March 9, 2020

CT Construction Digest Monday March 9, 2020

Long-delayed bond package of construction projects could be approved next week

The state’s long-delayed bond package of more than $1 billion for construction projects could be approved as soon as next week, Gov. Ned Lamont said Friday.
"My understanding with the legislature is we’re going to have a full bond package ready to go next week,'' Lamont said outside his Capitol office. The latest plan calls for one large package, rather than two smaller bills, he said. After millions of dollars were bottled up for more than eight months, Lamont called recently for releasing $625 million for cities and towns that includes $60 million for improving local roads. The money was previously tied to the legislature’s approval of electronic highway tolls, but it can now be released because Lamont has pulled the plug on truck-only tolls. Mayors and first selectmen have been clamoring for the money for months, saying that it has caused delays in various local projects. The money includes $60 million per year for local road improvements, which is usually released in allotments of $30 million in July and January. Towns also have not received $30 million for local capital improvements. The biggest piece of the package for towns is $475 million for local school construction grants. Officials originally believed that there would be a short-term release of money that the towns have been relying on and that has been factored into their annual budgets. That plan assumed that the full, $1.5 billion annual bond package would be debated later. Now, the latest plan says there will be only one vote, Lamont said. Lamont had told the annual meeting of the Connecticut Council of Small Towns last month that the money should be released. He then directed his budget director, Melissa McCaw, to prepare a bill for the legislature to approve and then schedule a meeting of the 10-member State Bond Commission. In a letter to McCaw, Lamont said he hoped the legislature would pass the bill no later than March 6, but that has not happened. “It is proper and prudent that we authorize new bonds and then allocate these grants so the towns and cities can record the revenues, make up for any deficiencies and plan their summer paving schedule,” the governor wrote. Some local officials said they had not heard the latest details about the behind-the-scenes writing of the bill at the Capitol. Senate Democrats said the full details had not yet been finalized Friday. A session of the state House of Representatives has been scheduled at 4 p.m. Wednesday - a highly unusual start time that would come after a finance committee public hearing that starts at 2 p.m.

Rhode Island denied rehearing in truck-only toll lawsuit
A federal appeals court denied Rhode Island’s petition for a rehearing in its truck-only lawsuit with the American Trucking Associations.
On Monday, March 2, the First Circuit Court of Appeals denied RIDOT Director Peter Alviti and the Rhode Island Turnpike and Bridge Authority’s petition for rehearing or rehearing en banc (involving all the judges of a court rather than by a smaller panel of them). RIDOT filed the petition on Jan. 2 after the appellate court reversed a lower court’s decision to dismiss the case in December.
In July 2018, ATA, along with Cumberland Farms, M&M Transport Services and New England Motor Freight, filed a lawsuit against Alviti claiming the tolls targeting truckers are unconstitutional. ATA is asking the court to declare the tolls to be a violation of the Commerce Clause and to include an injunction against enforcement of the tolls in the future.
Rhode Island gave two reasons for requesting a rehearing:
  1. Consideration is necessary to maintain uniformity of the court’s previous decisions.
  2. Use of the proper formula to reaching a conclusion based on the Tax Injunction Act “serves a central role in balancing state and federal relations and preventing interference with state taxation and state revenue collection.”
According to the petition, the First Circuit court “has consistently set forth a three-factor analysis with a particular emphasis on ‘the revenue’s ultimate use, asking whether it provides a general benefit to the public, of a sort often financed by a general tax, or whether it provides more narrow benefits to regulated companies or defrays an agency’s cost of regulation.’”
More specifically, Rhode Island is referring to the San Juan Cellular test:
  • The classic “tax” is imposed by a legislature upon many, or all, citizens. It raises money, contributed to a general fund, and spent for the benefit of the entire community.
  • The classic “regulatory fee” is imposed by an agency upon those subject to its regulation. It may serve regulatory purposes directly by, for example, deliberately discouraging particular conduct by making it more expensive. Or, it may serve such purposes indirectly by, for example, raising money placed in a special fund to help defray the agency’s regulation-related expenses.
  • For close cases somewhere in between, the focus should be on the ultimate use of the collected money, whether it is used for a general benefit or simply for defraying the cost of a regulation.
  • Rhode Island argued that the RhodeWorks Act that established the truck-only tolls “was imposed by the Rhode Island General Assembly to raise desperately needed revenue to maintain and repair public bridges.”
The district court dismissed the case based on the Tax Injunction Act. The lower court found that the tolls “are really a highly targeted and sophisticated tax designed to fund infrastructure maintenance and improvements that would otherwise need to be paid by other forms of tax-generated revenue.
“The panel, however, not only reversed the district court’s dismissal but in doing so shifted the (Tax Injunction Act) inquiry from its previous emphasis on the ‘revenue’s ultimate use’ as ‘a general benefit to the public’ to a focus on whether the assessment provides a special benefit to the payer,” the state argues in its petition.
Based on that shift, the state argued, the appellate court should grant an en banc rehearing.
During oral arguments, Rhode Island claimed that the truck-only toll is a tax under the San Juan Cellular test. The state argued a “general public purpose” for the tolls. However, the panel was not satisfied with that argument.
“Here’s the problem with that argument,” Judge Sandra Lynch said. “Every time the government raises money by any mechanism whatsoever, almost by definition it’s for a public purpose. That’s just impossibly broad. That cannot be the test. That is not what Congress said in the Tax Injunction Act.”
RIDOT is now left with two options: petition to the U.S. Supreme Court or face further proceedings in the district court as ordered by the First Circuit.