MARTA is pushing back on an independent audit commissioned by the City of Atlanta that claims the transit agency has shorted $70 million for expansion projects funded by a city sales tax.
A new assessment estimates that MARTA actually owed the More MARTA transit capital fund $865,630 as of June 30, 2022.
MARTA hired the firm KPMG to assess the methodology used in the original audit, published in August and conducted by accounting firm Mauldin and Jenkins.
How we got here
In 2016, residents voted to approve a half-penny sales tax to fund the More MARTA transit expansion and improvement program. The tax revenue is divided roughly equally into MARTA’s general fund to cover operating expenses for “enhanced bus service” and the City of Atlanta’s capital reserve account for new capital projects, such as transit along the Beltline, bus rapid transit and streetcar extensions.
Based on cost allocation calculations between fiscal year 2017 and fiscal year 2022, the Mauldin and Jenkins audit estimates that MARTA overshot its operational costs by $70 million.
MARTA General Manager and CEO Collie Greenwood knocked the methodology used in the original audit during a state legislative committee hearing on Tuesday.
“It’s a question of two methodologies. When the first methodology was rolled out, MARTA said, ‘That’s not the right methodology.’ We said that right from the start,” he said at a House Metropolitan Atlanta Rapid Transit Overview Committee (MARTOC) meeting.
‘Threshold methodology’ vs. ‘proportional methodology’
Victoria Fenley, a director at KPMG, said at the meeting that Mauldin and Jenkins used “threshold methodology” to calculate the amount owed by MARTA, since MARTA doesn’t track cost by bus route. This cost allocation method attributed all service changes after the More MARTA program’s inception to the program first, “regardless of the cause or location of those service level changes,” per the KPMG report.
Though this method was effective at allocating service costs at the beginning of the program, KPMG states, threshold methodology “has become less suitable as the program matured.”
“Specifically, it caused the More MARTA Program to absorb all future increases and decreases in service levels, which were not always directly attributable to the program,” the KPMG report states.
Instead, KPMG argues that “proportional methodology” would be a more accurate way to measure cost allocation since it accounts for when the More MARTA program “stabilized” by December 2019.
Both methods calculated the same allocation of More MARTA sales tax revenue to operating costs from FY17 to FY19. But after that, the proportional method uses December 2019 data and attributes service changes to the transit system as a whole, “offering a more balanced and equitable reflection of costs” especially as service changed across the board during the COVID-19 pandemic.
KPMG Managing Director Julie Barrientos said the issues started when MARTA had to cut bus services.
“It was applying all service reductions to the More MARTA program, which wasn’t true because all of the routes experienced service reductions,” she said during Tuesday’s meeting. “So when you get to that point you can see how there’s such a big discrepancy in the numbers.”
What happens next
Greenwood said MARTA has already transferred $20 million in response to the original Mauldin and Jenkins audit and that would have to be reconciled with this new assessment.
“We do have a fiduciary responsibility to all of our counties — so Clayton County, DeKalb and Fulton and City of Atlanta — and so we have to make sure that the moneys properly reflect the services rendered to each of these counties,” he said.
City of Atlanta Chief Communications Officer Allison Fouché said the city maintains that MARTA owed the amount estimated by Mauldin and Jenkins.
“We stand by our initial audit and look forward to working with MARTA on the remaining $60 million owed to Atlanta taxpayers,” she wrote in a statement to WABE. “We received the document, and it is currently under review by our Finance team. We will provide further details once the review is complete.”
MARTOC chair sides with MARTA’s methodology
Republican State Rep. Deborah Silcox, who chairs MARTOC, the committee with oversight of MARTA’s budget, told WABE she hopes the city and the transit agency can work this out and move forward on projects like a much larger renovation of the Five Points station.
In a press release on Wednesday, Silcox said “it’s evident” that after 2019, the threshold method “did not adequately account for service changes during the COVID-19 pandemic and led to misleading conclusions.”
“The proportional methodology offers a more realistic and equitable approach by considering the shared nature of our transit system and spreading costs across all routes,” she said. “This review is an important step toward addressing concerns, ensuring that the program operates with the highest level of accountability and making sure taxpayers’ investments in transit expansion are used efficiently as we continue to improve transit options for our community.”
MARTA and KPMG are pushing for other recommended changes, such as amending the Intergovernmental Agreement (IGA) between MARTA and the City of Atlanta to define funding allocation between operational expenses and capital projects. MARTA and the firm are also calling for a formal documentation process for service changes and scheduled performance reports.
“In that spirit, we would like to use this opportunity to urge the City of Atlanta to expedite the approval of permits for the Five Points Station Transformation Project so that we can begin deconstruction,” a Wednesday MARTA press release states. “Because of the delays, it is already behind schedule, and it is critical that we begin work to deliver this transformational project for our riders, our system, and the downtown area.”
MARTA will hold a board of directors meeting on Thursday.
