GOP leaders want Lamont to loosen development grants for small towns

Gov. Ned Lamont’s fellow Democrats in the legislature aren’t the only ones waiting for him to loosen his hold on the state’s credit card.

Republican legislative leaders want the administration to release long-stalled financing for a program designed to help small towns’ economic development initiatives.

The Small Towns Economic Assistance Program, commonly known as STEAP, “helps out the small communities that give so much to the state,” Sen. Kevin Witkos, R-Canton, told Lamont at last week’s State Bond Commission meeting.

Witkos added some of these small communities’ residents provide Connecticut significant tax revenues but “sometimes don’t get anything back in return.”

The 2001 legislature and then-Gov. John G. Rowland created STEAP to complement the state’s already established Urban Act, which funneled tens of millions annually into initiatives to grow jobs and expand development in Connecticut’s largest cities.

STEAP grants initially were restricted only to communities with populations under 30,000 when the program was enacted, 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.

Though eligible communities received about $230 million in STEAP grants between 2011 and September 2016 under Gov. Dannel P. Malloy, the program fell into limbo after that.

The governor’s budget office has sole authority to determine whether any town’s application for a STEAP grant meets state criteria. The administration also holds tremendous sway over the bond commission, which has sole authority to determine whether to authorize state financing for most projects and initiatives.

Legislators struggled for 10 months in 2017 to adopt a new state budget and bonding package, ultimately excluding the Malloy administration from negotiations that year and again in 2018.

Malloy didn’t approve any more STEAP awards during his final two years in office. Lawmakers authorized $30 million in new borrowing for STEAP grants before Malloy left office, and that authorization still is in force.

But Lamont, whose tenure began this past January, also has been at odds with the legislature over the state’s credit card. He also has not opted not to approve any more STEAP grants at this time.

Connecticut has more than $25 billion in bonded debt and ranks among the nation’s most indebted states on a per capita basis.

The governor initially recommended that lawmakers authorize no more than $1 billion per year in general obligation, or G.O., bonding, two-thirds of what it issued on average between 2012 and 2019. G.O. bonds are repaid with income tax receipts and other revenues from the budget’s general fund and are used to fund more capital projects not involving transportation.

Lamont also wants to ramp up state investments in transportation, but favors electronic tolling, which would provide hundreds of millions of dollars in receipts that Connecticut could use to pay cash for projects instead of more borrowing.

Lawmakers, to date, have declined to adopt tolls. And since Lamont says Connecticut’s aging, overcrowded highways and rail lines must be repaired, will the state try to put more borrowing on an already maxed-out credit card?

Until that question is answered, the administration said in July, bonding for non-essential projects must wait.

But Witkos said STEAP grants mesh perfectly with Lamont’s priorities.

Though they also can be used for local conservation and quality-of-life projects, they generally are used for economic development initiatives.

“And most of those use local contractors,” Witkos added, “so it’s still creating jobs” in Connecticut.

Office of Policy and Management Secretary Melissa McCaw told Witkos at the bond commission meeting that “the governor and OPM certainly recognize the importance of the STEAP program.”

But McCaw also made it clear other matters must be settled first.

“As we continue to make progress with securing a bond package and plan broadly for the state for the coming fiscal year,  I’m sure we will give proper consideration to the STEAP program.”

Deputy House Minority Leader Vincent J. Candelora, R-North Branford, another advocate for STEAP, said “when the local communities have the ability to invest money in economic development, they generally have done a better job than the state. It’s a program we should be supporting.”

Betsy Gara, executive director of the Connecticut Council of Small Towns, said rural and suburban communities have been struggling for years with little to no growth in state aid for non-education programs.

This has forced many towns to sacrifice some investments in economic development, because it might first have required a property tax hike to raise the initial funds.

“Small towns are working very hard to minimize those property tax increases,” she said. “The failure to approve a [state] bond package is putting a lot of pressure on towns.”

Lamont told reporters this past week that he’s confident he and lawmakers will reach middle ground soon on state borrowing, even though the new fiscal year — which began July 1 — is nearly three months old.

“We’re going to get a deal,” he said. “I know how to work with people.”

But the governor also said he won’t lose sight of his priorities. That means Connecticut must get its borrowing under control, and it must settle on a long-term plan to rebuild its aging, overcrowded transportation infrastructure.

“How much of that [transportation cost] is going to be on the backs of taxpayers? How much of that is going to be on the company credit card, so to speak?” said Lamont, who often notes tolls would spread that cost among out-of-state motorists as well as Connecticut residents.

“And then, based on that, we’ll know what appetite we have for further bonding for these other priorities,” Lamont added.