This year's severe winter, and the winter maintenance services needed to keep state highways open for traffic, has resulted in higher costs for the Michigan Department of Transportation (MDOT). As a consequence, MDOT is forced to scale back summer maintenance activities for the remainder of the fiscal year, which ends on September 30.
Winter maintenance is budgeted using the average of the last five winters to determine the current year's allotment. This winter, costs for snow and ice removal exceeded the average by approximately $18 million. This means that summer maintenance activities must be reduced by $18 million to remain within this year's budget.
"Although the need for winter maintenance services has exceeded available funding, we continue to view the safety of motorists on Michigan's roadways as our highest priority," said MDOT Director Kirk T. Steudle.
Maintenance of state trunk lines is funded with state transportation revenue from the state gas tax and vehicle registration fees. Revenues have declined during the past few years due to higher gas prices and more fuel-efficient vehicles — both resulting in decreased fuel consumption.
"We must be good stewards of the taxpayers' dollars, and unfortunately that means cutting back on some activities to stay within the overall maintenance budget," said Jon Reincke, MDOT engineer of Maintenance.
The cutbacks include a variety of items, such as mowing, shoulder and curb sweeping, litter pickup, replacing aging snowplows and heavy equipment, the Summer Youth Corps program, ditch cleaning and brush removal, along with placing a freeze on hiring maintenance personnel where vacancies currently exist.
The reduction in maintenance activities equates to about a 20-percent decrease in the overall summer maintenance budget, which includes all road maintenance on the state trunk line system (M, I and U.S. routes).
"Our first priority is safety," said MDOT Chief Operations Officer Larry Tibbits. "We will continue to fund those critical items that keep Michigan highways safe for all motorists."
The items MDOT will continue to fund include: energy costs for traffic signals and urban freeway lighting; road surface maintenance, including pothole patching; emergency repairs to bridges, culverts, guardrails, and signs; janitorial maintenance and trash removal for rest areas and roadside parks; litter pick-up to support the department's Adopt-A-Highway volunteer program; removal of large debris and dead animals from the traveled portion of the roadways; and lift bridge operations.
"These cuts will not impact major highway and bridge construction projects, which are funded primarily with federal transportation funds," said Steudle.
There will be less construction work in an uncertain economy, and flat revenues are ahead for many segments of the construction industry. This means less bond business for the surety industry, according to what chair of the board, Rick Kinnaird, told attendees at the 100th Anniversary Annual Meeting of The Surety & Fidelity Association of America (SFAA). Kinnaird, who is the senior executive for Surety at the Westfield Companies in Westfield, Ohio, said that sureties can expect lower profit margins in the foreseeable future as growth in expenses outpaces growth in revenues from premiums as the costs of construction materials increase, with some even becoming scarce. "There will be pressure in the industry to cut expenses," he said.
With less construction jobs available, the surety industry can expect to see more bidders on jobs of all sizes.
How many more bidders and how aggressive they will be depends on the availability of surety and bank credit. "If our contractors cannot get lines of credit that previously have been available to them, we are going to be writing fewer bonds for them," said Kinnaird.
On the positive side, there still is positive growth in many nonresidential construction sectors, such as energy, health care, transportation, and public safety. "In addition," Kinnaird noted, "sureties are going into this changing and uncertain market with strong balance sheets from the profit run of the last three years."
Kinnaird urged SFAA members to stand strong in the defense of surety products and the public policy benefits it provides to state and federal agencies in pre-qualifying contractors that will complete public jobs on time and according to contract specifications, and to taxpayers who would otherwise have to bear the costs of delay in completion of needed public projects and the extra costs to complete projects when contractors default. "We have a 100-year track record to keep building upon."
The Surety & Fidelity Association of America (SFAA) is a District of Columbia non-profit corporation whose members are engaged in the business of providing surety and fidelity bonds. SFAA member companies collectively write the majority of surety and fidelity bonds in the United States. SFAA also is licensed as an advisory organization in all states, as well as the District of Columbia and Puerto Rico, and is the designated statistical agent for all insurance departments, except Texas, for fidelity and surety experience. The SFAA represents its members on matters of common interest before various federal, state and local government agencies.