How to fix local roads

It’s no secret that Australian roads are in a state of disrepair, but it’s a lesser known fact that three quarters of our roads are managed by local councils. Many councils are struggling to look after our roads, because they don’t have the revenue, the capacity, or the expertise.

In this podcast, Natasha Bradshaw, Marion Terrill, and Dominic Jones discuss their latest report, Potholes and Pitfalls, which investigates why local roads are in a state of disrepair and provides a roadmap to fix them.

Read the report

Transcript

Natasha Bradshaw: Nothing fires up Australian drivers quite like an unfilled pothole, and you don’t have to drive far in Australia before you hit one. It’s no secret that our roads are in a state of disrepair, but what you might not know is that three quarters of our roads are managed by local councils. Many councils are doing a bad job at looking after our roads, because they don’t have the revenue, the capacity, or the expertise to manage our roads well.

I’m Natasha Bradshaw, an associate in the Transport and Cities program. And joining me today is Marion Terill, our Program Director, and Dominic Jones, Graduate Associate. We’re going to be talking about our latest report, Potholes and Pitfalls, which investigates why local roads are in a state of disrepair and provides a roadmap to fix them.

So, Marion, you’re always telling the government that they’re spending too much on infrastructure. So, why do you think they should be spending on local roads?

Marion Terrill: I do tell governments that they spend too much on infrastructure, and that’s because they prioritise building new stuff rather than looking after what we’ve already got.

About 20 percent of the cost of a road is in the construction, and the rest of the costs are the whole of life costs. But when they make these decisions to invest, they often don’t take account of the whole of life costs.

Natasha Bradshaw: OK, and why specifically local roads?

Marion Terrill: A lot of local councils don’t have enough money to look after the roads that they’re responsible for properly. There’s several reasons for this Firstly, there’s not enough money because the Commonwealth’s untied grant funding to councils over the past decade Has not kept pace with the costs to local councils partly because they froze funding But partly also because the way they index it It’s for CPI, not for what the for a more suitable measure of what local councils actually need to spend.

So that’s one reason, but also over time the usage of roads, particularly by heavy vehicles that do almost all of the damage, has increased. Whereas the spending on maintenance has not increased. We’ve also seen council services have expanded into a whole lot of different areas. So back in the 60s, half of what they spent on was roads.

We’re finding these days it’s more like about 20%. They’ve expanded into social services and environmental services. They’re responding to the demands of their communities, but it’s starving roads of funding. And finally, while some councils are perfectly well able to raise their own revenue, quite a lot of them are not.

They already have significant rates burdens on populations that don’t necessarily have very high incomes. Plus, we’ve got rate capping in two states. Those are the reasons why there’s just not enough funding in the system to look after local roads.

Natasha Bradshaw: And you’ve done some great work looking at estimating by how much we’re underspending on local roads.

Can you tell us a bit about that?

Dominic Jones: Yeah, so what we did was look at sort of digital mapping data, outlined the actual roads that councils across the country have, and we used those maps to estimate how much councils. should spend just to keep their roads in the same condition they are today. So let alone not even considering how much it would cost.

to improve their condition. And what we found was that year on year councils are spending about a billion dollars less than what they should be doing. So that means if, if things don’t change that the roads across the country are actually going to get worse and start going backwards.

Natasha Bradshaw: And if we don’t act now, the pothole plague might continue to spread.

And there’s a couple of reasons for this as well. Climate change is… Meaning that we’re seeing more heavy rainfall and flooding as well as more extreme heat and both of these are very detrimental to Our roads. It also matters when you do road maintenance. You can liken it to putting off getting a filling and ending up needing a root canal. It’s much more expensive down the track if we don’t fix our roads now It’s only going to be much more costly in the future But councils have their own revenue raising functions and they’re really set up by the state So, Marion, why is this the Federal Government’s problem?

Marion Terrill: Yeah, we did think about which was the right level of government to be funding this, because as you say it’s, it’s the state governments that create the councils. The most important thing about roads is that they are a network. There’s a minimum standard of roads that we need across the whole country for both goods and passengers.

If you think about with freight, there’s a, there’s a first and last mile. It’s particularly important for things like agriculture at the primary production end, but getting things to the, to people’s homes or to the shops or to their final destination point, a lot of that is happening on local roads.

Even a single stretch of road or one bridge that’s not up to standard, then a whole route is compromised. A road is important, not just to the locality where it is, is in or the council where it’s located. But it’s also important as part of a network and the federal government is absolutely about Australia’s network as a whole.

So that’s the most important argument for why we think the federal government should do it. But there is a subsequent argument and that is state governments themselves are reliant on the federal government for a lot of their revenue. So the federal government raises much more than it needs and the states quite a bit less than they need.

So, so it means that structurally. State governments are a bit reluctant to commit more funding to councils because of this problem that they themselves don’t have sufficient own source revenue. So those are the reasons why we opted really more for the Commonwealth than the states to be funding this shortfall.

Natasha Bradshaw: So that’s between the Commonwealth, the Commonwealth and the states, but why shouldn’t councils just up their rates?

Marion Terrill: Well, I guess some councils can. So some councils raise enough revenue. It’s mainly coming off council rates. But there is also quite a lot of charges for things like parking that some councils can impose.

And, and there’s quite a sharp divide here. In the cities, the metropolitan councils by and large have got enough money to do what they need to do. And the more remote you get, the less true that becomes. So those councils that are in, that are covering remote areas tend to be quite significantly underfunded.

And with Dom’s funding model he found that the shortfall for a, a regional council the funding shortfall is typically about 40%, but for a remote council it’s more like 75%.

Dominic Jones: That’s right, and for major cities it’s closer to 10%.

Marion Terrill: The other thing about this, of course, is that… People in more rural and remote areas tend to have lower incomes, so you, there’s not as many of them and they’ve got less income that you can tax to raise the revenue.

Natasha Bradshaw: So the biggest grant that councils get comes from the federal government and they’re the financial assistance grants and they haven’t kept up with government costs as Marion said. The federal and state governments give lots of different grants to councils. Last year, Queensland councils on average received 20 different grants just from the state government.

So what’s wrong with those grants?

Dominic Jones: Well, as you say, if a typical council has to apply for 20 different grants, then what that means is that they have to enter in these really long, lengthy applications, time and again, just to secure the funding they need to sort of… And what we found was that a lot of the time there’s a lot of duplication of effort between the different departments.

So, Different state government departments aren’t really talking to each other and so the same council will have to enter in the same data time and time again. And so for small councils in particular that have very few staff and are limited in the resources that they have, then applying these really lengthy application processes can actually drain.

the limited resources that they do have. And a sort of second problem with these type of grants is that even if you do secure funding, there’s a lot of requirements in reporting that can further sort of drain a council’s resources. For example, with roads to recovery funding, you have to set up a sign, which I’m sure we’ve all seen for any project over 10, 000.

And really that’s not providing a significant degree of benefit in sort of accountability and it’s just chewing up the time and the money that councils need to spend on, on completing the projects that they need to do.

Marion Terrill: I think another point I’d say on that is that often the time frames are quite short, that they have to complete them in, within, and, and that might sound like it’s fine, but sometimes councils really struggle to hire staff or to, to kind of get the project out the door in a six month time frame, for example, with Roads to Recovery.

And, and also this question of optimal timing that you talked about at the start, Tash, is really important that it might make sense for a council to bundle works together or to, in, in other ways to be in control of the timing of the project so as to get the best value for money.

Natasha Bradshaw: And Marion, as you mentioned at the start, governments love to give money for new projects and this is really a problem for councils if these grants are tied to being spent on a specific new project.

It might not be the project that’s of most value to that council’s community. And it also might not be affordable for the council in the long run to keep up the maintenance of any new road. Okay. So we’ve established that the federal government needs to invest more money in these untied grants, but.

Dom, some councils seem to be getting a raw deal when it comes to the allocation of these grants. Can you tell us what the problem is and how we can fix it?

Dominic Jones: This really goes to what Marion was talking about earlier, in the fact that some councils can quite easily raise revenue. They have big populations and those populations are often well off.

But as you get out into more remote areas, not only do you have very small populations, but they also have lower incomes on average. And so it’s just harder to raise the same amount of revenue that you need to provide basic services. In terms of the, the distribution of the financial assistance grants, what’s really striking is that different states across the countries have very different compositions of councils.

Nationally just 2 percent of us live in remote areas, but in the Northern Territory, That is 40 percent of the population is living in a remote area. And the way the grants are distributed at the moment doesn’t properly recognize this. And the result is, is that a remote council in the Northern Territory gets less than a sixth of the financial assistance grant funding per person that a remote council in New South Wales gets.

And this is just because having many more residents in remote areas means that their funding is spread much more thinly.

Marion Terrill: You could be thinking that we’re being quite negative about the capacity of rural and remote councils in particular to manage their road networks. Tash, tell us what you’re, what we’ve learnt about whether that’s true or not.

Natasha Bradshaw: Well, as part of our research for this project, we ran a survey of council road managers and they told us a lot about the types of problems that they’re facing and the way that they manage their roads and bridges. Councils across Australia manage Almost 150 billion dollars worth of roads and bridges.

Yet, a quarter of them don’t even know how many bridges they manage. This is pretty concerning if councils don’t even know what they’re managing You know, you’ve sort of got no hope of managing them well. In fact, in the past five years, Queensland councils found assets worth 1. 3 billion dollars that had never been recorded in their financial statements before.

And this is even worse for more complex data, like how many Cars and trucks are driving on your roads in a given day, which helps tell you when maintenance will be needed. So a lot of these councils don’t have the data that they need. And without good data, it’s also very hard to plan. So councils are required by legislation in every state to have these long term planning documents both for their assets and for their finances.

But what we find is many councils, particularly those in regional and remote areas, don’t have these planning documents. And if they do, they’re often very poor quality, so they’re not really helping them to make decisions about what they should invest in or to consult with their communities about what the communities would find most valuable.

Councils are doing a pretty bad job at looking after their roads and bridges, and that’s especially true for these regional and remote councils. But! There are a lot of barriers that are preventing them from doing better. What we heard from councils is that almost 90 percent of them had had difficulty hiring in the past 12 months.

And that’s a broader issue across the construction sector, but when we’ve got the federal and state governments investing in these major projects, it really draws resources away from these small council projects. We also know that the sector has done a lot of work to try and improve their data collection and standardization across the sector.

There’s a long way to go. Key data sets are riddled with errors and all the councils are doing things differently, which means there’s no way to check how your council’s going relative to another one or to improve your practices. We also know from councils that they don’t have the technology they need to do asset management well.

So if you’re in a In a city council, you’re likely to have really up to date tech to measure your road condition and store that data and use it to predict what you should be doing in terms of optimal maintenance. But if you’re in outback Australia, you’re likely to be using an Excel spreadsheet and just going to have a look at your roads or waiting for someone to call in and complain about a pothole, which we know is an expensive way to do it and also a pretty inefficient way to do it when you don’t have many staff.

So councils are facing a lot of constraints when it comes to doing better at managing their roads. Marion, we’ve heard a lot about the problems councils are facing. So where should the government start?

Marion Terrill: We have heard a lot and I think what we’ve tried to bring to this question is two things that are new.

Firstly the survey of road managers in councils that’s given us a lot more depth and understanding of what the challenges are that they face. And secondly, the model which estimates how much we’re underspending on local roads. I guess I would sum up by saying that this report is mapping a path to a better approach to funding and governance of local roads.

We would like to see an extra billion dollars a year spent on local roads. We think it should be funded by the Commonwealth. We think there should be a better distribution of the financial assistance grants by the Commonwealth. And we’d also like to see reforms. that ensure that councils have got the tools and the time that they need to be able to manage the roads and give them, give the community the roads that they need and deserve.

Natasha Bradshaw: Thanks, Marion and Dom. You can read our report, Potholes and Pitfalls, at grattan.edu.au. And you can find us on social media at Grattan Institute. Thanks for listening.