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CT Construction Digest Wednesday December 18, 2019

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Moody’s Praises Connecticut’s Budget Reserves But Knocks Transportation Infrastructure

From 2008 to 2018, Connecticut’s private-sector employment increased by 0.8%, and there are fewer government jobs today than there were in 2008.
“Connecticut ranked 49th for employment growth in the same decade, with lower-wage jobs accounting for much of the growth. An inefficient transportation infrastructure remains a hindrance,” said Marcia Van Wagner, vice president at Moody’s. “The hobbled economy places the state at a disadvantage when competing with other states for business and residents.”
Moody’s also cited as a problem the state’s net loss in population – between 2010 and 2018, Connecticut experienced the third largest rate of decline in its working-age population.
“Connecticut’s economy will remain hampered by a declining and aging population that gives the state one of the weakest population and labor force profiles in the country,” Van Wagner wrote. “The demographic trends weigh on the state budget, as the pool of taxpayers fails to keep up with the costs of servicing the state’s large pension burden.”
Van Wagner said the state has an advantage in its “well-educated workforce” and the report also highlighted the strength of the manufacturing and aerospace industry in the state.
“The manufacturing sector, which has added jobs in the past two years, is a potentially significant growth vehicle,” Van Wagner said.
While a declining working-age-population-to-pension-debt ratio doesn’t bode well for the state, Van Wagner praised the actions Connecticut leaders have taken to weather a recession.
“Even without an obvious catalyst for a strong recovery in the next economic cycle, structural changes have the state better prepared to withstand a recession than prior to the financial crisis,” Van Wagner said. “During the next downturn, the state will benefit from less exposure to severe fluctuations in the finance sector and budget rules that have built reserves, which are at a record high.”
Connecticut is projected to have about $2.8 billion in the Rainy Day Fund by the end of the fiscal year in June. That’s mostly the result of the volatility cap, which was approved as part of the bipartisan budget two years ago.
“When fixed costs (pension contributions, retiree healthcare contributions, and debt service payments) are high, reliance on spending reductions to counter revenue shortfalls can result in a proportionately larger impact on public services than if those spending adjustments were spread across the entire budget,” Van Wagner said. “With Connecticut’s fixed costs at approximately 30% of the general fund, every 1% reduction in revenue represents about 1.5% of the budget outside of fixed costs. The impact of revenue shortfalls on services raises political pressure to solve budget gaps with nonrecurring solutions, among which Rainy Day Fund withdrawals are the most transparent and do not contribute to future liabilities.”
Last week, state Treasurer Shawn T. Wooden and Gov. Ned Lamont said the state’s $894.6 million bond sale continued to reflect the renewed investor confidence in Connecticut’s long-term fiscal stability.
Wooden gave retail investors priority and total retail orders received during this period were over $511 million, the second-highest amount on any bond sale in Connecticut history, exceeded only by the historic March 2019 General Obligation bond sale, which had retail orders of $828 million.
Orders from both retail and institutional investors reached $1.7 billion. Since orders exceeded bonds available, the state was also able to lower the interest rates it pays to purchasers of the bonds.
Gov. Ned Lamont’s office also played up a report from Bloomberg News that the bond market has stopped penalizing Connecticut.
S&P Global Ratings has rated Connecticut’s general obligations bonds an “A.” Moody’s Investors Service and Fitch Ratings rank them one level higher at “A1” and “A+,” respectively.
Connecticut’s next Bond Commission meeting will be Wednesday, Dec. 18.

These 3 CT municipal funding streams on hold until new year
Christine Stuart
HARTFORD — Gov. Ned Lamont wants his transportation plan approved by the General Assembly before he releases any more funding for local road improvements to the state’s municipalities.
The agenda for Friday’s Bond Commission meeting includes $15 million for the Small Town Economic Assistance Program, $23.6 million in clean water funds for municipalities, and millions of dollars for various projects in the city of Hartford, including “improvements to the track and the installation of field lighting at Hartford Public High School.”
But the agenda doesn’t include the three main infrastructure funding streams for communities - road aid for towns, Local Capital Improvement Projects, or grants for other municipal projects.
“Cities and towns are being used as pawns by the governor, who is tying a vote on the bonding package to a vote on tolls,” Senate Republican President Len Fasano and House Minority Leader Themis Klarides said in a joint statement.
They called it “politics at its worst.” “While a bonding meeting will happen next week, it won’t advance Town Aid Road funding and it leaves significant uncertainty about whether or not the governor really will stick with a ‘debt diet’ and what that means for cities and towns,” Fasano and Klarides said. “Instead it will start the slow drip of political handouts while the entirety of bonding for the next year remains unknown. Snow removal funds our towns count on will remain a bargaining chip to hold over lawmakers’ heads.”
Following an unrelated event at the state Capitol Wednesday, Lamont said lawmakers will tackle transportation and a 2020 bond package “early in the new year.”
He said “the week before Christmas was not the easiest time to get everyone here. We’ll get them here in January.”
Lamont has refused to act on the 2020 bond package without a vote on his transportation package.
In the meantime, the Bond Commission, still plans to meet Wednesday, Dec. 18.
What’s not on the agenda are funds budgeted for municipal road improvements. The release of the first installment in July was six months late.
Lamont is using the bond authorizations as a way to win support for his transportation plan.
“The Senate Democratic caucus is committed to providing cities and towns with important municipal bonding following the January special session,” Kevin Coughlin, a spokesman for the caucus, said. “Democratic senators have been working closely with town leaders and understand how critical state funding is for local governments.”
He added that the recent Democratic budget provided $100 million more in municipal funding.
Klarides said municipalities already had to draw down their reserves for summer road projects because the funding for local roads never arrived. To have to wait another month for funding will be hard, especially if there’s a lot of snow, she added. The grant program can be used for snow removal costs.
“With a combined 36 years of legislative experience and dozens of budget cycles between them, Sen. Fasano and Rep. Klarides ought know by now how the bond process works,” Max Reiss, Lamont’s communications director, said.“The state cannot allocate funding for road aid, LOCIP or certain municipal grants without the approval of a bonding package—which the governor and legislature have agreed to take up next month. Connecticut’s communities would be destabilized and certainly could not count on those funds or future municipal aid grants if we raid the Rainy Day fund at the end of the business cycle as proposed by Sen. Fasano and Rep. Klarides. Both should also understand that their previous reckless proposal to add $700 million to the state’s credit card could have crowded out these projects.”
Reiss said the Republican’s transportation alternative advocates for “raiding the Rainy Day Fund, which would slam middle-class taxpayers, and those same cities and towns in the event of a recession.”
Lamont was unable to convince the General Assembly to approve his proposal to toll four Connecticut highways and increase the amount of money for improving Connecticut’s infrastructure. He was able to strike a deal with Democratic legislative leaders last month on a $20 billion transportation plan that includes truck-only tolls as part of the financing method.
Lamont, who opened his administration announcing he was putting the state on a debt diet, has only held three Bond Commission meetings this year.
So far, the state has borrowed $1.22 billion in general obligation bonds. There’s another $131.7 million in general obligation bonds on next week’s agenda. Bonding runs on the calendar year rather than the fiscal year.
“Infrastructure funding is critical to the public safety needs and economic development concerns of municipalities and their residents,” Connecticut Conference of Municipalities Executive Director Joe DeLong has said.
In September, DeLong said he appreciated the governor’s efforts to address Connecticut’s transportation needs and to secure adequate funding, but the grants that his members are waiting on are part of the same infrastructure picture.
“Approving these three grants proves how essential the money coming out of the Bond Commission is - it is literally the roads we drive on and the bridges we cross over,” DeLong said. “It is a dangerous waiting game being played with municipalities regarding these infrastructure funds.”

Multi-state pact could curb transportation carbon emissions
Steve Leblanc
BOSTON (AP) — Carbon emissions from cars, trucks and other means of transportation would drop while gas prices would jump under a multi-state draft climate proposal released Tuesday.
The proposal — known as the Transportation and Climate Initiative — is aimed at reducing pollutants contributing to global warming. An alliance of Northeast and mid-Atlantic states have been working on the project that would create a cap on pollution from transportation.
Under the agreement, wholesale fuel companies would be required to purchase pollution allowances at auction. The sale of those allowances could generate billions for states to invest in carbon-reducing transportation options — like electric buses, electric car charging stations, bike lanes and sidewalks.
If fuel companies pass the cost of the allowances onto consumers, the price of gas in the region could climb by five cents to 17 cents per gallon in 2022, when the pact would take effect.
The states say they hope the change would also put pressure on fuel companies to come up with alternatives to carbon-polluting fuels. The pact would cover all of New England, except New Hampshire, and would stretch south into mid-Atlantic states — a geographic area that has tens of millions of registered vehicles.
The states include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Virginia. The group also includes the District of Columbia.
The transportation sector accounts for more than 40% of greenhouse gas emissions in the region, officials said.
Under the proposal, transportation emissions are projected to decline by up to 25% from 2022 to 2032.
New Hampshire had been a part of the deal, but Republican Gov. Chris Sununu said his state was pulling out just hours after the draft agreement was unveiled.
“I will not force Granite Staters to pay more for their gas just to subsidize other state’s crumbling infrastructure," Sununu said in a written statement. “This program is a financial boondoggle."
Supporters say the pact would be a major step toward reducing transportation pollution — while also generating money to help pave the way to a renewable energy future.
One of those supporters is Massachusetts Republican Gov. Charlie Baker.
“You can use those resources to do a variety of things, but some of the things I think you'll see states use it for are charging stations, more money in public transportation, more investments in things that would encourage the development of electric vehicles,” Baker said.
The pact would help Massachusetts reach goals set out in a 2008 law that requires the state to reduce its carbon emissions by at least 80% below 1990 levels by 2050.
Critics of the initiative say it will be bad for the economy and for families that rely on their cars to get to work and school.
Christopher Carlozzi, the Massachusetts state director for the National Federation of Independent Business, called the plan a hidden gas tax increase that will increase operating costs for small businesses, resulting in higher prices for Massachusetts consumers.
He said that's particularly true for businesses where telecommuting isn't an option.
“Most small businesses require their workforce to be on-site," he said. “Retail stores, restaurants, construction sites, and manufacturers cannot operate without their staff at the place of business."
Supporters say there are other benefits. They estimate the agreement could result in fewer cases of asthma, premature deaths and traffic-related injuries. They also said the shift away from polluting fuels could save hundreds of millions by avoiding the worst impacts of climate change.
Massachusetts Environmental Secretary Kathleen Theoharides said the agreement will help encourage fuel companies to ramp up their investment in cleaner transportation systems.
“It sends a clear signal to the market that there is going to be a price on carbon,” Theoharides said.
The deal would be modeled in part after the nine-state regional "cap-and-invest" system for power plant emissions known as the Regional Greenhouse Gas Initiative. That pact involved many of the same states including every New England state plus Delaware, Maryland and New York.
The proposal released Tuesday is a draft version of a final proposal that will be released in the spring, allowing time for the public to weigh in. At that point, each state will decide whether to formally sign the final agreement.
The effort comes as the Trump administration has battled California over that state's efforts to curb fossil fuel emissions.
The states involved in the Transportation and Climate Initiative pact have joined a lawsuit against the U.S. Environmental Protection Agency over what they call that agency's illegal attempt to revoke California’s authority to set its own greenhouse gas tailpipe emissions standards.

Snow removal funds held
Lamont delays release, pending transportation plan vote
WATERBURY – Some of the state’s municipalities including Waterbury and Wolcott report financial strain during snow removal because of a delay in state bonding money for town road grants.
Gov. Ned Lamont has held up the bonding until the legislature passes funding for a 10-year transportation plan which at this point includes tolls for trucks.
All of the state’s cities and towns are still dealing with the snow and ice that pelted the region Tuesday, but those that rely on the grant for snow removal must turn to other funding sources to get the work done.
Mackenzie Demac, chief of staff to Mayor Neil M. O’Leary, said the city relies completely on the grant to plow roads during the winter. This year’s city’s snow removal budget is $1.07 million, the same as last year.
“For now, snow removal will be funded through surplus funds that we received last year,” Demac said.
Wolcott Mayor Thomas G. Dunn said the snowstorm at the beginning of the month cost the town about $35,000 just for the liquid melting product, which would come out of the grant if he had it. The town relies on the grant and is still expecting to get it, he said.
Wolcott expects to receive two installments of $151,085 for the 2019 fiscal year.
Dunn said. “If we do not receive it, then we have to move money from other line items which would hurt the operation of the town.”
The town budgeted $90,000 for overtime and $40,000 for supplies during the winter months for snow-related maintenance, which is about the same as last year’s budget, Dunn said.
Town officials take a snapshot of the last few years to determine what to budget for, he said. He is not concerned about being hit with more snow this year, though an icy winter would be more expensive to maintain causing a need for more of the melting product.“We just don’t know what Mother Nature is bringing us, so we will have to see what comes,” Dunn said. “Every storm is different, but we are prepared for it.”

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