The State Bond Commission’s approval of $10 million for Gov. Dannel Malloy's study on highway tolls has reignited debate over the decades-long controversy in Connecticut.
Revenue strain, election-year politics and regional tolling dynamics provide a backdrop.
The commission voted 6-3 on July 25 to fund the study on possible electronic tolling for interstates 91, 95 and 84, and the Merritt and Wilbur Cross parkways. It would also weigh the cost of tolling on in-state and out-of-state drivers.
Connecticut removed tolls from the Connecticut Turnpike – I-95 west of New Haven – in 1985 and gradually phased out bridge tolls over the following four years.
“The undeniable truth is that our Special Transportation Fund needs a new, reliable revenue source,” Malloy told the commission. “We need new options.”
The fund finances the state’s entire transportation system and is generated primarily through motor vehicle fuel taxes. To sell STF bonds, Connecticut must continually demonstrate that the fund is operating in balance during its biennial budget period and through the out years.
While the General Assembly voted in May to earmark about $30 million more in sales tax receipts from the general fund to transportation, Malloy’s administration said more funding is necessary.
According to Malloy, major projects that need completion include the I-84 Hartford Viaduct; the Waterbury Mixmaster at I-84 and state Route 8; and the widening of I-95, “where the gateway to Connecticut has now become a roadblock,” Malloy said.
“There are those large projects, but also dozens of smaller projects in every corner of Connecticut,” the governor added.
The study will also examine discounts, tax credits or other options such as congestion pricing for Connecticut residents and explore the reduction of motor-vehicle taxes, as well as the environmental impacts of electronic tolling systems.
Federal highway funding remains an open question. President Trump’s $1.5 trillion infrastructure plan is stalled in Washington.
“Trump has basically backed off on infrastructure and that’s not helpful to the states,” said Philip Howard, founder and chairman of the advocacy group Common Good.
The uncertain status of the gas-tax dependent Highway Trust Fund, as vehicles become more fuel efficient or completely electric, has many states examining tolls and other alternative revenue sources. The highway fund has operated at a deficit for about a decade, and could go dry within three years.
The federal gas tax has remained at 18.4 cents since 1993 and increases to it have continually stalled in Congress. Since 2013, at least 26 states have raised gas taxes, including seven in the last year alone. Connecticut reduced its motor vehicle fuel tax in 1997 from 39 cents per gallon to 25 cents, where it remains.
Malloy, in the final year of his second term, has essentially punted the Connecticut tolling question to the next administration, given that the state could take at least nine months before selecting a vendor.
“I think it’s a good idea for Connecticut. It will give the incoming administration some tools,” said Alan Schankel, a managing director at Janney Capital Markets. “I can understand why some people are against it because once you have the study, there’s that feeling that you have to have the tolls.”
Connecticut’s Democratic and Republican primaries are Aug. 14, with the general election set for Nov. 6.
The state legislature and federal government would have to approve any tolling mechanisms.
“Connecticut’s pretty dependent on its transportation system,” Schankel said. “It’s hard to get from here to there without having to use Interstate 95 at some point. And it’s not like the federal government is going to step in with a great infrastructure plan.”
He added, “It makes sense as long as they keep the funding in transportation.”
A referendum to create a lockbox for revenue placed in the state's Special Transportation Fund will go before Connecticut voters in November.
Connecticut, which has scheduled a negotiated $889 million general obligation bond sale for mid-August, has struggled with diminishing revenue, high debt and legacy costs. All four bond rating agencies downgraded the state’s GOs last year.
Moody’s Investors Ratings assigns an A1 rating to Connecticut, while S&P Global Ratings and Fitch Ratings rate the bonds A and A-plus, respectively. Kroll Bond Rating Agency rates them AA-minus.
“Connecticut could use a spring cleaning, like other states including New York, New Jersey and Illinois, someone who can come in and look at all aspects of how it does business," Howard said. "That includes pay, pensions, the services it provides, how it provides them and how they could be done more efficiently.
“They could estimate how they could deliver essential services – pick a number, say, 20% less – and that could free up capital to do the funding and rebuild the infrastructure.”
State Sen. Scott Frantz, R-Greenwich, a bond commission member who also co-chairs the General Assembly’s finance, revenue and bonding committee, voted against funding the study.
"The legislature spoke loud and clear that there was no appetite for tolling and placing another tax on hard-working businesses and families across the state,” Frantz said. "While it is possible that some out-of-state revenue could be raised through electronic tolling, the governor completely ignores the fact that the rest of the burden will fall onto Connecticut residents.”
A toll-resumption proposal died in the legislature in May. State lawmakers have been sharply divided over tolling and other matters, including a fiscal 2018-19 biennial budget that they approved four months late last year.
The state Senate is split 18-18 between Democrats and Republicans, while Democrats have an 80-71 advantage in the House of Representatives.
State Comptroller and bond commission member Kevin Lembo also voted against funding the study. The commission, he said, should not be a substitute for legislative action.
"I do not support financing this study through bonding without legislative directive," Lembo said. "These decisions should be left to the next governor and legislature."
Electronic, or open-road tolling, could counter safety concerns from tolling opponents.
A fatal accident in 1983 prompted Connecticut's toll removal that decade. Seven people died when at the Stratford gate when a tractor-trailer crashed through a toll lane and hit three vehicles.
Another fatality at the Stratford gate two years later prompted Gov. Bill O’Neill at the time to order the closure of turnpike tolls two months ahead of schedule.
Targeting out-of-state vehicles through truck-only tolls, as the endorsed Democratic gubernatorial candidate Ned Lamont favors, could be legally risky. Trucking groups have sued Rhode Island and Pennsylvania over tolls.
The American Trucking Associations and three motor carriers representing the industry called Rhode Island’s plan unconstitutional. Their lawsuit in the U.S. District Court for the District of Rhode Island said Gov. Gina Raimondo’s so-called RhodeWorks initiative discriminates against interstate trucking companies and impedes interstate commerce flow.
It seeks monetary damages and “any other relief from the plaintiffs that the court deems proper.”
In the U.S. District Court for the Middle District of Pennsylvania in Harrisburg, the Owner Operator Independent Drivers Association Inc., the National Motorists Association and others parties want $6 billion in Pennsylvania Turnpike refunds from the state Department of Transportation, saying PennDOT used them improperly for mass transit and other uses.
“The tolls imposed by [Pennsylvania Turnpike Commission] far exceed the value of the use of the facilities or services conferred on the operators of motor vehicles using the Pennsylvania Turnpike and far exceed the costs incurred to operate and maintain the Pennsylvania Turnpike System,” the lawsuit said.
Preliminary estimates by Connecticut’s Department of Transportation said tolls, if fully installed by 2022, could generate $600 million to $800 million in new revenue annually.
Indiana Gov. Eric Holcomb and the legislature are Republican.
“Even deeply red states understand that the gas tax is an unreliable revenue source, and that transportation infrastructure is necessary to grow jobs,” Malloy said.
Other states and municipal issuers are studying tolling variants.
In Massachusetts, which changed to open-road tolling last year, the $41.9 billion budget Gov. Charlie Baker signed two weeks ago included a pilot program to study the effect of offering discounts during off-peak traffic hours. The Massachusetts Turnpike, the Tobin Memorial Bridge between Boston and Chelsea and the Boston Harbor tunnels are tolled.
New York City transportation advocates are pushing state lawmakers in Albany to enact a congestion pricing proposal in Manhattan, which they say could generate $1.5 billion annually for budget-strained mass transit and $15 billion through bonding.
“I think that these jurisdictions have a fair amount of leeway in establishing these things,” Schankel said.