Cooperative Ventures: New approaches to road maintenance

(from Maine Townsman, April 1992)
By Jo Josephson

Economies of scale. They are said to occur when increasing the scale of the operation allows for greater efficiencies (read lowering the cost). Economies of scale. Achieving them has never been more critical.

But how do you achieve them in a rural state like Maine, where the size of most municipal operations is small, too small to be economical?

Do what you've always done: hire the job out or join with your neighbors in a cooperative venture, say those who do.

Maine's municipalities have traditionally cooperated with each other on a major scale when it comes to public safety. Interlocal agreements to come to each other's aid during fires are widespread and long standing.

Driven by Maine's Solid Waste Management Law, they are now beginning to cooperate with each other on a regional scale when it comes to solid waste disposal, be it through interlocal agreements or the more complex disposal district.

But while Maine's municipalities have traditionally contracted out their winter road maintenance (according to a survey conducted in 1989 by the Maine Local Roads Center, 38 percent of the towns in Maine "hired out" their winter maintenance to a private contractor), it is just recently that they have begun cooperating with their neighbors on the maintenance of their roads.

This article looks at that phenomenon, what is currently being said about economies of scale and local roads and how it is being achieved through a variety of cooperative ventures by a number of communities and organizations around the state.

Cooperation on Local Roads

Cooperative agreements for the maintenance of local roads--be they through the use of shared equipment or the joint purchasing of materials--do exist, albeit on a limited basis.

But the practice is growing. According to some, it is a management tool whose time has come.

It's a tool whose time is long overdue, according to Steven Deller and John Halstead, authors of the recently published Financing Rural Roads and Bridges in the Northern New England States.

After analyzing 316 usable returns from a survey sent to 981 towns in Maine, New Hampshire and Vermont in the summer of 1990, of which 55.7 percent were from Maine, they concluded the following:

In their 70-page study, which was published October 1, 1991 by the Maine Agricultural Experiment Station, Deller and Halstead found that the average amount spent maintaining one mile of road in the three states reached its maximum at about 80 miles; after that the costs began to rise.

Chart Object: Economies of Scale in the Provision of Northern New England Local Roads

Put another way, they found that the costs of local roads exhibited economies of scale up to about 80 miles of road; beyond 80 miles, economies of scale were exhausted.

Deller and Halstead also found that the total mileage responsibility for the average town in Maine, Vermont and New Hampshire is relatively small: approximately 40 miles compared to the average size county in the U.S. with road responsibility for 728 miles. New England states are unique according to Deller and Halstead in that the county has limited or no road responsibility.

ME

NH

VT

Total

Cooperative venture

Percentage responding 'Yes'

Lease of equipment

17.2

21.6

12.5

16.9

Purchase of gravel

12.1

16.2

21.9

15.4

Purchase of asphalt

12.1

16.2

9.4

13.1

Purchase of salt

41.4

18.9

12.5

26.9

Sharing of personnel

10.3

32.4

31.3

22.3

Spreading of asphalt

10.5

24.3

9.4

14.7

Bridge repair

8.6

5.4

6.3

6.9

Snow removal/sanding

62.1

48.6

62.5

59.2

Other

12.1

16.7

16.1

14.1

The authors also found that over half of Maine's towns maintain less than 30 miles of road and 95 percent maintain less than 80 miles.

These findings led them to conclude "…that a the vast majority of Maine towns are incurring higher operating costs than necessary because economies of scale are not being captured."

Deller and Halstead note that among the approaches to achieving economies of scale is one that is popular in the Midwest: the transfer of local roads to county governments; they further note that that option is not a viable one in New England due to the limited scope and attitudes there towards county government.

What is viable, they say is the approach currently pursued by approximately 40 percent of the towns responding to their survey and that is some sort of cooperative arrangement.

Survey responses indicated 58 percent of New Hampshire towns, 40 percent of Vermont towns and 32 percent of Maine towns have some form of cooperative agreement when it comes to road maintenance.

The most common cooperative link is with other towns; the next most common link is with the State Department of Transportation, according to their findings.

As to the types of arrangements, looking at the statistics for Maine, cooperative sanding and snow removal lead the pack (62 percent) followed by the cooperative purchase of salt (41 percent) followed by the sharing of equipment (22 percent).

Maine appears to lag behind Vermont and New Hampshire in their cooperative sharing of equipment and personnel but leads them in purchase of salt, due in no small part to the cooperative purchasing programs of its regional planning commissions and councils of governments.

In concluding, Deller and Halstead note the following:

  1. Sharing of expensive equipment provides towns with access to sometimes expensive equipment that may be inefficiently used when purchased by a single town.

  2. A potential deterrent to sharing equipment is the problem of distribution of maintenance and repair responsibilities In other words disagreements over which town assumes responsibilities for repair and upkeep of equipment which can lead to bad relations among communities.

  3. However, the problem can be circumvented if the sharing agreement is well thought out and documented in advance.

A closer look at some of those cooperative arrangements in Maine follows.

The RPC/COG Experience: Joint Purchasing

The simplest form of joint ventures when it comes to road maintenance can be found in the joint purchasing programs of Maine's regional planning commissions and councils of governments.

Be it the purchase of materials such as sodium chloride (road salt), culvert and signs, gasoline and diesel fuel, and tires or the purchase of services such as road striping, catch basin cleaning or road paving, the savings through their joint purchasing programs are noteworthy.

As well they should be. Suppliers bid more competitively when it comes to getting the business of many communities at once.

Salt

By and far the most popular joint purchase is that of road salt, otherwise known as sodium chloride.

Don Meagher of the Penobscot Valley Council of Governments which has conducted a cooperative purchase of winter road salt since 1987 recently did a study to determine just how much his participating communities were saving: he asked those who were not participating in his cooperative bid how much they were paying. Nineteen communities in the Penobscot Valley responded.

In order to compare the two groups. he averaged the price paid by each group and found that the average price for PVCOG purchase communities was $33.99 and the average price for those purchasing individually was $36.79. Therefore, the average savings came to more than $3 a ton.

As Meagher notes. "The price any community pays for salt, whether part of the PVCOG bid or buying individually, will vary based on many factors including total amount and distance from the stockpile."

Carol DeVere, who directs the Joint Services Division of the Greater Portland Council of Governments, figures that the savings for the 40 towns that participated this year in their joint purchase of 25,000 tons of salt was in excess of $250,000, more specifically the savings averaged $5 to $7 a ton.

As DeVere, whose joint purchase also includes towns served by the Southern Maine Regional Planning Commission, sees it the savings depend on the bidders you can attract to your area. She admits that the southern part of the state attracts many.

DeVere's operation, which puts out 15 bids for products or services annually or biannually, is totally self-sufficient. Those participating in its joint purchases include municipalities that are not members of the Greater Portland COG. All participants are charged a certain percentage of the cost; in the case of road salt it is 1.5 percent per ton; in the case of paving it is 2 percent.

As DeVere sees it, by not distinguishing between members and non-members they are able to increase the volume and that is the name of the game.

The experience of the Capital Coastal Council of Governments in Augusta, is also worth noting when it comes to the joint purchasing of road salt. According to its most recent cooperative purchasing report, towns participating saved anywhere from $400 to over $4,000 depending on how much salt they bought.

"The sodium chloride bid alone provided 30 percent to 50 percent direct savings to those municipalities who participated," according to the report.

Paving

A more recent entry into the joint purchasing arena is that of paving. While towns participate in salt purchases every year out of raw necessity, not every town puts money aside for paving. In fiscally tight times, paving projects are often the first to be put on the proverbial back burner.

Greater Portland COG's DeVere says that while their road salt bid includes 40 towns, only 13 participate in their paving bid. Moreover, while the participants change, the number stays pretty constant.

DeVere also notes that their joint pavement purchasing program serves smaller towns primarily. "There is a fine line as to when and whether to go it alone with paving," she says.

DeVere says that the average bid price they get is about $24 a ton and that the bids are fairly consistent But she says she doesn't award the bid on the basis of price, but rather on the basis of quality, going for the lowest bidder who provides the highest quality.

Not only does Greater Portland COG provide hot bituminous asphalt in place, its program also provides for joint purchase of cold bituminous asphalt as well as for a so-called road reclamation service or asphalt recycling.

As an indication of the growing interest in joint paving purchases, Capital Coastal COG's David Allender reports that in response to a recent survey, his organization will be offering road paving for the-first time this year, serving the towns of Chelsea, Georgetown, Litchfield, Manchester, Monmouth, Readfield, Windsor and Winthrop, purchasing about 12,000 tons of asphalt, paving 12 to 13 miles.

Individually, Allender says the towns would have paid $28 to $38 a ton; if Greater Portland COG s figure of $22 to $24 a ton holds the saving will be significant.

Unlike Greater Portland COG, his service is only open to members; over two-thirds of Capital Coastal COG's members have participated in some aspect of its Cooperative Purchasing Program.

In Aroostook County: A Joint Highway Department

The most sophisticated example of a local roads cooperative agreement in Maine these days can be found in Aroostook County.

When it snows in the towns of Mapleton, Chapman and Castle Hill, the roads are plowed by personnel paid from their joint highway account. The sand that is spread has also been paid for out of that same account. So it is when brush is cut and ditching is done.

But when it comes time to purchase new equipment, each of the towns turns to its own equipment reserve account to come up with their established share of the cost.

And when one of the towns decides to pave its roads, while joint purchasing may be the rule, the payment for it is from the town's individual road improvement account.

Who does pay for what in these three Aroostook County towns and how it is paid for is laid down in an interlocal agreement that provides for, among other things, a Joint Highway Department.

It's not your usual interlocal agreement. No other one in the state deals with roads. But then again, the three Aroostook County towns of Mapleton, Castle Hill and Chapman with their combined populations of 2,724 are unique.

At least two of the towns have shared their town manager for almost 40 years; all three have had an informal, unwritten agreement for sharing road maintenance for almost ten years.

As Duncan Beaton, who currently manages the three towns and their combined 56 miles under the spanking new (read February 1992) interlocal agreement sees it, the agreement is a "tool to provide the most service for the least possible cost."

Currently, total maintenance costs, according to Beaton, are about $5,400 a mile. This figure includes personnel, equipment, and reserves, but excludes the cost of overlays. Compared to neighboring towns that go it solo, the savings are more than $1,000 a mile, according to Beaton, who also says that the average figure put out by the state is currently $5,600 a mile.

The agreement between the three towns is also unusual because it covers arrangements not included in the Interlocal Agreement Act of Title 30A.

It gives the 13-member "Joint Board" of selectmen unusual powers, powers which some have likened to the powers of a town council, in that the Board, not the voters has final say in approving a "Joint Highway Budget".

And because of this power, not only was approval needed and given last December at separate special town meetings in the three towns, it also had to be, and was approved, shortly thereafter by a special act of the Maine State Legislature as well.

That agreement reads, in part, as follows:

The Town of Castle Hill, the Town of Chapman and the Town of Mapleton may enter into an interlocal agreement authorizing the respective legislative bodies of those towns to authorize a joint board of municipal officers to establish and set the appropriation for each town for joint expenses only. Each town shall fund its share of the joint expense appropriations established and set by the joint board.

The agreement is both simple and complex, according to Beaton.

On the one hand is the Joint Highway Department's Operating Budget which pays for the personnel and equipment and materials involved in the winter and summer maintenance (read plowing, brush cutting, ditching, winter sand, summer patch, and repair, maintenance and rental of equipment, as well as insurance).

Last year the Joint Highway Department's operating budget totaled approximately $190,000; half went for personnel costs. This year it is budgeted at $176,875.

The three towns contribute to that budget following a cost-sharing formula that is based on the number of miles of road maintained in each town. Thus Mapleton with the greatest number of miles currently pays 52.4 percent of the total budget adopted by the joint board; whereas Castle Hill and Chapman each pay 23.8 percent.

On the other hand is the Highway Equipment Reserve Account of each town. It's mandated by the agreement requiring each town to set aside a certain fixed amount each year for equipment. Under the agreement the total amount to be set aside in equipment reserves by the three towns collectively shall be no less than 15 percent of the joint operating budget. Under the interlocal agreement, each town's share is set according to the number of miles of roads they contribute to the joint system.

In 1991 the total amount to be set aside for the equipment reserve account was 20 percent of $190,000 or approximately $38,000. For Mapleton that translated into approximately $20,000; for each of the other two towns that came to approximately $9,000.

Then there is the Town Road Improvement Reserve Fund of each of the three towns. It's there to pay for the basic materials used in the construction of their individual roads (read hot topping, gravel, culverts). That amount is determined by the individual board of selectmen in the three towns, based on the recommendation of the town manager. According to the annual reports of each town, last year Mapleton raised $70,000; Chapman raised $30,000 and Castle Hill raised $7,500.

Numbers and formulas aside, as Beaton sees it whether or not a joint highway department is viable depends on a great number of factors including the relationships between the member towns be they historical, political or geographical.

His three towns are tied by a road network that connects each town intimately, forcing residents to travel through each others towns over their neighbors roads. In addition, many residents who live in one community own property in adjoining communities, points out Beaton

It goes without saying that if there is historical antagonism between the towns it won't work.

Communities Downeast: Joint Paving Contracts and Equipment Purchase

Then there is the joint road program that is evolving among a growing number of towns and unorganized townships in Washington County.

For the most part it is a joint paving program; what sets it apart from other large joint purchasing programs is the fact that it is coordinated not by a regional planning commission but by a private consultant and that some of its members have begun to make joint purchases of equipment.

Last year there were eight towns and unorganized townships in the joint paving contract; this year there are 15 towns and unorganized townships in the contract.

Last year they purchased about 14,000 tons and paid about $22 a ton in place; this year they are purchasing 28,000 tons.

Last year they rented their sweeper from the paving contractor; this year they will lease it "in-house". In-house? Flush from the success of the first year of their joint paving program, the towns of Perry and Pembroke and the Washington County Commissioners jointly purchased a hydraulic sweeper at a cost of $3,000 each. They plan to rent it to the other towns in the joint purchasing project this year for about $50 an hour and put the money into a reserve account.

Next year the three are thinking of jointly purchasing a culvert steamer and renting it out to the others as well.

Last year all the arrangements were made by a private consultant, whose services ranged from writing up the specs to putting out the bids to assessing the mix, to overseeing the paving at a cost of $1 a ton. The arrangement was so successful last year that it is continuing this year.

"Forget town lines; you've got to start working together." That's the advice of Pembroke Selectman Milan Jamieson who along with Perry Selectman Richard Gove spearheaded the joint paving program.

For years the neighboring towns of Perry (population 758) and Pembroke (population 852), like other small municipalities in Maine. had "piggybacked" onto the Maine Department of Transportation's paving program paying MDOT about $22 to $24 a ton in place, compared to the $36 to $45 a ton if they had gone it alone.

But piggybacking off the State was dependent on the town road being adjacent to a State road, not to mention the fact that the State had to be working in the area when a town decided to pave its own road.

So when the State began to ease off on the arrangement last year, Pembroke's Jameison and Perry's Gove decided to connect with MDOT Paving Technician Roger Picard, who had established a consulting business on the side out of Bucksport known as Pavement Management Services and put out their own joint contract.

They were subsequently joined by Robbinston, Charlotte, Lubec, Dennysville, and the two unorganized townships of Trescott and Edmonds.

This year, according to Picard, Pembroke and Perry have been joined by Whiting, Township 21, Township 27, Dennysville, Alexander, Robbinston, Calais, Lubec Baileyville, Princeton, Charlotte, and Grand Lake Stream Plantation, and Edmonds

Aside from advising towns to work together on their roads, Jamieson's advice is to start small, don't get the group too large, and find the best resource around to help you.