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Road Construction Funding Methods Critical

Other Funding Methods Critical To Ensuring Ongoing Roading Construction Programmes

The Government and roading sector need to urgently explore other funding methods to maintain current momentum and ensure that vital roading projects do not get delayed, said Chris Olsen, Chief Executive Roading New Zealand. He was responding to today’s release of Transit New Zealand’s 2006/07 Draft 10-year State Highway Forecast.

“Up until a month ago, New Zealand’s transport construction funding over the next 10 years was set to increase by about $4.5 billion. However, the new forecast has decreased the amount of funding to $3.5 billion due to a funding shortfall arising from a drop in revenue and cost pressures,” said Mr Olsen.

“As resolving the shortfall is not progressing as fast as we’d hoped, it’s important to sustain current momentum and look at other sources of funding. The industry needs to prepare and allow for rising costs and inflation, and consider how tolls, loan funding and development levies can help grow revenue. We mustn’t lose sight of the fact that New Zealand’s infrastructure development has largely been funded through loan funding.

Mr Olsen acknowledged the substantial increase in funding from the Government announced in 2003 and in 2005, however, failure to maintain the work programme as initially planned will have direct impact on road users unless the balance of funding required was secured through other funding sources. More certainty of funding will give contractors the confidence to further invest in staff and plant, speeding up future projects. “

“The industry shouldn’t see the draft State Highway Forecast as all doom and gloom. We are making progress. Capacity in the industry has increased, and construction and the amount of funding available has continued to rise. It is still a very competitive market with over two-thirds of tenders going below Transit’s estimate and, on average, over three tenderers per project. This is much the same as it was in 2003.”

Cost increases in the sector are not arising from a lack of competition, the sector has grown in size by over 50% in recent years and has expanded by over 1000 employees last year in anticipation of extra construction work ensuring there is healthy competition. Mr Olsen believes that increases in project scope is a factor in driving up construction costs.

ENDS

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