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CT Construction Digest Tuesday October 8, 2019

Build now, pay later? It’s not going to be that easy
Keith M. Phaneuf
As Gov. Ned Lamont fishes for legislative support for his new transportation plan, he’s dangling some juicy bait: hundreds of millions in low-interest federal loans that can rebuild infrastructure and jump-start Connecticut’s economy now — but don’t come due for 10 or 15 years.
If that sounds a little too good to be true, however, you wouldn’t be wrong.
That’s because while the governor reels in lawmakers with visions of new bridges and wider highways, his plan also comes with a hook: Connecticut can’t leave the entire bill for its children to pay off.
Some new source of revenue must be established now and the dollars set aside, especially in a state that already has dumped more than $30 billion in pension debt on future taxpayers.
And while his administration briefs lawmakers on the transportation plan in hopes of securing a special session later this fall, legislators have come within nibbling distance — but haven’t yet bit.
“What’s very important to the governor is to do two things at once,” Ryan Drajewicz, Lamont’s chief of staff, said Friday. “We want to be fiscally responsible, but also to recognize the reality that we have within the legislature.”
That “reality” is a Democratic majority in the House that proclaims it’s ready to adopt tolls now, and a Democrat-controlled Senate that might be able to pass tolls by the narrowest of margins — but doesn’t want to do so without Republican support.
The GOP remains wary of any tolling network, even one much smaller than the system Lamont proposed in February . But Republican leaders also concede there’s appeal in the governor’s plan to leverage huge sums of federal money — cheaply — right now.
“What we’re seeing now is what the Republicans wanted all along, and that’s long-term planning for infrastructure,” said Deputy House Minority Leader Vincent J. Candelora, R-North Branford.
Though the governor hasn’t released many details of his plan, sources familiar with it say it involves a 10-year investment of about $18 billion, or an average of $1.8 billion per year.
Connecticut currently spends about $1.5 billion annually on its infrastructure, a roughly equal mix of state borrowing and matching federal grants.
Lamont wants to supplement that foundation with low-interest federal financing available for highway, bridge and rail work. Interest rates are close to 2%.
That means if  the state starts paying off this obligation around 2030 or 2035, and follows the typical 15- or 20-year schedule, the full debt might not be paid off until 2045 or later.
Federal transportation officials wouldn’t approve such financing unless Connecticut dedicates revenue now to be pledged against the debt, Drajewicz said.
And while he didn’t offer specifics of the governor’s plan, sources said it involves electronic tolling tied to about 16 to 18 aging bridges.
That’s far less expansive than Lamont’s February plan, which involved tolls on four major highways involving about 50 gantries.
By scaling back the tolling system, and shifting some debt costs far into the future, Lamont hopes to entice lawmakers wary of a major tolling system.
And by acting now, the governor also said Connecticut could inject about $300 million more into its construction economy each year, on average, over the next decade.
Protesters greeted Gov. Ned Lamont and Lt. Gov. Susan Bysiewicz in June as they headed to a meeting on tolls.
“Transportation infrastructure is the horse and everything else is the cart,” Drajewicz said, “If we transform our infrastructure, what will follow will be an economic rebirth for the state of Connecticut.”
“You have to be responsible and balanced,” Shubert said, urging Lamont and lawmakers to find the right mix of present-day revenue and future debt. Some transportation advocates estimate the state’s transportation capital program needs to grow by as much as $700 million per year, far more than even Lamont has proposed.
“The sooner we start addressing the shortfall, the better off we will be in terms of providing safety, relieving congestion and [spurring] economic growth,” he said.
House Majority Leader Matt Ritter, D-Hartford, said recently that the governor’s plan should draw bipartisan support — if Republican legislators practice what they preach.
“There is no disagreement among any of the caucuses that we need a massive infusion of cash” into the capital program,” Ritter said.
Why not?
For one reason, required contributions into pensions for state employees and teachers are projected to rise significantly between now and 2030, despite the recent refinancing of both systems.
Connecticut’s payment to the teachers’ fund alone will rise by 55% over the next decade.
If the governor’s plan locks Connecticut into hefty transportation debt payments in the 2030s, Candelora said, legislators then may have no fiscal option other than to order a much more expansive tolling network than Lamont is seeking now.
Lamont said he also fears some legislators interpret his plan to mean no decision about tolls or other revenue needs to be made in the near future.
“I did get that sense. ‘Hoo boy, thank God, we don’t have to make a decision now. We can put it off ‘cause the money’s not due for 20 years,’” he said. “That sits on our balance sheet. That crushes our credit rating. Everybody knows you have to pay back the money. My God, deal with it.”
Lamont said he is determined not to hand future governors a transportation debt balloon payment.
“Yeah, isn’t that what every governor does to the guys that come after him?” he said. “That seems to be an old habit around here. I want to break people of that bad habit.”

Making case for more state investment, Waterbury Mayor O’Leary takes Gov. Lamont on tour of city’s redevelopment projects
MICHAEL PUFFER
WATERBURY — Mayor Neil M. O’Leary took Gov. Ned Lamont on a tour through several multimillion-dollar redevelopment projects in the city’s South End Monday, and pledged to continue focusing on the area.
That promise comes at a time Lamont is seeking to drastically reduce state borrowing — an effort that would squeeze the sort of state funds that have funded most of the city’s recent work in the South End.
Even so, O’Leary said he’s confident the prospects for new jobs and economic growth will convince the state to continue sharing its limited resources with Waterbury.
“I know these projects are stalled slightly because of the debt diet, but the debt diet is an issue that needs to be addressed,” O’Leary said. “The governor clearly said that projects that have a positive impact on economic development and jobs are going to be the top priority. And everything you see down here is all about jobs and economic development.”
O’Leary’s comments came outside of a nearly-finished building where local nonprofit Brass City Harvest plans to sanitize and distribute produce on behalf of local farmers. A state grant covered $1.6 million of the $2.9 million budget for this project.
Just across East Liberty Street from the “food hub” site is the former Nova Dye property. A massive factory burned flat there in 2012.
A $2 million state grant following the fire paid to clear the rubble. The city plans to use another $3 million state grant to finish the cleanup and build a youth baseball field.
Most of these grants have been raised by state borrowing. This year’s state bond package has been held up in an impasse between Lamont and the General Assembly over transportation funding and tolls. Lamont is currently pushing a scaled-back tolling plan.
Lamont on Monday said the bonding package is “tied” to whatever transportation plan is ultimately approved. More money borrowed for transportation will mean less money available for special projects, he said.
“If you put $700 million in transportation bonding, it crowds out a lot of good projects like this,” Lamont said outside the food hub. “If we find another way to pay for some of the transportation funding, then we will have more bonding to do some of the projects we talked about today.”
The city needs another $2.5 million to $3 million, O’Leary said, to finish a cleanup of another project Lamont visited Monday — cleanup of the 17-acre Anamet site. The city has already spent $2.4 million in state bond money on cleanup at Anamet, leaving the project about half completed.
The city hopes to gain additional state money to finish up the project and market the site for redevelopment.
Waterbury is seeking another $1 million from the state to finish cleanup of the former Risdon manufacturing site on South Main St.
O’Leary said he also plans to pursue cleanups of 777 South Main St. and 835 South Main St., just around the corner from the food hub. O’Leary, who is up for reelection, said he expects those cleanups to launch during his next term.
Lamont visited one South End effort that doesn’t rely directly on state funds — a $1.1 million jobs training program aiming to curb the 23% unemployment rate in the census tract around Mill Street. That one relies on funding and labor donations from local nonprofits and businesses, along with $450,000 from the Federal Reserve Bank of Boston.

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