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CT Construction Digest Tuesday December 3, 2019

State awaits release of Lamont’s revised plan for transportation funding
Connecticut is waiting for the rollout of CT2030 II since Gov. Ned Lamont and Democratic majority leaders announced they had agreed on a revised transportation funding plan a week ago.
The proposal that was outlined last Tuesday has yet to be fully drafted, so the details are sketchy at this early stage.
The original CT2030 initiative was a 10-year, $21.3 billion financing plan that Lamont released on Nov. 7. It allocated $14.2 billion for roads and bridges, and $7.1 billion for public transportation.
The governor and Democratic leaders plan to generally follow its outlines, including its timetable, funding sources, and list of projects.
CT2030 proposed 14 bridge and highway tolls that the Lamont administration estimated would raise an average of $325 million annually from passenger cars and trucks.
Lamont and Democratic leaders agreed to a truck-only tolls plan based on a recommendation from House Speaker Joe Aresimowicz and House Majority Leader Matt Ritter.The two House leaders proposed to charge tolls on commercial trucks to help finance 12 bridge improvement projects identified in Lamont’s 2030 plan. It is estimated the bridge tolls will generate $180 million annually.The list of projects include the Mixmaster interchange of Interstate 84 and Route 8 in Waterbury, four bridges on Route 8 south of the I-84 interchange in Waterbury, and the Rochambeau Bridge over the Housatonic River on I-84 in Newtown and Southbury.
Like CT2030 did, Lamont and Democrats propose to use revenue from truck-only tolls to secure low-interest federal loans to finance the bridge projects.
CT2030 anticipated receiving $1.5 billion through the Transportation Infrastructure Finance and Innovation Act. Under TIFIA, the state government must dedicate a revenue stream for repaying the low-interest construction loans.
Lamont and Democratic leaders propose to extend the repayment schedule for the TIFIA loans from the 27 years assumed in CT2030 to 35 years.
The CT2030 II plan will also count on the state government continuing to receive an average of $750 million in federal grants annually for highway and transit programs.
Like CT2030, Democratic leaders and Lamont also rely on $750 million in special tax obligation bonds a year, plus an additional $100 million in general obligation bonds for financing transportation projects.
Democratic leaders and Lamont also plan to follow the current schedule for transferring all sales tax revenue from auto sales to the Special Transportation Fund. The share is due to gradually reach 100% in the 2023 fiscal year.
House and Senate Republicans propose to tap the budget reserve fund to achieve pension savings in the Special Transportation Fund. Lamont and Democratic leaders advocate a more cautious alternative.
For example, Senate Republicans recommended drawing down $1.5 billion from the budget reserve to pay off a portion of the state’s unfunded pension liability that is attributable to the Special Transportation Fund.
The budget reserve fund as a balance of $2.5 billion, and it is estimated to reach $2.8 billion after the 2020 fiscal year based on current budget projections. This would be 14% of the 2021 general fund.
Lamont and Democratic leaders are open to using surplus funds to pay down pension debt.
Under state law, if the balance of the budget reserve fund exceeds 15% of the general fund, the state treasurer must apply all other funds that would otherwise be deposited to paying down unfunded liabilities in the State Employees Retirement System or the Teachers Retirement System.
In the event this requirement is triggered, Lamont and Democratic leaders propose to pay down some of the unfunded SERS liability attributable to the Special Transportation Fund.
CT2030 plan anticipated obtaining $3.2 billion in low-interest federal loans from the Railroad Rehabilitation & Financing Program to help finance $6.2 billion in improvements to state rail lines.
The Lamont administration proposed to use state-owned rail lines as collateral for the RRIF loans. Like the TIFIA loans, Lamont and Democratic leaders propose to extend the repayment schedule for RRIF loan from 27 years to 35 years.
The CT2030 plan proposed to spend $348 million to purchase new transit buses and modernize maintenance facilities, $100 million to improve the Route 1 bus corridor that connects Stamford, Bridgeport, and New Haven, and another $8 million on signs, additional shelters and service displays with real-time bus service information.

Navy inks $22.2 billion contract with Electric Boat for at least nine new submarines
Julia Bergman           
The Navy has signed a $22.2 billion contract with Electric Boat to build at least nine Virginia-class attack submarines over the next five years.
The contract includes the option to buy a 10th submarine, but that purchase is contingent on a six-month review of submarine production at EB and Newport News Shipbuilding, which together build two Virginia-class submarines per year.
With construction starting soon on a new class of ballistic missile submarines, a top priority for the Navy given these submarines will be armed with nuclear weapons, the Navy wants to ensure that EB, Newport News and their suppliers can handle that amount of work especially since the Virginia program has faced delays due to welding issues and materials not being delivered on time.
The Navy's concern delayed the signing of the contract, which covers the fiscal years 2019 through 2023. The submarines will join the Navy's fleet starting in 2025 through 2029.
The new Virginia submarines will involve more work and cost more than previous versions. An 85-foot section will be added to the submarines to enable them to store more weapons, deliver special operations forces and other uses. That will add $500 million to the construction cost, bringing the total price per submarine to $3.2 billion.
"This is not your father's submarine. This is a new, much more enhanced project," said U.S. Rep. Joe Courtney, D-2nd District, who is chairman of the congressional subcommittee with oversight of Navy shipbuilding.
Up to 12 submarines could be built under the contract. Courtney, who's pushed for more submarines to be built to help address a dip in the size of the attack fleet expected in the late 2020s, said Navy officials have told him they'd like to build 10 submarines over the next five years.
The contract includes $400 million to buy materials that would be needed to build the 10th submarine. Certain materials take longer to procure so they are purchased several years before construction starts. Courtney said the $400 million, which he called a down payment, is a signal that the Navy is serious about building the 10th submarine. If the 10th submarine is built that would raise the value of the contract to $24 billion.
The contract also includes options to build additional submarines in both 2022 and 2023, the result of Courtney's efforts in Congress, though Congress would still need to appropriate the money for those submarines.
"This contract allows for our shipbuilding team, our suppliers and our employees to plan ahead so that we can continue to deliver submarines of unmatched quality, stealth and lethality," EB President Kevin M. Graney said in a statement.
In statements, Connecticut's Democratic senators, Richard Blumenthal and Chris Murphy, said the contract is good news for EB, which employs about 17,000 people, and would create more skilled jobs.
"This new contract will fuel thousands of jobs in our state and provide long-term stability to the thousands of small Connecticut companies that support our defense manufacturing sector. This is a great win for our state," Murphy said.
"The contract is critical for our national security, and just as important the future of highly skilled Connecticut jobs," Blumenthal added.
The Navy buys submarines in groups known as blocks, and the previous contract included 10 submarines for $17.6 billion, then the largest shipbuilding contract in Navy history.

Lamont comes full circle on tolls; let’s get on with it
The Day Editorial Board             
Gov. Ned Lamont expended an awful lot of political capital to get back to where he started.
A week ago, Democratic legislative leaders and the governor announced they had agreed on the outline of a plan to impose electronic trucks-only tolls, using a dozen gantries on the state's highways. During the 2018 campaign, Lamont had proposed such tolling of trucks, but once elected he pushed a plan to impose tolls on all vehicle traffic, calling it necessary to generate enough revenue to meet Connecticut’s transportation needs.
More than any act, that flip-flop likely accounts for Lamont’s poor approval ratings and the lack of any “honeymoon” of goodwill typically afforded a new governor.
In retrospect, the governor needed to count the votes before sticking his neck through that particular gantry. Instead, he learned the hard way that he lacked the support necessary to implement general tolling, despite his Democratic Party having large majorities in the House and Senate.
During the last legislative session Lamont pushed a plan to construct 50 electronic tolling gantries throughout the state’s highway system. Lacking support, it never got to a vote. A month ago, the Lamont administration returned with a revamped plan of 14 gantries, targeted to locations in high need of transportation investment and part of his CT2030 plan to invest $21 billion in transportation infrastructure over the next decade.
In a subsequent meeting with Democratic senators, Lamont learned even that slimmed-down plan had no path to adoption.
The anti-toll opposition has been well organized and vocal. Republican lawmakers, meanwhile, have remained in lockstep in their opposition to tolls, showing no mood to compromise. That was again made clear when Republican leaders quickly rejected the truck-only proposal. The politics are clear enough; Republicans want the Democratic majority to fully own any toll legislation, then run against them on the issue in 2020.
Our view remains that some form of general assessment tolling on all vehicles is the best way to create the reliable revenue stream necessary to bring the state’s transportation infrastructure into the 21st century, while assuring out-of-state drivers contribute roughly 40% of that investment. It is disappointing that the Democratic majority did not show the political courage to back the governor on such a plan.
Yet the politics are what they are. Having a truck tax will provide desperately needed transportation revenues.
But we have concerns.
Will it survive a legal challenge? Rhode Island’s truck-only approach is under appeal by the trucking industry.
Can it raise the revenues needed? Lamont’s CT2030 toll plan projected to generate $320 million annually to underwrite low-interest federal financing, while a trucks-only system is expected to raise $180 million. To lower payments, Democrats say they can extend some of the low-interest federal loans over 35 years rather than 27 years envisioned in the CT2030 proposal.
Democrats are also eyeing the $2.5 billion Budget Reserve Fund, saying it if grows to exceed the statutory goal of 15% of operating costs — about $2.9 billion — it could be tapped for about $250 million to help pay for transportation.
This is a version of the more aggressive Republican plan to immediately transfer $1.5 billion out of the reserve to avoid any tolls or higher taxes. We see that approach as reckless in that it would create a budget crisis when a recession hit.
Fears are being expressed that tolls could send trucks onto to local sideroads, but that has not proved to be the case in Rhode Island. The lost time and added fuel use would cost more than the tolls.
Republicans also warn that in time the electronic tolls will be imposed on all vehicles. That could one day happen if the fees from the truck approach do not raise the necessary revenue, but it would require an act of the legislature and lawmakers would be accountable to the voters, as they should be.
What we soundly reject are suggestions that the Connecticut Constitution be amended to preclude assessing tolls on passenger cars. The constitution should not be manipulated for something as trivial as providing Democrats political cover in the 2020 legislative elections.
With increased automation and greater use of electric vehicles, who knows what the future will bring and what will be the best policies for paying for transportation infrastructure. Needlessly limiting options through a constitutional amendment would be foolish.

Waste agency plans to borrow $333M for Hartford trash-plant overhaul
Matt Pilon
Overseers of the aging waste-to-energy plant on the banks of the Connecticut River in Hartford expect to issue $333 million in tax-exempt public bonds to finance a proposed overhaul of the facility and a related recycling plant. That estimate is included in a newly signed term sheet between the quasi-public Materials Innovation and Recycling Authority (MIRA) and its selected construction overseer and facilities operator, Sacyr Rooney Recovery Team LLC (SRRT). The two sides have been in talks since last year. The negotiations have taken longer than expected, which led lawmakers to probe the situation earlier this year, after which both sides renewed in writing their commitment to work out a deal. The term sheet signed last week means the parties have cleared the first of two hurdles laid out in their memorandum of understanding drafted back in July. “We are pleased to reach this milestone in the mission to bring the publicly owned facility back to full and reliable service,” MIRA President Thomas Kirk said in an email to HBJ last week. Overall, the project is far from a done deal. Next up for MIRA and Sacyr Rooney is the drafting of a “comprehensive development agreement” or CDA, which would contain more detailed financial information than the term sheet. The self-imposed deadline for the CDA is Oct. 2020. If a deal isn’t reached by then, the state and Sacyr Rooney would likely part ways, leaving the future of the facilities in question. “There are significant challenges remaining, the most critical being the cost of the project and the sources of revenue,” Kirk said. “With the recent reductions in wholesale power prices for the renewable energy produced by the facility, the need for additional or supplemental revenue remains a challenge.” In addition, the tightening of contamination standards by China -- a major historical buyer of recyclable commodities -- has also squeezed prices for cardboard and mixed paper. The term sheet also lays out a variety of targets that both sides must hit, including the amount of waste processed per year and how many municipal waste contracts MIRA must corral for Sacyr Rooney. Outreach and talks with towns begin now, Kirk said. The state legislature’s original intent for the so-called Mid-Connecticut plant was to find a private partner willing to commit capital to the redevelopment in exchange for various revenues on the back end, but the July MOU made clear that taxpayer financing, secured by tipping fees, energy sales and other revenues generated by the facilities, would be a bigger part of the picture. Sacyr Rooney may end up financing some of the project. According to the term sheet, the company has committed to explore the feasibility of a mechanical and biological treatment and anaerobic digestion facility, which would help divert organics from the waste stream and open up more capacity at the waste plant. However, if Sacyr Rooney finds that the facility wouldn’t be financially feasible, it would not be required to build it, according to the term sheet. The term sheet also includes a host community agreements that would pay the city of Hartford an estimated $4 million per year. That’s more than in recent years, but roughly on par with what the plant paid the city in the earlier part of this decade.

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