Short Takes

MARTA’s low fare revenues a future concern

January 22, 2023January 23, 2023

By David Pendered

MARTA’s revenues from fares are at an historic low as remote work remains a norm.

MARTA’s not alone. Investors are watching this emerging trend at other transit systems, a New York-based bond researcher said last week.

Howard Cure (Credit: volckeralliance.org)

Howard Cure didn’t name MARTA when he spoke in a panel discussion hosted Jan. 19 by the Volcker Alliance and Penn Institute for Urban Research. The purpose was to explore the future of downtowns as everything from property taxes to restaurant revenues is affected by the ongoing effects of downtown workers staying away because of the coronavirus. Transit was one topic discussed in a program available here.

Cure cited the New York and San Francisco transit systems and noted the extent of revenue dips they’ve experienced, an indication he’s paid close attention to their fiscal condition.

Cure offered an insight to transit system managers nationwide, based on his perspective as the partner at Evercore Wealth Management who directs municipal bond research. Muni bonds are the type of borrowing transit systems including MARTA conduct to fund projects.

To transit managers who may listen in, Cure said:

“You’re going to have to make a decision as the managers, and the state governments and local governments, of these transit districts [on] how you are to get your resources. Do you raise sales taxes to cover some of this, or toll roads or gas taxes? How much burden do you want to put on people who are really reliant on the system? Because if you cut back on the quality, you’re going to perpetuate the cycle of less and less people riding the system.”

MARTA has made its position clear on fare hikes – they’re not an option. The current budget states on page 1 of the executive summary:

“The FY2023 budget represents MARTA’s eleventh straight year of a balanced budget without a fare increase despite unprecedented fare revenue losses due to the Covid pandemic. Due to strong growth in sales tax revenue and federal Covid relief funds, the authority is in excellent position to resume pre-pandemic service levels and advance its capital program.”

The depth of MARTA’s commitment to hold the line on fare hikes is made clear in the data tables within the budget and a table on page 96 of the Annual Comprehensive Financial Report MARTA released Nov. 23, 2022:

2023 – $67 million, budgeted
2022 – $65 million
2021 – $52 million
2020 – $102 million
2019 – $133 million
2018 – $138 million
2017 – $138 million
2016 – $141 million
2015 – $146 million
2014 – $140 million
2013 – $141 million.

MARTA notes that the federal stimulus payments have enabled the system to continue without greater disruption to riders and employees. The leap in sales tax has been significant, though state law allows MARTA to spend only a portion on its maintenance and operation. The remainder has to be spent on capital projects.

Cure had observed in his comments that budget holes in transit systems as a group will appear eventually. “It’s been papered over by a lot of federal money coming in,” Cure said.

One of the systems Cure cited, New York’s MTA, already has been put on warning by analysts with Moody’s Investors Service.

The MTA is forecast to be in good financial shape until federal relief funds run out in 18 months to 24 months, according to Moody’s Sept. 23, 2022 rating action. After that, the outlook turns negative:

“[W]e expect that once federal aid has been exhausted, MTA’s significant budget pressures will return due to the slow, incomplete ridership and revenue recovery, unless it makes material adjustments to better match its operations to future revenue levels.
“Out-year budget gaps will be challenging to resolve without further weakening financial and debt metrics, or negatively affecting MTA’s service delivery and capital plans.”