GOP leader worried Lamont’s ‘debt diet’ could stifle grants for small towns

A Republican leader on the State Bond Commission expressed concerns Tuesday that Gov. Ned Lamont’s “debt diet” could stifle an important economic development grant for small Connecticut towns.

Also Tuesday, Lamont followed his first bond commission meeting by making another appeal for bipartisan compromise on tolls to ensure a major rebuild of Connecticut’s aging, overcrowded highways, bridges and rails.

“We’ve neglected to look after some of the smaller towns in our state,” Sen. Kevin Witkos, R-Canton, told Lamont during the commission meeting.

Witkos urged the governor — who chairs the bond commission and whose budget office sets its agenda — to support $30 million in financing for the Small Town Economic Assistance Program, commonly known as STEAP.

The General Assembly created STEAP in 2001 to complement the Urban Act Program, which provides large sums of annual state bonding to assist economic development initiatives in Connecticut cities.

STEAP grants initially were restricted only to communities with populations under 30,000 when the program was enacted in 2001, and that still remains largely the case. But the program was amended in 2005 to include six towns larger in population than that limit, yet still ineligible for Urban Act awards.

“It’s an important source of revenue for towns that are looking to do economic development,” said Betsy Gara, executive director of the Connecticut Council of Small Towns.

Small communities traditionally have used STEAP grants to finance downtown revitalization programs, or even smaller projects such as sidewalk and parking lot development in commercial areas.

But the grants are paid for with borrowed dollars, which means they are subject to a complicated approval process.

The legislature initially “authorizes” borrowing for STEAP and many other programs.

But the 10-member bond commission has sole authority to determine when — and if — the state can afford to pursue any given initiative.

The legislature has authorized $30 million in financing for the STEAP program, but the bond commission released no funding during the last 18 months of Gov. Dannel P. Malloy’s administration.

Lamont first took office in January and Tuesday marked his first bond commission meeting — but STEAP funding wasn’t on the agenda.

The new governor already has announced plans to put Connecticut on a “debt diet.” While the Malloy administration recommended about $1.6 billion in borrowing per year, Lamont has said he wants to maintain an annual limit of about $1 billion.

Debt service costs, coupled with required contributions to pensions and retirement health care programs, now consume nearly 30 percent of the General Fund, and Lamont has said Connecticut simply cannot afford to carry this much debt.

“We have a skinny agenda because we have a skinny bond appetite,” Lamont said to open Tuesday’s meeting.

Lamont’s budget director, Office of Policy and Management Secretary Melissa McCaw, said the administration still is reviewing the STEAP grant authorizations and has made no final decision about whether to release the funds this fiscal year.

McCaw added that the priorities right now are the major statutory grants that are paid for using borrowed dollars.

For example, the bond commission did approve $85 million in financing Tuesday for two grant programs that support road repairs and other municipal infrastructure projects.

Also Tuesday, Lamont told reporters after the commission meeting that he remains open to talks with Republican legislative leaders about tolls.

The Democratic governor has proposed installing electronic tolls, which would boost transportation fund revenues by nearly 40 percent by 2023 or 2024 — and give Connecticut the revenues to support a more aggressive bonding program.

The administration also estimates as much as 40 percent of toll receipts would be paid by out of state motorists.

Senate and House Republicans say Connecticut doesn’t have to wait four or five years to expand transportation work — and it doesn’t have to toll anyone.

Republicans want to redirect other bonding — currently used for school construction, capital programs at state universities and economic development — for transportation.

State funds for transportation construction work would swell from about $800 million per year to $1.4 billion annually under the GOP’s “Prioritize Progress” plan. In contrast, Lamont would essentially keep resources for transportation work constant over the next four or five years until toll receipts arrive.

The Lamont administration appealed last week for a bipartisan compromise and the governor said Tuesday that “I’m all ears” on options that meet fiscal criteria.

“I’m playing the long game,” Lamont said, adding that any alternative must provide a reliable funding source to pay for a long-term rebuild of transportation infrastructure.

But Rep. Chris Davis of Ellington, ranking House Republican on the Finance, Revenue and Bonding Committee, said the GOP can’t compromise on tolls.

“I think it’s quite clear that he (Lamont) doesn’t have enough votes in the Democratic caucuses to be able to achieve his goals,” Davis said afterward. “I’m not sure there’s going to be much movement on our side of the aisle to try to raise taxes on people.”