November 6, 2018

CT Construction Digest Tuesday November 6, 2018



Projections show transportation funds getting lean by 2021

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.

  • Energy supplier to close Norwalk office

    Alexander Soule
    Calpine is closing the main Norwalk office of North American Power at a cost of more than 35 local jobs, less than two years after acquiring the electricity and natural gas provider.
    Kerry Breitbart and Carey Turnbull created North American Power in 2009 as an alternative supplier to utilities like Eversource Energy, Avangrid and municipal utilities like South Norwalk Electric and Water.
    Calpine plans to shutter within a year the Norwalk office of North American Power at 20 Glover Ave., with a Calpine contact not responding immediately Monday to a Hearst Connecticut Media query on reasons for the closure.
    The company acquired North American Power in January 2017 for $111 million, with the Houston-based giant sold itself last March to a consortium that includes Energy Capital Partners and the Canada Pension Plan Investment Board, in a transaction valued at $5.6 billion.
    Under CEO Thad Hill III, Calpine recorded a $356 million profit in the second quarter to reverse a $212 million loss the year before, with revenue up 8 percent to nearly $2.3 billion.
    Today, North American Power has more than a million customers in Connecticut, New York and 10 other states, with about one in every four electric customers in Connecticut purchasing service from alternative suppliers like North American Power.
    In August, North American Power notified customers that it had stored confidential information in a manner that could allow unauthorized access, to include Social Security numbers, with the company finding no indication information had been misused and offering two years of free credit monitoring from Kroll.
     North American Power’s revenue zoomed in 2014 to $263 million as energy prices spiked during a winter cold snap for customers on floating-rate contracts.
    As of August according to the most recent analysis by the Connecticut Office of Consumer Counsel, 31 percent of North American Power customers in Connecticut paid at least half more for their electricity than they would under Eversource’s default “standard offer” service, middle of the pack among 10 alternative suppliers of electricity service tracked by OCC. In the aggregate, those customers paid $38 million more over the preceding 12 months than they would have under standard offer service from the utility in their territory, OCC determined.

    Millstone Unit 2 in safe shutdown for repairs

    Waterford — Millstone Power Station Unit 2 was taken out of service Sunday after staff identified that in-core detectors — devices placed in the reactor core to measure and map power levels — were not working properly, the Nuclear Regulatory Commission and Millstone said Monday.
    Millstone recently completed a refueling and maintenance outage, during which all of the plant's in-core detectors were replaced, according to NRC spokesman Neil Sheehan. The detectors are miniature fission chambers that provide continuous information in the reactor core, Sheehan said.
    Sheehan noted the reactor "was at about 20-percent power and coming out of the outage when it was determined the detectors were not operating properly and a shutdown was necessary yesterday afternoon."
    Millstone spokesman Ken Holt said staff identified some of the detectors were not working properly during testing of the in-core instrumentation at Unit 2.
    "There is an ongoing effort to resolve the issue," Holt said.
    As of Monday afternoon at 2 p.m., Holt said the unit remained "in a safe, shutdown condition."
    Sheehan said NRC resident inspectors assigned to Millstone will follow up on Dominion Energy's troubleshooting efforts and repairs, and will track plans to restart the unit.

    US construction spending flat in September

    Spending on U.S. construction projects was essentially unchanged in September, the weakest showing since June, as an increase in home construction was offset by a slide in spending on government projects.
    The Commerce Department said Thursday that the flat reading for September followed a 0.8 percent rise in August.
    The strength last month was driven by a 0.6 percent increase in residential construction and a smaller 0.1 percent increase in nonresidential activity, which pushed this category to an all-time high. However, these gains were offset by a 0.9 percent drop in spending on government projects.
    The increase in residential construction featured an 8.7 percent jump in apartment construction, which offset a 0.8 percent drop in single-family homes. Apartment construction can be volatile from month to month. Overall, the home sector has struggled for much of this year as builders have had to cope with rising costs for land, lumber and labor. Part of the increase in lumber prices stemmed from the higher tariffs the Trump administration has imposed on Canadian softwood lumber.
    Residential construction has been a drag on the overall economy, falling every quarter this year. While business construction was strong in the first two quarters, it fell at a 7.9 percent rate in the July-September quarter. The decline was viewed as a potentially worrisome sign that the boost businesses received in bigger tax breaks for investment from the $1.5 trillion tax cut passed last December may be starting to wane.
    While overall construction was flat last month on a percentage basis, it did climb enough to push total spending to a record annual rate of $1.33 trillion.
    The 0.1 percent rise in private non-residential construction boosted that category to a record annual rate of $463.9 billion, thanks to gains in hotel construction and office building, which offset a drop in spending in the category that includes shopping centers.

    Harp: No On Lockbox

    Paul Bass
    Mayor Toni Harp supports more state funding for transportation. She doesn’t want to create a “lockbox” to do it.
    Harp offered that view on an election-eve episode of WNHH FM’s “Mayor Monday” program.
    On the program, she was asked about whether she supports a referendum question on Tuesday’s ballot to create a constitutional “lockbox” that would dedicate revenues raised from the gas tax and motor vehicles fines solely to transportation spending. It would be placed in a virtual “lockbox” that legislators wouldn’t be able to use for other purposes.
    Advocates for investing in rebuilding roads and bridges and improving train and bus service are supporting a “yes” vote. They argue it will create public confidence by ensuring that the money would be used for that intended purpose and therefore enable the state to make much-needed transit upgrades.
    Harp said she supports improved transit. But she argued that “lockboxes” limit legislators’ options when they have to make tough choices at budget time — when, perhaps, a more pressing need presents itself and there’s not enough money for every worthwhile use.
    Harp, who for 11 years co-chaired the legislature’s Appropriations Committee, argued that the referendum question if approved, “would take away the responsibility that we’ve given to our legislature to make those decisions on our behalf based on what is happening when they pass that budget. ... You’re really tying the hands and you’re absolving the legislature of the responsibility of doing the work.”
    “That’s why we elect people to go the legislature. They are there in real time making real decisions based on what they think their constitutions need and want,” Harp said.
    In response to a caller’s question, Harp reminded voters to turn over their ballots Tuesday so they can vote for state constitutional offices like comptroller, secretary of the state, attorney general, treasurer. The options for those offices will be placed on the back of New Haven’s ballot.
    Each city has a different ballot; New Haven’s has races on both sides this year rather than one side. That has raised concerns that many voters won’t notice and turn the page over to complete their ballots.
    Harp said she shares that concern.
    “It’s an easy thing to forget. That will absolutely suppress the vote for the constitutional officers,” she said.
    She said she hopes that poll workers remind all voters Tuesday about the double-sided ballots when voters sign in. After the election, she said, “we’re going to have to see how many votes fall off because we did it that way and have a conversation” if results show a drop-off in voting for races on the back.
    Local city clerks design local ballots; then the secretary of the state’s office approves the designs. Secretary of the State spokesperson Gabe Rosenberg said local elections officials were asked during a pre-election conference call to remind voters on Tuesday about two-sided ballots.
    “I haven’t heard concerns per se, especially since there are towns with two-sided ballots (because of local referenda) almost every election with statewide offices. Also, the instruction to turn the ballot over is big and bold,” Rosenberg stated. (View New Haven’s ballot here.)

    School Board Reviewing Plans For Glastonbury High School Field House Expansion, Kitchen Renovation

    The Glastonbury Board of Education officially started the budget season Monday by reviewing four proposed capital improvement projects, including a new field house at Glastonbury High School.
    The four projects included $2.2 million for the field house; $1.2 million to update and renovate the kitchen at Glastonbury High School; $150,000 for repaving the parking area at Hopewell Elementary School; and $80,000 for the replacement of a fire alarm panel at Smith Middle School.
    If approved by Town Manager Richard J. Johnson in January, and the board of finance and town council over the winter, the pair of high school projects will be bundled together in order to get reimbursement from the state. The state would reimburse the town for about one-third of the total project cost.
    Superintendent Alan B. Bookman said the $2.2 million for the field house work is an estimate and he should have firmer number in a week. The board will prioritize the list of projects during its meeting in November. The current field house will be demolished and the new building will include six locker rooms and bathroom facilities.“We weren’t trying to build something that was going to be a work of art,” Bookman said. “It needed to be something that was going to be very functional.”
    Board vice-chairman Douglas C. Foyle agreed with Bookman’s assessment.
    “It’s a sparse-looking building, which is a positive statement in terms of not doing a work of art,” he said. “It’s going to get the job done. The insides look like its going to get the job done. I’m not interested in a work of art as long as it is functional. And this is a functional building that gets the job done.”
    Bookman said the renovation of the kitchen at the high school will make it compliant with the Americans with Disabilities Act. All the equipment — including the stoves which date back 70 years — will be replaced. An office for food service staff will also be built.
    “It’s not the latest technology and it’s not the best functioning,” Bookman said of the current kitchen facility. The high school is also the town’s emergency shelter.
    Board Chairwoman Susan Karp said the projects could receivesignificant state reimbursement.
    “We’ve made it very clear to the board of finance and town council, the field house and kitchen have to be done,” she said. “We want to make sure the needs of our student athletes will be met and met in the most cost-effective manner.”
    “We would look at all the possibilities and timing of when could it be done, how long it will take and how we can do it with the least disruption to the school,” Bookman said.