Tolls vs. ‘Prioritize Progress’: competing plans or a natural pairing?

They have been hailed as natural, implacable enemies.

Mongoose and cobra. Hatfields and McCoys. Red Sox and Yankees fans.

Now add to this list the folks who support Democratic Gov. Ned Lamont’s tolls plan, and those who favor the Republican legislators’ alternative, the tolls-free “Prioritize Progress.”

Ever since Lamont reversed himself and endorsed tolls for all vehicles three months ago, the two sides have been at odds.

Each proposal has its advantages and its weaknesses, both of which have been subjected to a withering storm of public debate.

Now, with just seven weeks left in the legislative session, lawmakers must choose one, or subject Connecticut to another year of the status quo — an inadequate capital transportation program eventually headed for a congestion nightmare, or worse.

So first, here’s a short primer on how Connecticut pays for road, bridge and rail upgrades, followed by a breakdown of the competing plans.

How CT pays for transportation

The Department of Transportation’s capital program is a separate entity outside of the state budget — but they are related and affect one another.

Connecticut pumps hundreds of millions of dollars into the capital program each year by borrowing — selling bonds on Wall Street.

Recently that borrowing has hovered between $700 million and $800 million per year.

The federal government adds another $750 million to that in matching grants, giving the state between $1.4 billion and $1.5 billion in new capital resources each year.

The problem is Connecticut short-changed its transportation capital program for decades prior to now, and $1.5 billion in new money each year isn’t anywhere near enough to do the job.

DOT Commissioner Joe Giulietti recently told lawmakers he needs at least $2 billion to make a difference — and then that annual number would need to grow throughout the 2020s and 30s.

Lastly, that money Connecticut borrows has to be paid back, and that’s where the state budget comes in.

Every year the state makes payments —principal and interest — on billions of dollars of accumulated transportation bond issuances from years past.

That debt service line item eats up about $650 million of the budget’s $1.6 billion Special Transportation Fund. The rest goes to pay for DOT operations, winter snow removal, rail subsidies, and bus and other transit programs.

So if the state wants to borrow more money to rebuild roads, bridges and rail lines, then it needs more dollars to pay off the debt.

Which brings us to …

Lamont’s tolling plan

The governor would order electronic tolls on interstates 84, 91 and 95 and on the Merritt Parkway with a base charge of 4.4 cents per mile — before discounts are offered to Connecticut motorists.

This would raise $800 million per year for the budget by 2024 or 2025, the administration says, with 30 to 40 percent coming from out-of-state motorists.

This would easily cover the debt payments on more annual borrowing.

But it would also give Connecticut the option of shifting toll receipts directly into the capital program and paying in cash — not borrowed dollars — for hundreds of millions of dollars in work, according to Lamont budget director Melissa McCaw.

Over the next two decades Connecticut could save billions of dollars in interest costs with this debt-avoidance approach.

Giulietti said he also believes a reliable, long-term revenue source like tolls could help Connecticut control its debt costs down the road.

“If we can lock in what the future revenue streams can be, then it really allows for some creativity,” he added.

“This is not just about getting a fund to balance. This is about positioning Connecticut for economic growth. … This is about making the case for families to be here in Connecticut.”

Melissa McCaw
Budget Director

More importantly, McCaw said, it would finally allow Connecticut to rebuild an aging, overcrowded transportation system that’s an impediment to a healthy future.

“The bottom line here is that Connecticut needs to make a decision about the path forward for transportation,” she said. “This is not just about getting a fund to balance. This is about positioning Connecticut for economic growth. … This is about making the case for families to be here in Connecticut.”

“Speeding up our rail service from Hartford to New Haven, to Stamford and New York City, with more frequent service to Waterbury and New London, with easier access to Bradley Airport and an upgraded Tweed Airport,” Lamont told legislators in his Feb. 20 budget address. “These transportation upgrades are the building blocks of our economic future.”

But tolls aren’t the only idea for financing an infrastructure rebuild. There’s also …

Prioritized Progress

“The Democrats and the governor have some people convinced the only way to do this is with tolls, and that’s simply a fallacy,” said House Minority Leader Themis Klarides, R-Derby.

In 2015, Republican legislators noted Democrats had massively increased borrowing for non-transportation purposes — and not just for schools and economic development.

Rather than simply cut programs out of the state budget, Democratic legislators and Gov. Dannel P. Malloy were putting them on the credit card. Connecticut was borrowing more than $100 million per year to make payments on borrowing. And a steady stream of community-based projects — often in Democratic legislators’ districts — consistently found their way into the bonding program.

Between 2012 and 2015, bonds issued for non-transportation purposes — and repaid out of the budget’s General Fund, not its Special Transportation Fund — grew from $1.1 billion to $2 billion per year.

Republicans asked a logical question: What if Connecticut redirected about $700 million per year of this borrowing away from these other areas and into transportation?

If Connecticut combined:

• $700 million in annual borrowing repaid out of the General Fund,
• With the $700 million-to-$800 million it’s already borrowing and paying off out of the Special Transportation Fund,
• And $750 million per year in federal grants,

It would have more than $2.1 billion each year to spend on transportation projects — and no one would have to pay tolls.

“This is about a reallocation of bonding,” said Senate Minority Leader Len Fasano, R-North Haven. “These simply are choices, but some people don’t want to make them.”

These are the basic advantages of each program. But no plan is without its flaws …

Can roads and bridges last until toll receipts arrive?

With toll receipts not due for three or four years, Lamont nonetheless has no intention to bolster funding for transportation to cover the interim.

He even wants to cancel additional resources legislators pledged to the Special Transportation Fund over the next few years.

The DOT warned in a February memo that the governor’s plan “would have significant impacts on our capital program, severely constricting the number of new projects that advance in the current, and future years.”

When pressed to elaborate on what he could do under the Lamont plan until toll receipts arrive, Giulietti promised only that he could maintain the average condition or roads, bridges and rail lines using a series of short-term “patches.”

Transportation advocates insist Lamont’s plan would put the capital program on a near-starvation diet in the short-term.

By comparison, Prioritize Progress would elevate spending on projects right away, and by more than $500 million per year. By the time toll receipts arrive in 2024 or 2025, the GOP plan already would have a massive head-start on Lamont’s, having invested $2 billion-to-$2.5 billion more over the next four years.

“The Democrats and the governor have some people convinced the only way to do this is with tolls, and that’s simply a fallacy.”

 House Minority Leader Themis Klarides, R-Derby

Why haven’t more advocates for transportation, both among the legislature and outside of state government, jumped at the Republican minority’s plan given its massive advantage in transportation investment?

“I would hate to think the reason is it’s a Republican plan,” Fasano said, adding he believes more legislators would back the GOP plan if they reviewed it closely. “I really believe many people who criticize it haven’t even read it.”

The administration says that provided tolls are approved now, it could respond if a transportation construction emergency arises in the next four or five years. 

How? By borrowing against future toll receipts.

Lamont already is talking about borrowing against future toll receipts to cover the projected $213 million capital cost to install gantries and other toll infrastructure.

McCaw couldn’t say what interest rates the state would expect to pay under that scenario.

And if public opposition to tolls is strong now, it would only be worse if motorists learn future toll receipts are being pledged to a private investor in exchange for a smaller, lump-sum payment to fix roads or install toll gantries now.

But Prioritize Progress has its own problems with debt and other fiscal issues.

Would GOP plan collapse under debt, fiscal insolvency?

One of the reasons Lamont and others want toll revenues for the Special Transportation Fund is because the rest of the state budget is in even worse shape.

Surging pension costs and payments on non-transportation borrowing consume almost one-third of the General Fund, compared with 10 percent two decades ago. This is siphoning resources away from education, health care, social services and municipal aid.

What happens if and when the General Fund has to pay off a significant chunk of transportation borrowing?

Within a decade, McCaw says, annual debt service costs will have grown by $600 million.

That’s one-third of the entire cost of today’s state program to fund local education.

And this burden “is 100 percent born by Connecticut taxpayers” with nothing from out-of-state motorists, she added.

Making matters worse, the Special Transportation Fund still is headed for insolvency. Even if the General Fund is used to pay off some transportation debt, the STF would go belly up — without toll receipts — by 2026.

But transportation advocates say the problems — both with Lamont’s plan and with the Republicans’ — are solvable.

How so? By putting them together.

Could tolls and Prioritize Progress complement each other?

“We see a tremendous amount of opportunity if the two proposals were somehow merged,” said Don Shubert, president of the Connecticut Construction Industry Association.

Shubert has endorsed Lamont’s tolls proposal — but also said the governor’s plan for the next four years likely would mean not treading water but actually falling backward in infrastructure repair.

Lyle Wray, executive director of the Capitol Region Council of Governments and another advocate of tolls, has referred to Prioritize Progress as a potential “bridge to tolls.”

“How do we get from here to there?” Wray said, referring to the potential four- or five-year gap until toll receipts come in. “I would explore a merger, for sure.”

Major projects, such as the widening of I-95 in Fairfield County or repairing the elevated section of I-84 in Hartford, could proceed as planned — or maybe even faster, Shubert said.

Why couldn’t Connecticut redirect some of the bonding earmarked for schools, economic development or community-based projects and shift it to transportation for the next four or five years, advocates ask, and then phase it out as toll revenues become available?

The answer, some say, is principle. Others say it’s politics.

Can you compromise with the ‘toll monster?’

The Lamont administration insists there is middle ground.

As long as there is a sustainable, long-term funding source for transportation involved, McCaw said, the administration would consider an interim plan that temporarily redirects borrowing for transportation purposes.

“We are happy to engage in a discussion on what the short-term opportunities are,” McCaw said, adding the plan must be fiscally sustainable.

But Republicans say it’s the Democratic governor who won’t give ground. Lamont should recognize, Fasano says, that the public simply doesn’t trust the “toll monster.”

“I say no tolls — period,” he said.

Rep. Laura Devlin of Fairfield, ranking House Republican on the Transportation Committee, said tolls are “a flat-out money grab” for a state grasping at straws to solve it fiscal dilemma.

The reason for this hard line in the sand, Republicans say, can be found within state government’s track record. 

Connecticut spent $1.3 billion in fuel tax receipts on non-transportation programs between the 2006 and 2014 fiscal years — even as the wholesale gasoline tax rose four times during that period.

And residents still are reeling from major state tax hikes in 2011 and 2015.

What isn’t in doubt, transportation advocates add, is that time is running out.

If a long-term transportation rebuild with a new funding source isn’t adopted this year, the odds of it getting done in 2020 — when legislators are up for re-election — are slim, they say.

Similarly, once Connecticut and the nation slide into recession — which some economists warn could happen as soon as next year — the odds of a transportation rebuild also shrink.

By the time the political and economic smoke clears, the state might not be ready to do anything new for four or five more years.

“And no one wants that,” Shubert said. “That’s a catastrophe. You don’t want that.”