When MARTA’s history is written, Sept. 25, 2012 may rank in importance only behind the date back in 1971 when DeKalb and Fulton voters first approved a funding mechanism for the agency. Because one way or the other, the audit made public Tuesday by MARTA and KPMG is going to transform the agency.
We already knew that MARTA would have to change dramatically. As the audit points out, the transit agency is on a collision course with financial disaster, with reserves scheduled to be exhausted by 2018. Falling tax revenues that have affected almost all government agencies explain part of that crisis, but only part. MARTA leaders, including outgoing CEO Beverly Scott, understand that significant efficiencies would have to be found in the system if it is to survive.
The good news in the KPMG report is that such efficiencies exist. The bad news is that such efficiencies exist in sometimes embarrassing plenty.
According to the audit, MARTA’s pay scale is reasonable, and staffing levels in some functions are at or below comparable agencies elsewhere. As KPMG auditors also point out, the agency has taken difficult steps to try to deal with its challenge, including freezing salaries for the last five years and eliminating
700 staff positions in fiscal 2011. But as KPMG documents, that isn’t enough:
— Benefits, particularly pensions, are much more costly than they should be.
According to KPMG, “MARTA’s healthcare claim, retirement, and workers
compensation costs are $50 million higher than national averages including both private and public sectors.” Retirement costs alone are some $22 million higher each year than they should be. Renegotiating such benefits is always a painful process, particularly given that 60 percent of MARTA’s workforce is unionized, but the agency has little financial option.
— MARTA’s internal culture and its labor contract tolerate a level of absenteeism that is startling and expensive, forcing the agency to compensate for the recurring manpower shortage by the hiring of some 371 additional employees at an annual cost of $10 million. That is not tolerable.
— While many areas of the agency operate efficiently, those that do not offer
substantial opportunity for cost savings through privatization. According to
KPMG auditors, for example, it costs MARTA seven times as much to process an invoice as it would to outsource that function. It costs MARTA more than twice as much to cut an employee’s paycheck as it would through privatization. By outsourcing those two functions alone, the agency could save $1 million annually.
Altogether, easily outsourced functions could save the agency some $27 million over a five-year period, KPMG estimated. More difficult outsourcing projects could save another $115 million over five years, although in some cases that would require renegotiation of labor contracts. (MARTA’s contract with the Amalgamated Transit Union expires June 20, 2013).
Not all of the savings identified by KPMG will be realized. Privatization, for example, is often oversold as a cost-cutting option, although the scale of potential savings identified in the audit suggests that it offers a critically important option. Reducing pension and healthcare costs will take time, and will require the cooperation of union members who are faced with a choice of protecting current benefits or protecting their jobs.
All in all, however, the audit findings represent an enormous opportunity for MARTA to restore its financial standing and independence and perhaps play a renewed role in the region’s transit future.
That will require leadership. The agency is in the process of hiring a new CEO and is down to its final two candidates. The deciding factor in that choice should be each candidate’s ability and willingness to implement changes on such a large scale in a relatively small time.
And that in turn will require leadership by the MARTA board. While the board has an obligation to MARTA employees, its deeper obligation is to those the agency serves, many of whom are low-income seniors, students and workers who often can’t afford other forms of transportation. Those customers have already been forced to accept repeated cutbacks in service as well as fare increases. As the audit documents, it’s now time to look elsewhere for savings.
– Jay Bookman