Are we taking our eye off the ball by cutting back on maintenance and focusing on big ‘shovel-ready’ projects?
Contractors around the country are being warned that big road maintenance cuts are coming and they might need to shed staff due to Covid-19 budget pressures.
Amalgamated Workers Union national secretary Maurice Davis said contractors were warning him of an impending “disaster” due to the cutbacks – both in terms of future asset costs and jobs lost.
“Essentially what’s happening is NZTA [New Zealand Transport Agency], AT [Auckland Transport] and the councils are shaving their maintenance budgets and that to me is just a disaster.
“The shovel-ready projects are great, but you’ve got to have both running.”
He’s not the only one who is having contractors coming to him saying that.
Civil Contractors CEO Peter Silcock said NZTA was currently working with contractors to see what “strategic” cuts could be made to maintenance budgets in light of budgetary pressures.
Alongside that, councils were cutting their road maintenance budgets by 25 percent in some places.
“A lot of the money that’s being allocated at the moment around infrastructure, it’s not in that normal maintenance-type area.”
Infometrics economist Brad Olsen said infrastructure spending was a key part of the country’s economic recovery strategy so he found warnings of maintenance cutbacks concerning.
“If we can’t even maintain maintenance spending across the country I guess I’d be circumspect about the ability for infrastructure to deliver the amount of work needed to sustain New Zealand’s construction sector.
“It probably highlights a concern that we’ve held for a while about the ability for the spending that’s been announced in the infrastructure space to actually make the significant dent that Government has been expecting.”
The budget squeeze
Local road maintenance is funded by the NZTA and local councils split the costs 50:50. State highway maintenance is paid for entirely by the NZTA.
However, both organisations are under intense fiscal pressure. NZTA’s National Land Transport Fund lost money under lockdown because everyone stopped driving. It is funded through fuel excise taxes and road user charges.
Councils have also faced major budget pressures due to Covid-19. Auckland Council faced a $714m fiscal hole thanks to the pandemic and councils across the country have increased their debt caps to 300 percent of revenue.
The Productivity Commission’s Local Government Financing report from last year shows why road maintenance budgets are such an appealing target for cuts at a council level.
Across all council budgets road maintenance is the second-largest piece of operating expenditure (15 percent). That number is even higher, on average, for rural councils (30 percent).
A spokesman for NZTA said the total forecast NLTP budget for local road and state highway maintenance was still $3.5b and $2.5b respectively for the entire 2018-2021 period.
However he acknowledged Covid-19 had a “significant impact” on the NLTF and that the agency was working with the Government to make sure enough funding was available to deliver the NLTP.
‘We’ll catch it up’
Porirua Mayor Anita Baker said when she was first elected as a councillor, road maintenance was one of the first things to go when the squeeze went on the budget.
Then, the council just kept facing the same decision every year.
“One year we didn’t have any maintenance of footpaths.”
The council mantra was always “we’ll catch it up”.
“You can never catch it up when you look at our rates and everything we have to pay for, because everything keeps going up. All the costs go up. Every year there’s a new amount from somebody. It’s not getting cheaper.”
What followed were a cluster of “white circles” around potholes on the city’s roads. When they didn’t get fixed the circles just got bigger.
It eventually became an issue voters started to harangue candidates about on the campaign trail. This time around her council decided to vote to increase its road maintenance budget despite major fiscal pressures.
“The biggest thing I got complaints about [on the campaign trail] was roading…all the time, it’s our biggest complaint.”
Silcock said both councils and the NZTA would lose more in the long-run if they cut back on maintenance now.
“If you do your regular maintenance you might get away with a little bit of patch-up here and there every two or three years.
“If you leave it for 20 years then the integrity of the road starts to be impacted and it means that you have to do a replacement.”
Road Transport Forum chief executive Nick Leggett said a reduced maintenance schedule would also pose problems for vehicles and drivers.
“Poor road maintenance increases wear and tear on trucks and of course all vehicles on the road. It therefore increases maintenance costs, but also it can compromise safety of vehicles.”
More jobs in maintenance
Keeping maintenance work going could also keep the industry occupied as it waited for shovel ready projects to fully kick into gear.
Silcock pointed to a three to six month gap, with little work for civil contractors. Shovel-ready projects would not be able to fill that gap quickly enough.
“Maintenance should actually give you more consistent work.”
Davis said cutting maintenance budgets would have a greater impact on employment than extra money spent on “shovel-ready” projects.
Dollar for dollar money spent on maintenance generated three jobs for every one created through building new infrastructure. With new builds, more money tended to be spent on equipment.
“If you’re trying to generate employment. Maintenance is where it’s at, but also maintenance is ready to go now. That work is already there.
“You don’t need consenting it’s all ready to go.”