December 7, 2017

CT transportation system at risk of dramatic contraction

Connecticut's cash-starved transportation program would need to scrap some rail services, drive up fares, suspend 40 percent of planned capital projects and defer major highway rebuilds like the Hartford viaduct, to remain solvent over the next five years, Gov. Dannel P. Malloy's administration has warned Wall Street.

As Connecticut prepares for a major bond sale next month to finance transportation improvements, projections sent recently to bond-rating agencies show the new state budget won't prevent the Special Transportation Fund from falling into a series of annual deficits starting in July — or from reaching insolvency by mid-2020.

The Department of Transportation estimates that to avert this crisis with revenue alone would require a 14-cents-per-gallon increase in gasoline taxes — at least until tolls could be fully implemented about six years from now. The DOT estimates tolls could raise $700 million annually by about 2024.

Meanwhile, transportation officials also warned the deficits, absent adjustments, probably would derail tens of millions in transportation grants.

And while insolvency isn't expected for another two and a half years, some cutbacks — including a reduction in Shoreline East rail services — might be necessary as soon as next May, Department of Transportation officials warned.

"Without significant new revenue, the only way to balance the STF and operate DOT is to severely cut the operating budget and slash the capital program," transportation officials wrote last month in a memo to Malloy.

Malloy was scheduled to discuss the transportation crisis with legislative leaders Wednesday afternoon and brief them in detail on Thursday.

Top lawmakers excluded administration officials from the four weeks of negotiations that produced a new, biennial budget plan last month. The governor signed that deal after both the Senate and House approved it with bipartisan, veto-proof margins.

Malloy's transportation vision in tatters

The governor, who proposed a 30-year, $100 billion program to rebuild Connecticut's transportation system in February 2015, has had limited success since then securing resources for the program.

Most of his time since then has been spent pressing for resources simply to keep the transportation program financially afloat.

About 7 percent of the overall state budget, the Special Transportation Fund — which holds about $1.51 billion this fiscal year — chiefly is used to cover debt payments on transportation-related borrowing and DOT operations.

Lawmakers agreed in the spring of 2015 to dedicate a portion of sales tax receipts to transportation. This was deemed the key to funding the first five years of the governor's 30-year program, through 2020.

A gubernatorial study panel recommended several options in early 2016 to fund the final 25 years, including restoring tolls to highways, increasing gasoline taxes and boosting sales taxes. These options, which would raise an estimated $42 billion over 30 years, have not been adopted.

Meanwhile, projected growth in gasoline tax receipts — which has been undercut for years by improving vehicle efficiency — has been downgraded again.

As recently as January, fuel tax receipts were expected to climb 16 percent over the next three years combined. But a new forecast issued two weeks ago reduced that to just under 10 percent.

But debt costs on transportation bonds –involving both outstanding debt and anticipated borrowing in the next few years — are not slowing down as Connecticut tries to reverse decades of deferred maintenance and other infrastructure investment.

That cost alone is projected to jump 38 percent over the next three years combined — and 73 percent over the next five.

By comparison, operating and other non-debt costs in the transportation fund are on pace to grow just under 12 percent over the next three years and 26 percent over the next five. Much of that is tied to transit service costs.

Huge cutbacks to operating, capital programs

If legislators don't want to raise the revenue to cover those costs, the DOT and the administration say severe cutbacks would be necessary.

Connecticut must demonstrate to potential bond investors that its transportation program has sufficient revenues to cover double its projected capital costs for the next five years.

Given the projected crisis, the administration targeted potential spending cuts and fare increases that it calculates are necessary to restore balance — unless legislators dedicate more revenues to transportation.

Anticipated cutbacks involving transportation operations include:

  • A 10 percent rail-fare increase starting in July 2019, followed by additional 5 percent bumps in the 2021 and 2022 fiscal years.
  • A 25-cent bus-fare increase starting in July 2018.
  • Reductions to the Shoreline East rail service as early as 2018 and possible elimination of the entire service in 2020.
  • Elimination of weekend and off-peak service on the Danbury, Waterbury and New Canaan branches that feed into the MetroNorth commuter rail line, which links New Haven and New York City. This could happen as early as 2019.
  • Reductions to transit district subsidies of 5 percent or more.

Anticipated cutbacks involving the capital program include:

  • Reductions to the overall planned capital program for the next five years by 40 percent.
  • Deferral of major reconstructions of Interstate 84 including the viaduct — an elevated section of highway — in Hartford and the "Mixmaster" junction of I-84 and Route 8 in Waterbury.
  • Reduction or possible elimination of all municipal aid for transportation projects. The state distributes $60 million annually through the Town Aid Road program.
  • Cancellation of planned fleet bus purchases.
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