The Metropolitan Atlanta Rapid Transit Authority is experiencing severe budget constraints affecting operations, and sales tax revenues dedicated to paying debt service are down.
But the structure of debt service and conservative fiscal management practices are designed to ensure that debt payments are made and the double-A ratings are protected, MARTA treasurer Richard Marsh said in a recent interview.
The transit agency has about $1.6 billion of outstanding sales-tax revenue bonds. The debt is rated Aa3 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
The train and bus system services Fulton and Dekalb counties. Most of Atlanta is in Fulton, but about 10% of the city lies in Dekalb. The two counties levy a one-cent sales tax earmarked for MARTA’s capital needs.
Sales tax revenues are sent to the Georgia Department of Revenue monthly, which distributes 100% of the collections to MARTA’s bond trustee.
“MARTA never touches the sales tax revenue until the trustee takes off the required funds to ensure debt service is paid,” Marsh said. “Only after the required debt service is met are remaining revenues passed on to MARTA. We have internal policies that basically say we do not program more than 45% of the sales tax for debt service.”
However, all of the sales tax revenue would be used for debt service if needed. Currently, the agency maintains more than two times debt service coverage, while a rate of two times is required by bond covenants.
Marsh said MARTA has scaled back some capital programs and will maintain a focus on safety and good repair programs in upcoming budgets.
“We do practice fairly conservative fiscal management and we’ve been consistently proactive in reacting to the economic downturn,” Marsh said. “In the 10-year plan we are proposing now to maintain conservative fiscal practices and maintain our strong credit ratings.”
MARTA and Atlanta officials recently have carried on a public campaign about the transit agency’s lack of funds for operations because the Georgia General Assembly recently ended its session without offering any relief.
The agency anticipates a $24 million gap in operational funding in fiscal 2010 and is required by state charter to maintain $65 million in capital reserves, which cannot be used for operations. Lawmakers recessed before acting on requests to change the requirement. MARTA and Atlanta officials have asked for a special session of the legislature to deal with the funding problem.
The agency’s proposed fiscal 2010 budget is expected to include recommendations to cut operations.
The new budget is expected to include $200 million to $250 million of new debt for MARTA’s rehabilitation and replacement maintenance program, Marsh said. If approved in the budget, the debt could be sold in July.