A rapidly growing trend in Maine municipal finance is long-term borrowing for major road repair and construction, a practice for many years relegated to a few larger communities but which has recently become a phenomenon in smaller and mid-sized communities.
Better local capital budgeting, less state and federal highway aid and the soaring cost of rebuilding or even just paving roads is compelling many Maine towns to borrow rather than pay cash for large infrastructure projects, according to Robert Lenna, executive director of the Maine Municipal Bond Bank, and others.
“There’s a trend, no doubt,” Lenna told the TOWNSMAN recently. “It’s definitely there to see.”
Lenna said the increase in sophistication in local planning and budgeting for expensive road projects is matched by local voters’ recognition that bonding is a cost-effective way to get large improvements done right away. Moreover, communities undoubtedly save significant money by doing the work now rather than after putting money aside for several years only to find out the cost has doubled or tripled.
Voters also increasingly understand that bonding for major road projects spreads out the cost so that future users of the road will help make the bond payments each year.
“It becomes a fairness question of ‘if you get a benefit perhaps you should share in the cost’,” Lenna said. “That argument just takes on more value in times when budgets are strained” and people are clamoring for property tax relief.
Once the annual payment is booked into the municipal budget, voters are in an enviable position of being able to take on new bonds as old ones expire to maintain a steady, structured plan of local road repairs and construction.
“That kind of understanding is becoming more persuasive as people look at the condition of the roads” and the cost to fix them, Lenna said.
That’s what Lincolnville Town Administrator David Kinney hopes for in June, when town meeting voters will be asked whether the town should borrow $850,000 over 15 years to repair four gravel roads, or just under two miles of roadway.
It would be a first for the Waldo County town of 2,150, which has 11.5 miles of gravel roads to rebuild and pave, Kinney said in a recent interview.
According to Kinney, after he and the road commissioner developed a priority list for road repairs this year, some residents were concerned that the town would take years to make it to their road – maybe as many as 15.
Those residents came to selectmen and said they understood their roads weren’t as bad as higher-ranked areas, “but they told selectmen ‘do it faster and get to my road,’” Kinney said.
“It’s a lot to ask the people for, but we’re building an asset,” he added. “It seems like an effective approach to addressing more roads sooner.”
By deciding to bond, selectmen were able to subtract $280,000 from the proposed budget, in exchange for a first bond payment of about $90,000.
Last December, in a keynote address to the annual Maine Transportation Conference, Northeastern University Professor Joseph Giglio said the cost and scope of needed road construction across the nation is far outpacing government’s ability to finance it in traditional ways.
As Lenna at the MMBB pointed out, the cost of steel has increased 40 percent just since January, to about $100 a ton; asphalt at the refinery level has jumped 14 percent in 30 days; and diesel fuel is up 11 percent in six weeks.
Those latest price increases are affecting municipal paving and road maintenance accounts in many Maine communities which have doubled in just the past year. And since road work in scores of small towns constitutes half of the annual municipal budget, keeping up with those kinds of price increases while holding down property tax rates is becoming increasingly undoable.
In addition to spiraling costs, towns are dealing with continued major delays in state road funding and construction; less state revenue sharing in many communities this spring; and public demands for better and more roads with every new housing subdivision.
The situation isn’t much better in larger communities such as Saco, either. There, voters last year agreed for the first time to borrow $5.4 million, at an annual cost of $325,000, as the first step on a long journey to fix the city’s infrastructure.
Finance Director Lisa Parker said that like so many other Maine towns in recent years, nuts and bolts investments have been cut to maintain the operations side without reducing direct services or eliminating jobs.
Then along came LD 1 and its annual tax levy limits, this year compounded by increased pressure to hold down costs after another divisive statewide tax fight last year.
“There have been major cuts to our capital budget to somewhat comply with LD 1,” Parker said in a recent interview.
In addition to borrowing for road work, Saco officials also have increasingly relied on lease-purchase agreements to finance expensive road equipment, with the same goal of “chunking up the payments” and stabilizing road budgets, Parker said.
According to Lenna, Maine communities are bonding $250,000 to $1 million at a time for road work. Business has been brisk for the past several years and is expected to continue climbing, he said.
“ Maine towns traditionally have not taken on a great deal of debt. They have been reluctant to do that,” Lenna said. “But I also think there’s more understanding today about who pays for the infrastructure.”
As annual town meetings come and go, voters are making decisions about road budgets in every corner of Maine. In Wells, voters increased road spending from $50,000 to $500,000, Pownal agreed to borrow for the first time, but slashed the request from $5 million to just under $1.2 million. Even in Industry, a sleepy town of 850 near Farmington, voters recently decided to set aside $100,000 to start a road improvement reserve fund.
In Yarmouth outside Portland, the town council will ask voters in June to approve a $3 million local roads bond to address not only the most pressing needs, but also to tackle the huge backlog of projects that have gone unfunded for years.