Voters will decide the fate of a proposed transportation “lockbox” Tuesday, but even if the measure passes it’s unclear if this will provide Connecticut with enough cash to rebuild its aging, overcrowded highways, bridges and rail systems in the coming years.
More specifically, the approval of the lockbox does not ensure that Connecticut will be able to borrow, at affordable rates, the hundreds of millions of dollars it needs annually to leverage billions more from Washington to finance its transportation program.
New projections show one key barometer of the transportation program’s fiscal health — the ratio of revenue to debt — could be slipping into dangerous territory within the next two years.
And as Connecticut takes on more debt so it can tackle major, long-deferred projects, it’s getting harder to keep the transportation fund in good financial shape.
“We haven’t stepped off the cliff yet,” said Don Shubert, president of the Connecticut Construction Industry Association and one of the founders of Move CT Forward — a coalition of construction businesses, trades and other transportation advocates. “There are no guarantees going forward when it comes to the Special Transportation Fund.”
“The next administration is going to have to find a stable, reliable, and efficient means to fund transportation in Connecticut or risk further deterioration of our roads, bridges, transit systems and our entire economy,” Chris McClure, spokesman for Gov. Dannel P. Malloy’s budget office, said Friday.
At issue are two key components in the $1.6 billion transportation fund, which represents about 7.5 percent of the entire state budget.
The first is total projected revenues, both for the current fiscal year as well as the next three or four.
The second involves the annual debt payments — involving principal and interest — the fund must make on transportation-related bonds.
The ratio of revenues to debt is crucial when the state goes to Wall Street to finance major transportation projects. Connecticut pledges when it issues the bonds to maintain a 2-to-1 ratio of revenue to debt service costs for the current fiscal year.
It also traditionally has demonstrated that the transportation program is likely to maintain a 2.5-to-1 ratio of revenue to debt payments for the next four fiscal years. The latter has been a key provision in keeping Wall Street credit rating agencies happy — and keeping the state’s interest costs down.
But according to new projections the state prepared for Wall Street to support a mid-October sale of transportation bonds, Connecticut already is struggling to hit those benchmarks.
The state easily cleared the 2-to-1 mark for the current fiscal year, with $1.68 billion in revenues against $646 million in debt costs. That’s a ratio of 2.63-to-1.
But the state also hopes to ramp up its transportation rebuild program, and that means taking on more debt.
After borrowing $600 million in 2015 and $700 million in 2016, the state has issued $800 million in transportation bonds in each of the past two fiscal years. And the goal is to get that yearly total up to $1.2 billion by 2022. That’s because for each dollar Connecticut spends, it typically leverages $3 to $4 in matching federal transportation funding.
Next fiscal year, which begins July 1, 2019, the revneue-to-debt ratio in the transportation fund slips marginally to 2.60-to-1, but is greater than the 2.5-to-one benchmark Wall Street likes to see in the fiscal out-years.
But by the 2020-21 and 2021-22 fiscal years, though, the ratios fall short at 2.48-to-1 and 2.39-to-1.
Connecticut’s mid-October forecast doesn’t even include a projection for the fourth fiscal out-year, 2022-23.
Malloy warned last winter that billions of dollars worth of planned transportation projects would fall into limbo over the next five years absent more state funding.
Some of the key projects on that list include:
- Replacing the elevated section of I-84 in Hartford, commonly known as the viaduct.
- Renovating the “Mixmaster” junction of I-84 and Route 8 in Waterbury.
- And widening Interstate 95 in southwestern Connecticut.
According to the DOT, the state anticipates issuing bonds in the next few years to proceed with all three of these projects.
Legislators approved a fiscal patch this past spring, transferring an extra $29 million in sales tax receipts into the transportation fund this fiscal year and another $120 million in 2019-20.
The most recent sale of state transportation bonds went well. According to state Treasurer Denise L. Nappier, the mid-October sale of $850.1 million in bonds attracted a record-level of demand from investors.
But Republican legislators and other critics of the state’s hefty bonded debt long have countered that Connecticut remains attractive to investors because they believe the state — with its great wealth — can afford to pay higher interest rates.
Nappier, a Democrat, did caution after the bond sale that “Connecticut will need a more robust and forward-looking approach” to finance transportation in the future, “such as public-private partnerships and alternative revenue sources.”
The Malloy administration warned on several occasions that the transfer of extra sales tax revenues to transportation was not a long-term solution.
“The corrective action taken in 2018, along with our strengthening economy, have given us some short-term relief to challenges in the Special Transportation Fund,” McClure said. “However, the steps taken, such as the accelerated sales tax transfer, are not permanent solutions and do not solve the larger issues we face as our transportation infrastructure demands repair, renovation, and renewal and is currently supported by gas taxes that are dwindling with improvements to fuel economy.”
Malloy, who wanted legislators to finance a 30-year rebuild of transportation infrastructure, got State Bond Commission approval earlier this summer for a $10 million analysis of how to implement electronic tolling on Connecticut highways.
But it remains uncertain whether that analysis will be performed.
The DOT likely won’t be ready to award a consulting contract for that analysis until March — two months after Malloy leaves office.
Republican gubernatorial nominee Bob Stefanowski has said repeatedly he won’t support tolls. Democratic gubernatorial nominee Ned Lamont has left the door open for tolls — but only for trucks.
Only independent candidate Oz Griebel, who led the former State Transportation Strategy Board, favors tolls, and said he would launch a pilot program in the next term to help motorists adjust to this system.
Griebel told The Mirror last week that the latest projections for the transportation fund only underscore the need for immediate action to address a transportation crisis that threatens Connecticut’s economic future.
“The sad part is we’re not even having a serious conversation about a serious issue” in the gubernatorial race, Griebel said. “The other two candidates are getting away with intellectual murder on this.”
Stefanowski has offered no plan to finance a major transportation upgrade and Lamont’s estimates for revenue from a toll system is limited to trucks — $100 million to $250 million per year — with no supporting analysis. That falls far short of the comprehensive, electronic tolling system recommended by a state study panel in 2016.
State transportation officials have said tolls on all vehicles could raise $600 million to $1 billion annually, depending on the level of discount provided to Connecticut motorists.