

Moody’s action actually covers an array of MARTA’s debt, including an upgrade of the rating on $1.7 billion in sales tax revenue bonds. Moody’s determined the outlook is stable.

The upgrade was issued as the system looks to attract new sources of revenue.

One such source is land leases and air rights for developments on and above MARTA-owned property. MARTA now collects $10.1 million a year in land leases, according to the recently adopted budget. The sum represents 2.4 percent of MARTA’s $415.8 million in anticipated operating revenues.

MARTA has been pushing transit oriented developments since 1998. That’s the year the Lindbergh Station was chosen by the former BellSouth as one of three areas where BellSouth intended to concentrate its employees, who were working on space provided through 75 leases in multiple locations.

In addition, MARTA intends to increase its sale of display ads for alcohol. The initial deadline for bids was delayed from June 10 to Tuesday.

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 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.

5 replies
  1. maketransitregional says:

    MARTA is unable to be financially sound. The sales tax supports over 50% of the revenue and MARTA loses money on each ride provided even at the highest flat rate in the country for a fare. Why?  If you ask MARTA they say the state does not support them, but they are not a state service, and their service is not designed for all of Atlanta citizens. They are two counties and maybe a third one soon in MARTA. Clayton couldn’t support itself in the past and cost Fulton and Dekalb taxpayers $10M for non payment of Clayton services. Past MARTA management had to finally shut them down and take action. 
    We need to have a publicly elected official that manages a separate entity for the State and then we can have a single fare for riding anywhere, connectivity between counties, economies of scale for operations, coordinated schedules, simpler signage and professional management that understands business and not just looking at their next job somewhere in transit in another state.Report

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  2. atlman says:

    maketransitregional
    This is utter nonsense. Why should the state run a transit system for metro Atlanta? If the state runs a transit system, it has to be statewide, like the state does for the STATEWIDE highway system and like it will for the freight/passenger rail network that they are (quietly) planning.
    The service is not designed for all of Atlanta citizens because all of Atlanta citizens refuse to join MARTA, primarily because the white conservative citizens in the suburbs do not want to share power on an even keel with the black leaders in Fulton and DeKalb. I told you this yesterday on another post, and you did not respond. 
    “We need to have a publicly elected official that manages a separate entity for the State and then we can have a single fare for riding anywhere, connectivity between counties, economies of scale for operations, coordinated schedules, simpler signage and professional management that understands business and not just looking at their next job somewhere in transit in another state.”
    And who is going to vote on this official? Are people in Valdosta, Columbus, Albany, Macon, Rome etc. going to elect the leader of a transit system that will serve at most 28 and as few as 6 of our 159 counties? Also, there is no evidence that anyone who gets elected in this state, where most of the population is primarily concerned with not being governed by a black person, would be “a professional manager who understands business.” That sure didn’t describe Sonny Perdue, doesn’t really describe Nathan Deal (though he is better than Perdue) and it also doesn’t describe the folks in Paulding who opened a movie studio WITH TAXPAYER DOLLARS despite no filmmaking/entertainment talent or financing in Paulding (nearly all of it is downtown) and virtually no desirable onsite filming locations. If that is not enough, you have the Cobb leadership proposing building a pedestrian bridge across Cobb Parkway so folks leaving the Braves games can get to THE CHEESECAKE FACTORY IN CUMBERLAND MALL, and folks in Gwinnett County too dense to realize how much money and economic development a second airport focusing on commercial/business travel would bring into their county (and Paulding rejected it too). 
    These are the people who you want running transit in metro Atlanta merely because you can’t abide having to work with the black leaders in Fulton and DeKalb (and soon Clayton) by joining the MARTA board? Hilarious. A classic example of why we can’t have nice things, and why they instead go to places like North Carolina, Florida and even Texas where the good ole boys have already made peace with the fact that blacks and Hispanics have amassed economic and political clout.Report

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