BRADENTON, Fla. - The Metropolitan Atlanta Rapid Transit Authority will consume its reserves by 2018, and that could derail plans to fund billions in capital needs over the next decade, according to Moody’s Investors Service.

MARTA, the largest transit system in the United States that does not receive operating support from the state, also faces an operating shortfall of $248 million by 2021, Moody’s analyst Xavier Smith said in a special commentary Friday.

In July, voters in the Atlanta region rejected a transit tax that would have provided $600 million to maintain MARTA’s aging system.

Without the new tax revenue, the transit authority faces continued struggles to meet capital needs and increasing expenses due to deferred maintenance, Smith said.

“Much of MARTA’s rail assets are in disrepair and require replacement as maintenance was deferred due to financial constraints,” he said. “Deferring maintenance saves money in the near term but significantly raises future expenses as unrepaired assets deteriorate at a faster pace, further limiting its budgetary flexibility, and narrowing its already thin liquidity position.”

Similar funding issues were highlighted in a September audit by KPMG LLP, which said MARTA’s cost-cutting measures in response to the recession have not gone far enough.

The audit also said that the country’s ninth-largest public transit agency “must make significant and fundamental changes to operations to avoid across-the-board cuts that will adversely affect operational and customer service.”

Many of the challenges facing MARTA were also reflected in Moody’s Aug. 12 downgrade of $1.43 billion of third-lien subordinate bonds to A1 from Aa3.

The downgraded bonds are secured by a sales tax subject to an open-trust indenture. The lower rating was based in large part on years of lower sales tax collections, adequate debt-service coverage but outsized variable-rate debt, prolonged strain on operations supported by reserves, and the lower priority of bond payments.

Moody’s affirmed its Aa2 rating on $365 million of first- and second-lien sales tax bonds, which have closed trust indentures so no additional debt can be issued.

The sales tax is collected in Atlanta as well as Fulton and DeKalb counties where MARTA operates 600 buses and 48 miles of fixed-rail service.

By law, sales tax revenue pays debt service before any excess can be spent on operations.

“MARTA’s primary revenue source is a regional sales tax that is insufficient to cover mounting operation and maintenance expenditures much less fund its 10-year, $1.5 billion capital expansion plan, which includes adding 12 miles of rail and seven more stations,” Smith said. “Moreover, there is an additional $6 billion to $7.1 billion in unfunded capital needs through fiscal 2020 based on the age of major assets.”

The transit system has also suffered from a declining number of passengers. MARTA’s annual ridership was 17% lower in 2011 than it was at its peak in 2000.

“Waning ridership is partly the result of service cuts stemming from two economic downturns and severely pressured financial operations exacerbated by high costs,” Smith said.

The KPMG audit recommended that MARTA outsource some functions to create greater savings, and suggested other measures to bring in new revenue. Those recommendations are being considered by MARTA’s board.

Standard & Poor's assigns a AAA rating to MARTA’s first- and second-indenture sales tax bonds and an AA-plus to the third-indenture sales tax bonds.

MARTA said in a statement that Moody’s commentary reflects issues identified in the KPMG audit report, and that the staff is preparing recommendations for the governing board to consider.

“Over the past five years as a result of the severe and sustained economic downturn, MARTA has been working aggressively to address our financial challenges,” the MARTA statement said. “We've implemented significant internal and external cost cutting measures and fare increases as well as sought opportunities for additional revenue sources.”

The agency disputed some figures mentioned by Moody’s, and said that MARTA currently has a $1.6 billion backlog of capital needs, and the $6 billion to $7 billion in unfunded future capital needs are over a 30-year period.

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