TN: CARTA internal audit suggests financial stability, longterm challenges

Chattanooga's public transit agency looks financially stable following an internal audit of the fiscal year that ended in June.

The Chattanooga Area Regional Transportation Authority is about to enter its third year of new management after Mayor Tim Kelly changed out most of its governing board in 2023, hoping to reverse the stagnant state of services available to residents with a focus on improving financial health.

CARTA, like most public transit authorities, does not operate at a profit. A preliminary report in August showed against an expected annual budget of $29,896,901, CARTA's actual revenue was closer to a flat $29 million. However, lower-than-estimated expenses meant the shortfall was only around $500,000. Revenues were impacted by the Incline Railway being damaged by wildfire last December, which left the lucrative service out of commission until July, with insurance payouts partially offsetting the loss.

The authority ended the year with no outstanding bonds or debts, with its largest looming threat being a pension liability of $13 million. That number doesn't reflect how much CARTA owes pensioners— a much higher figure— but the amount of money the authority has to make up in order to meet future payments on time.

Overriding takeaway is clean audit report, CARTA is showing evidence of sound financial management," CARTA board Chair Johan de Nysschen said at December's meeting. "Doesn't mean we don't have challenges. The lack of an operational reserve continues to keep me up at night.

Auditors found the transit agency had less than $1 million in cash and cash equivalents in June, with its operating cash deficits supported mainly by grants and subsidies from the state and federal governments.

For the 2026 fiscal year that started in June, the board approved a $34.8 million budget, an almost $5 million jump from the previous year, mainly off the back of increased revenue projection and an additional $1.8 million from the city of Chattanooga.

Hamilton County, which gave CARTA no money in the previous fiscal year, also committed $140,000 to the agency — still significantly lower than the $583,000 the board had asked for.

With the internal audit complete, CARTA will turn over its financial data for further audits and oversight from the Federal Transit Administration, the Tennessee Department of Transportation, and the county and city governments.

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