Roading Funding Shortfall

Funding the Future: Our Road Funding Shortfall How do we fund the shortfall in the roading area?

The Issue

Everyone benefits from the roading network. Whether it is getting from A to B, getting product off the farm, delivering goods and services around town or having a place identifying where you live, our lives would be pretty tricky without it!

The Council currently spends around $22.6M every year on roading and footpaths. This spending is diverse. It can vary from large projects like building a new bridge or be as simple as replacing a broken road sign.

$22.6M might sound like a lot of money, but it’s important to remember that we are dealing with a road network in the district that stretches over 1,700km. If this was State Highway One, it would stretch all the way from Timaru to Cape Reinga! And, that’s just the roads. It excludes all the other bits of the roading network, from road signs to footpaths to road marking to streetlights to kerb and channel.

All of this is paid for through a mix of rates and central government financial assistance (via the NZ Transport Agency).

There are three issues that will impact on funding of local roads significantly in the future.

Firstly, the government have conducted a major review of how they will assist Councils in funding local roads in the future. The government review has resulted in changes across the country to all Council Financial Assistance Rates (or FARs). The FAR represents the amount of money the government will contribute towards local road works. The review will result in the rate for Timaru District reducing to 51%.

Starting in 2015/16, the rate will be 55%, with a 1% reduction annually until it reaches 51%. The average FAR over the last three years for Timaru District was 56%.

This is further complicated by changes to support for different types of roading work. Work such as road seal widening or new kerb and channel previously funded through our road renewals allocation must now be funded as projects. Projects funding is limited and approval is based on national priorities not local ones that will make financial assistance for such projects more difficult to attain. This is expected to have a significant impact on future funding levels.

Secondly is the introduction of the One Network Road Classification (ONRC) by government. The ONRC is a new system of road hierarchy that will apply to all roads nation-wide. It will likely influence the availability of funding for district roads.

The third aspect is the need for funding to increase for roading over the next 10 years if we are going to keep providing what we currently do. This is required because of:

  • the ongoing ageing of our district’s roading infrastructure
  • the changing use on our network, for example through the impact of heavier trucks, farm machinery and more heavy traffic wearing out our roads faster.
  • increases in contract costs

Combined, the overall effect of these three issues will mean that ratepayers will have to shoulder more of the cost of the local roading network. We estimate that as a result of these changes, over the next ten years, there will be a funding shortfall of between $400,000 to $1.2M annually that must be found if we are to maintain what we currently provide. The extent of this shortfall cannot be confirmed until the final roading plan is signed off by the government later this year and a clearer picture is available of the impact of the other changes discussed above.

The Options

1) Don’t fund the shortfall and reduce the service provided for roading

The shortfall would not be funded. This option would mean less money would be spent on maintaining and upgrading roads in the district. This would require us to change how we deliver some roading services. For example, sealed roads could be turned back into gravel roads or less road grading could occur.

2) Partially fund the shortfall, continue to advocate to government and reduce the service provided for roading

Some of the shortfall would be covered, leading to an additional 1.2% increase in rates over three years. This option would likely mean some changes to how we deliver services would also be required. Of the estimated $400,000 - $1.2M annual shortfall, Council is proposing to fund between $300,000-$500,000 annually over the next ten years, at the lower end of the funding required.

3) Fully fund the shortfall in the next financial year and maintain the service provided for roading

All of the shortfall would be funded and there would be no changes to the service provided. This could mean up to an additional 3% increase in rates compared to 2014/15.

Preferred Option

Option Two is the Council’s preferred option.

The Council is proposing to fund an additional $300,000 in 2015/16, $400,000 in 2016/17 and $500,000 in 2017/18.

This means that Council is intending to set money aside to partially cover the shortfall. Changes in how the service is provided may also be required. At this time, due to the uncertainty over the level of the shortfall, the severity of these changes in service cannot be confirmed. Some examples could include reduced street cleaning,
unsealed road grading or roadside mowing. Any change in level of service has the potential to have an undesirable local impact.

Council will continue to actively pressure for government to restore the model of funding to an appropriate balance between local communities and government.

Council is investigating other ways of providing the service more efficiently and effectively and reducing overall costs or levels of service. For example, it will review whether we should continue to provide the same standard of service for something like footpath resurfacing. It is also part of the Mid-South Canterbury Roading Collaboration along with Ashburton, Mackenzie and Waimate districts. This group aims to provide opportunities to share resources, ideas and approaches, with the aim of ultimately reducing costs and improving levels of service for the respective district’s ratepayers. Currently, the group is working on a standard maintenance contract. Potentially in the future, savings and greater efficiencies could be created for the community through joint tendering of contracts.

Supporting Documents and Links

TDC Submissions on FAR Review and Emergency Works Review

New Zealand Transport Agency - FAR Review

New Zealand Transport Agency - One Network Road Classification

TDC Infrastructure Strategy