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CT Construction Digest Monday July 13, 2020

Lamont restores capital improvement grant program for small towns
HBJ Staff
The state says it's reinstating a capital improvement initiative for small towns that has been dormant since 2016 in an effort to support local economies slammed by the COVID-19 pandemic.
Gov. Ned Lamont announced Thursday that Connecticut is reinstating the Small Town Economic Assistance Program (STEAP), which is a state grant program aimed at funding capital improvement projects in towns ineligible to receive bond issuances.
Lamont said the state is restoring the program with a new round of grants worth $15 million to provide towns financial support during a time of fiscal uncertainty due to the global health crisis.
Additionally, the STEAP initiative is being relaunched with a special COVID-19 provision that supports towns with expenditures based on their response to the pandemic for new construction, expansion, renovation, or replacement for existing facilities.
“Our small towns have been hit hard by COVID-19 and are in need of our help to fund these projects,” Lamont said in a statement. “Simply put, some of our small towns need to modernize their infrastructure so that we can support efforts to grow the economy but lack the property tax base they need to fully fund these projects on their own. The state can and should do what we can to help with these costs, as these small towns drive tourism... ."
The governor's office said towns selected to receive STEAP grants will be required to execute a contract with the state agency overseeing their grant prior to spending any project-related funds. Expenditures made prior to a contract being signed are not eligible for reimbursement, officials said.
The application period for the initial round of funding, coordinated by the Office of Policy and Management (OPM), lasts from Monday, July 13 to Aug. 14. Projects will be selected by mid-September, officials say.
Application materials can be found on OPM's website and the Department of Administrative Services’ contracting portal in the coming days.

China is outsmarting the U.S. in transportation: Getting There
Jim Cameron
Which is the No. 1 country in the world for transportation? Certainly not the United States. Not even countries in the European Union. No, you have to look farther east, as Marco Polo did in 1271, to find the future — China.
I’m so tired of ignorant Americans chanting “we’re number one,” when we are not. Not in health care, education and clearly not when it comes to using transportation to bolster our world trade.
Compare our crumbling interstate highway system, much of it built during the Eisenhower administration, to China’s superhighways, twice the length of our own.
Or look at our decaying railroads versus the 15,000 miles of high-speed rail on the Chinese mainland, making Amtrak’s Acela look like a toy train (145 mph versus 220 mph, one train for 300 passengers per hour versus China’s 1,000-passenger trains departing every 15 minutes).
We keep hearing of the Trump administration’s plans for rebuilding our infrastructure, but nothing ever comes of it. We pay lip service to that crucial investment but never appropriate it as the priority it is.
Meanwhile, China keeps spending $300 billion a year on its roads, rails and ports, much of that money coming from bargain-loving American consumers. Crucially, part of that investment is focusing overseas, creating a new Silk Road to markets in Europe and Africa.
Beijing has promised $8 trillion in loans to developing countries to build deep water ports and rail terminals to service China’s 1,000-plus container ships delivering its products overseas. Compare that to the U.S.’s merchant marine fleet, just 175 American-owned vessels.
China has invested heavily in the port city of Gwadar Pakistan, linked to western China by rail. And in the tiny African nation of Djibouti, positioned strategically at the mouth of the Red Sea, China not only built and owns the super-port there but has established its first overseas military base there with 400 troops.
Djibouti is just a toe-hold in Africa, but the port is connected by a Chinese-built railroad to nearby land-locked Ethiopia, one of the wealthier countries in Africa and anxious to acquire Chinese-made products.
Of course, China is only doing what other empire-building countries like Great Britain did in the 1800s — issuing loans to countries that they’ll never be able to repay while providing lucrative markets for their products. Kind of a lose-lose situation for the debtor markets. When Pakistan and Djibouti can’t repay those Chinese loans, use your imagination to guess what they’ll have to give up instead.
To protect those Chinese-built ports and megaships, China’s People’s Liberation Navy is enjoying rapid growth, soon to rival the U.S. Navy’s capabilities in the Pacific. By 2030 they will have 530 warships and submarines.
Even the land route from China to Europe is being revived with rail. There are now three trains a day departing the industrial and technology hub at Xian traveling Marco Polo’s old route west through Kazakhstan, Azerbaijan and Georgia carrying containers filled with electronics and textiles.
The transcontinental journey takes about two weeks but is cheaper than air and faster than shipping. It’s not a bullet train, just efficient low cost transportation through 60 countries with 5 billion potential customers.
So while the Trump administration battles China with tariffs and empty rhetoric (like calling COVID-19 “Kung Flu”), the Chinese leadership is playing the long game. We are not only getting outspent by Beijing, but outsmarted.
As legislators fled the Capitol as the coronavirus spread through Connecticut last March, they failed to approve the annual limit on the state’s credit card — a seemingly routine task, but one whose absence now jeopardizes billions of dollars in planned projects.
It’s unclear whether lawmakers will address this oversight later this month when they return to Hartford for a special legislative session, or defer action until after the November elections. Their ability to postpone delivering the bad news ultimately hinges on Connecticut’s cash position remaining strong and having other resources on hand to pay the bills.
“Bluntly, we are ignoring what we know to be the reality of the current situation,” Deputy House Minority Leader Vincent J. Candelora, D-North Branford, wrote recently in a letter to legislative leaders. “The sooner we face reality, the sooner we can start to plan to address this enormous challenge.”
Connecticut borrows billions of dollars annually for capital projects by selling bonds on Wall Street. But there is a borrowing limit and it’s tied to the revenues the state expects to receive each year. As expectations for tax receipts and other resources shrink, so does the debt limit.
Revenue forecasts were high when lawmakers left the Capitol on Wednesday, March 11, to allow for a four-day deep cleaning of the complex. Had the Finance, Revenue and Bonding Committee — before it left — approved a revenue schedule for the fiscal year beginning July 1, the debt limit would have been set high as well.
But lawmakers, who expected to return to the Capitol the following Monday, never came back because COVID-19 infections rapidly spread. Leaders indefinitely postponed business, and since then, state analysts have dramatically lowered their revenue projections by more than $2 billion — for this fiscal year and for each of the next two.
Over three years the combined reduction approaches $7 billion, according to an April 30 report. The projections reflect the fact that more than 600,000 Connecticut residents became unemployed as the pandemic shuttered thousands of businesses or forced them to scale back operations.
Some of the revenue drop is temporary. Gov. Ned Lamont deferred income, corporation and other  state tax filing deadlines from April 15 until mid-July to assist struggling Connecticut households and companies – a move praised by lawmakers from both parties.
But Candelora said Connecticut, nonetheless, clearly has to scale back its borrowing now.
State law caps not only the outstanding bond debt the state can carry at any given time, but also how much new bonding legislators can tentatively schedule for future approved projects waiting in line to receive financing.
By law, when the state gets within 90% of the debt limit, the governor must craft a plan to immediately reduce planned borrowing below that threshold. If debt exceeds 100%, then all borrowing is shut down.
State Treasurer Shawn T. Wooden warned recently that were the finance committee to adopt a revenue schedule that matched the recent April 30 forecast, Connecticut would be within 99.3% of its debt limit. Lamont and legislators would need to postpone $2.2 billion in planned borrowing to get down to the 90% threshold.
Legislators routinely authorize borrowing for projects months or even years before the state actually borrows the funds to carry them out. The State Bond Commission also has to endorse a project before it is financed, and in some cases, initiatives approved by the legislature never receive funding.
But this doesn’t stop lawmakers from touting the project as soon as the General Assembly gives its OK, particularly if it involves a project earmarked for a legislator’s home district. Nor does it stop Wall Street credit rating agencies from considering these legislative authorizations when assessing Connecticut’s credit worthiness.
Wooden said Thursday that “certain caution is still warranted,” involving the debt cap. “We continue to take careful note of the matter.”
Caution is needed because Connecticut doesn’t borrow money only to finance capital projects. When the state’s cash balance is low, the treasurer may temporarily shift bond proceeds into the common cash pool so the state can pay its operating bills. The treasurer’s office was forced to make several such transfers during the last recession, but Wooden has said Connecticut’s cash position, to date, has been strong.
But if cash reserves run low before the November elections, Connecticut may need to borrow funds. To facilitate that, legislators first would need to reset the state’s debt limit. And to do that, apparently, Lamont and legislators would need to put billions of dollars’ worth of projects on hold — at the worst time from a political standpoint.
The state debt limit calculation sent to legislators by Treasurer Shawn Wooden.
Connecticut ranks among the most indebted states, per capita, in the nation, and debt service costs consume more than 10% of the annual budget, a problem that prompted Lamont to press for his debt diet immediately upon taking office in January 2019. To date, though, the governor’s fellow Democrats in the legislature’s majority have balked at that diet.
Chris McClure, spokesman for Lamont’s budget office, said “if the legislature adopts a new schedule, and adjustments are needed, we will work with them to find the best possible solution. If that includes necessary adjustments to bond authorizations, we are able to do so at any time–including in the next regular session.”
But Rep. Jason Rojas, D-East Hartford, who co-chairs the Finance, Revenue and Bonding Committee, said it’s premature to act until Connecticut gets a clearer picture on its eroding revenues, which may take several more months.
“We still don’t have a clear picture of exactly where things stand,” he said. Income tax and other key tax filings are due on July 15, and the state should have a clearer picture of its finances later this summer or early in the fall, Rojas added.
Rep. Chris Davis of Ellington, ranking House Republican on the finance panel, said with Connecticut and the nation sinking into recession, legislators can’t plan to borrow funds taxpayers can’t afford to repay.
“We don’t want to over-extend ourselves in an emergency situation,” Davis said. “We realize the economy is in a deep recession and its unclear when it’s going to lift. It would be unwise of us to continue to spend.”