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Rising asphalt costs crunch local budgets
(by Joseph Koziol Jr. - September 03, 2008)
Rising asphalt costs crunch local budgets
By JOSEPH KOZIOL JR.
Local governments are facing a new challenge in planning budgets with a change in state and Geauga County policy that will cost them more for some paving projects.
Munson Township Trustees learned of the impact last week, when a 2007 policy change kicked in for their road projects planned this year.
Township Road Superintendent James Teichmann said bids received in March jumped by $100,000 because of a cost adjustment allowed for asphalt suppliers.
In March, the township received a bid of $381,486 from Ronyak Paving Co., of Burton, for seven roads and a portion of one other one planned for resurfacing. The township planned the resurfacing of Basswood, Lakeview, Orchard, Parkside, Parkway roads, Elk Run and Stonegate Drive, as well as a stretch of Rockhaven Road, between Mayfield (Route 322) and Sherman roads.
The sharp increase in price left the township with two options, Mr. Teichman said. Either spend another $100,000 and keep up with the roads or cut back on the amount of work.
He said cutting back would leave the township in a precarious position, allowing the road program to fall further behind and facing even higher costs later. Two years ago, he said, the township held off on doing planned work along Rockhaven Road and paid an added $25,000 the following year for it.
Mr. Teichman said the policy may bode well for businesses, but it can wreak havoc when attempting to budget for the work.
Trustees voted unanimously to supply the added $100,000 rather than delay the work.
The new policy deals with asphalt binder, the adhesive that holds the sand and stone together in an asphalt mix, Mr. Teichman said. In March, the cost for the binder was running at about $52 a ton, while today it is over $70 a ton, he said.
The new policy allows contractors to adjust their prices even after bids have been submitted, and that resulted in the $100,000 price jump for Munson.
The policy was adopted by the Geauga County Engineer's Office and applies to all county and township road projects.
In August, Geauga County Engineer Robert L. Phillips wrote to the township that the first year of the program saw little impact on the cost of road projects, but that changed in 2008.
"There were few cost adjustments during the 2007 construction season," he wrote. "Our experience in 2008 has been different. Asphalt-binder cost adjustments allowed by the current contract provisions are causing a huge increase for the cost of projects. We understand that most townships have not planned for these unprecedented cost increases."
In his letter, Mr. Phillips said the cost adjustments are fair and beneficial to both sides. "We followed the lead of the Ohio Department of Transportation and believe that the cost adjustment is fair for the public authority and contractors," he wrote. "The formula established by ODOT and used by this office allows for cost increases and cost decreases based upon the average cost per ton of liquid asphalt sold in the state of Ohio."
Despite the unexpected price increases that local governments will face, the policy will benefit them in the long run, Mr. Phillips said. If a contractor is forced to guess what the price of the product would be six months after a contract is signed, it could have negative ramifications, he said. If a contractor projected his price would jump by $100 and it jumped by $300, he would face the prospect of either taking a loss on the job or cutting corners on a project to make up for that potential loss, he said.
Of all the items involved in performing a contract, Mr. Phillips said, the state chose to allow the adjustments for asphalt. Even though fuel has been volatile in terms of pricing, that was not a factor the state chose to consider in allowing the adjustments, he said.
The new policy allows local governments to get fairer bids on the work, he said. Without it, the state is likely to see more contractors go out of business as they lose money on jobs that were bid on earlier, he said. Losing contractors would result in a less competitive market for local governments to receive bids from, Mr. Phillips said. "I don't know whetehr that helps a community to have less competition."
Higher prices for asphalt, fuel and even road salt are causing problems for budgets everywhere, he said. "We're all going to do less work."
With four months to go in the year, Mr. Phillips said, the county has already exceeded last year's total budget for fuel. He said he has spent his entire budget for fuel this year.
He said governments around the state have taken bids for road salt but have yet to award them because of a steep price increase.
The jump in price for road salt is being blamed on limited supplies. Mr. Phillips said one factor is that the upper Midwest has record snowfalls last year and bid early. He said Wisconsin officials ordered an extra million tons of salt this year in response to last year's snowfalls. That, in turn, created an artificial shortage in supply for everyone, he said.
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