Lamont's new take on Connecticut's old transportation problems

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As Connecticut Gov. Ned Lamont touted his $21 billion, 10-year transportation bill, the underlying message was clear: Connecticut needs to shore up its infrastructure.

As a possible legislative special session looms, how to navigate the fractious politics and pay for this new twist on a longstanding problem is far more vexing. The complexities may even force the governor to rework a plan that revives longtime sticking point: highway tolling.

The state's own fiscal struggles, infrastructure aside, provide a backdrop to the so-called CT2030 plan Lamont released Nov. 7. This time the governor is trying to soft-sell highway and bridge tolling, calling for 14 toll gantries as opposed to the 50 requested last year.

"On the plus side, it's good because it lays out a pretty vivid picture of what the plan would bring, and it's looks like he's backed down on the tolling aspect," said Howard Cure, director of municipal bond research for Evercore Wealth Management. "The first time out it wasn't handled that well."

Still, Lamont had no firm commitment his fellow Democrats in the General Assembly. They emerged from a caucus on Wednesday lukewarm at best.

Out-of-state drivers, Lamont said, would pay about 40% of the tolls, with his administration projecting $320 million in annual related revenue. That's less than what neighboring states, including the Massachusetts and New Jersey turnpikes, pull in from existing highways.

Affected communities would receive a portion of toll revenue.

Lamont, sliding in popularity polls even among Democrats, faces united Republican opposition on tolling. Tolling opposition affected some local election results earlier this month. Democrats, who control both branches of state government, have been reluctant to endorse the plan without at least minimal GOP approval.

With Democrats holding a 22-14 advantage in the Senate, Lamont would need 18 votes for his bill to pass as is. Democratic Lt. Gov. Susan Bysiewicz would break a tie. The Democratic edge in the House of Representatives is 91-60.

Next year is an election year, making a toll package dicier after the calendar flips.

"The no-tolls opposition is not very sophisticated, but it's very effective, and there's not an effective counter-coalition," said Melissa Kaplan-Macey, vice president for state programs and Connecticut director for New York think tank Regional Plan Association.

Senate Republican Leader Len Fasano, R-North Haven, said his constituents worry about how the state would spend the money.

"It's the words 'toll' and 'trust in government' that make people pause and say you know what, this plan is scary in a lot of ways," Fasano said.

Connecticut now finances its infrastructure projects primarily through Special Tax Obligation, or STO, bonds.

The Special Transportation Fund, a separate infrastructure account, could go dry in five years. Lamont would prop up the STF by earmarking 100% of car sales taxes to the fund by 2023, consistent with recently enacted budgets. The package also calls for a 15% reserve fund for the STF.

According to Cure, replenishing the STF is important for bondholders. "There's a lot of debt connected with that and they have to put money into it," he said.

"This reminds me of how New Jersey had to beef up its gas tax because some of the projects had to stop," Cure said. "You don't want that happening in Connecticut."

Lamont's plan would diversify the state’s overall infrastructure financing to include a reduced level of STO bonds; low-interest loans from the U.S. Department of Transportation’s Build America Bureau, through pledging a dedicated funding source such as tolling; Transportation Infrastructure Finance & Innovation Act, or TIFIA loans to finance bridges and tunnels at rates around 2% for urban projects and below 1% for rural projects; and Railroad Rehabilitation & Improvement Financing, or RRIF loans.

While differing from Lamont on tolls, Fasano said maximizing federal dollars makes sense. "The interest rate varies from 0.8% to 2.2%, which is really low interest rates considering we bond [GOs] at about 5% to 5.5%, so that's a significant savings," he said.

Other means include cash financing of some projects Lamont said is consistent with nationally benchmarked data; and added support from Connecticut’s general fund through general obligation bonds consistent with the "debt diet," a commitment by Lamont and state Treasurer Shawn Wooden to reducing the state’s bonding levels.

Lamont said his plan would preserve the full $750 million in funds Connecticut receives annually, separate from any loans, from the U.S. Department of Transportation.

Republicans on Thursday released their own plan, called FastrCT, which they said features no tolls, tax increases or new taxes. Among other features, it would eliminate all bonding through the STO after 2022; back federal low interest loans with a stabilized Special Transportation Fund; and re-establish the Transportation Strategy Board and establish a Connecticut-New York Railroad Strategy Board.

Connecticut abolished tolls on its turnpike system and selected bridges after a truck in 1983 plowed into the Stratford toll gate on Interstate 95, killing seven.

Some Republicans have suggested that legalizing recreational marijuana or sports betting could provide revenues to pledge on bonds, instead of tolls. Lamont dismissed both as iffy.

"I don't think the Trump administration would be willing to consider that when it comes to bonding for the TIFIA bonds, the very low-cost financing," Lamont told reporters in at the capitol in Hartford on Tuesday. "They want to do it with an independent, reliable revenue stream. Nobody knows what marijuana does, nobody knows what sports betting does.

"You want to do it in a fiscally responsible way. Next to transportation, they say get your fiscal house in order. And they don't want us playing any games in terms of how we finance this. They don't want us borrowing from the general fund to put money into the special transportation fund, creating a hole over there to fill a hole over here."

Connecticut, with years of budget troubles and poorly funded pensions, has low ratings for a state government: A1 from Moody's Investors Service, A from S&P Global Ratings, A-plus from Fitch Ratings and AA-minus from Kroll Bond Rating Agency.

Lamont said he is wary of the GOP proposal's use of state reserves.

"Taking money out of the rainy day fund is a risky proposition that requires serious evaluation," he said in a statement Thursday. The fund has been replenished, estimated at $2.3 billion over the summer.

Federal approval is no given, according to Cure.

"There's a question of how supportive it will be, given the delays over the Gateway tunnel, a project that is so urgently needed. Connecticut has to present a meaningful plan." President Trump for years has stalled the Gateway tunnel, a project to fix decaying tunnels that connect New York and New Jersey under the Hudson River.

The Regional Plan Association worries about a heavy emphasis on highways — $14 billion for road improvements and $7 billion for transit — with much of the transit funding rail-oriented. Connecticut owns the rights of way to the Metro-North Railroad line, which the Metropolitan Transportation Authority operates and which connects Fairfield and New Haven counties with New York City.

"There's only $180 million over 10 years for bus transit and the number of rail and bus riders is pretty equal," Kaplan-Macey said. Another concern is the highway expansion and the lack of "demand management" measures such as the expansion of high-occupancy-vehicle, or HOV lanes, she added.

"It seems like a traditional, old-school way of trying to build your way out of congestion."

Lamont has been marshaling business support for the plan. He said the plan could generate $40 billion of economic activity.

Top executives from insurance giants Aetna, Travelers and The Hartford plus New Britain toolmaker Stanley Black & Decker and Danbury pharmaceutical company Boehringer Ingelheim, among others, have urged the governor and lawmakers to forge a deal.

According to the governor, chief executives intend to lobby pivotal lawmakers across the state. Corporate statements, though, merely touted improved transportation in general, not financing particulars.

Labor groups with an eye on construction projects will be involved as well.

Business leadership's relationship with the state has been rocky the past few years. General Electric Co. moved to Boston from Fairfield two years ago. Aetna announced a move from its longstanding Hartford home before recanting and Boehringer Ingelheim has periodically objected to the state's political climate.

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Infrastructure Transportation industry State and local finance TIFIA State budgets Ned Lamont State of Connecticut Connecticut