Is it a plan to fight climate change, or a gas tax? The TCI is facing fierce pushback

Jan Ellen Spiegel

In the annals of Connecticut’s legislative brawls, this one has the makings of tolls 2.0.

The new transportation effort that is grazing the guardrails is the Transportation and Climate Initiative, TCI. It’s a climate change-combatting concept that seeks to replicate through the motor vehicle sector what the Regional Greenhouse Gas Initiative (RGGI) accomplished through the electric power sector — cutting greenhouse gases and other emissions while raising money to cycle funds back into related climate-change programs. In the case of TCI, it could also cycle funds into the state’s dwindling transportation fund.

TCI is envisioned as a cap-and-invest program for motor vehicles, just like RGGI is for power plants. Both essentially put a price on carbon pollution to incentivize using less of whatever is producing that pollution. In RGGI, for the right to pollute above a set cap that goes down over time, power plant owners buy emission allowances from their states through quarterly auctions. The states get the money, most of which is supposed to be invested in consumer benefits such as energy efficiency programs that help lower energy use further.

Only the broad outlines of TCI exist at this point. Enabling legislation needed to start the process of designing an actual plan, specific for Connecticut, has been hit with pushback rarely seen in Connecticut on matters related to climate change. Normally bi-partisan affairs, this measure made it through the environment committee on a party-line vote. And full-bore PR campaigns by supporters and opponents can make it tough to tell if the two sides are even talking about the same bill.

“Stop the gas tax” is the GOP and fossil fuel-related industries’ high-octane approach — focusing solely on the likelihood that TCI will cause gas prices to increase. It poses an arguably Trumpian-tactic that TCI supporters — who have been working towards this for more than a decade — have had to counter with less headline-grabbing explanations and decidedly lower-key outreach.

“They’re coming after the middle class wallet,” proclaimed Senate Republican Leader Kevin Kelly, R-Stratford, at a kickoff event last month during which the words “climate change” were uttered precisely once — though not by any of the legislators in attendance.

“Any time government puts their hand in our wallet, it’s a tax,” said House Republican Leader Vincent Candelora, R-North Branford, at the same event.

“It’s not a tax. Categorically, it’s not tax,” said James Bradbury, mitigation program director at the Georgetown Climate Center, which has acted as TCI’s facilitator since 2010 when 11 states from Maine to Maryland plus the District of Columbia signed the initial declaration of intent. Republican M. Jodi Rell was governor at the time. Virginia and North Carolina have since joined.

“It’s an environmental program that is first and foremost designed to reduce emissions,” Bradbury said. “It’s convenient for the opposition to call anything they don’t like a tax.”

But proponents have had to wind their way through the reality that gas prices are expected to rise about five cents a gallon when TCI is slated to go into effect in 2023. The increase is capped at nine cents, which has not stopped opponents from seizing on a study by Tufts University — now discounted by some, including the author himself — that gas prices could rise by 38 cents a gallon.

Opponents have also seized on the fact that of the 14 jurisdictions that have been working through the development of TCI, only four — Connecticut, Massachusetts, Rhode Island and the District of Columbia — signed the memorandum in December to move into the final stage, though all the remaining states say they are working toward that. Those three New England states account for three quarters of the region’s motor vehicle emissions.

“You counter it with the facts,” said Charles Rothenberger, climate and energy attorney at Save the Sound. “I think one sign of the desperation of the opposition is that they’re really resorting now to things that are factually untrue. A less-polite person would call them lies.”

Supporters point out that gas prices tend to fluctuate wildly in the best of times due to standard market forces. For instance, they plunged at the start of the pandemic and now have gone back up by almost $1, so five cents due to TCI would be negligible.

“Fundamentally, what this policy is is a cap on pollution that comes out of motor vehicle tailpipes,” Rothenberger said. “It’s that simple.”

Many moving parts

Coupled with plunging natural gas prices, RGGI was extremely successful and has all but eliminated coal and oil power plants in New England and provided billions of dollars to all the participating states, mostly for energy-efficiency measures to help further reduce the need for electricity.

But TCI has more moving parts.

In TCI, the cost of the carbon will be paid by large suppliers of transportation fuels — gasoline and on-road diesel — at the wholesale level. In Connecticut alone, it’s estimated those payments will bring in $89 million in 2023, increasing to as much as $117 million in 2032. Just as ratepayers picked up some of the cost under RGGI, consumers likely will pick up some of it under TCI — the per-gallon price increase. It’s not a tax.

But TCI deals with a more complicated sector than RGGI. Motor vehicles cut across every swath and socio-economic sector of life with impacts that are uneven. For instance, low-income people driving older, less-efficient vehicles would likely get hit harder at the pump, as would rural residents and others who have no public transit options to help defray costs. Wealthier people with newer, more efficient or even electric vehicles would obviously feel it less.

The regional structure for all the states — first released in 2019 — requires that at least 35% of each state’s auction proceeds from selling emissions allowances be re-invested in those communities and/or to the people that typically suffer disproportionately from the impacts of climate change and pollution in addition to those with limited transportation options.

TCI states use that broad structure to tailor the programs to their particular needs. Just a couple of those specific adjustments are in Connecticut’s enabling legislation, including pushing that percentage of the auction proceeds going to the environmental justice community up to 50%, with specific language designating it for over-burdened and under-served people and areas —  and taking great pains to structure the required equity advisory committee that helps design the state plan to represent as many constituencies as possible.

Katie Dykes, commissioner of the Department of Energy and Environmental Protection, a champion of TCI, has hit the road with Garrett Eucalitto, the state’s deputy commissioner of transportation, to sell the program to skeptical residents and lawmakers.

“It has all the hallmarks of climate programs that have proven successful in our region,” Dykes pointed out. “It’s market-based; it’s regional in scope; it’s ambitious. It’s tackling emissions in a sector that hasn’t been addressed yet. And it’s going to drive billions of dollars in investments in our communities.”

She points out that while climate change mitigation is the goal — since it will lower motor vehicle emissions broadly, by 26% — it will also provide public health benefits, potentially helping to lower the stubbornly high incidence of asthma in the state.

Last month, the American Lung Association’s annual “State of the Air” report once again found parts of the state among the most polluted in the country. Motor vehicles have for some time now constituted the largest sector of greenhouse gas emissions in the state and the nation, about 40%.

“It is a choice of opponents of this program to ignore those very real impacts and to refuse to propose an alternative solution and to call this a gas tax when in fact this is an incredibly cost-effective solution to address a growing source of emissions in our economy — the transportation sector,” Dykes said.

The opposition to TCI

Republican leaders have piggy-backed on the No Tolls CT campaign that’s still around from that fight, drawn in another piece of legislation to lower emissions standards on medium and heavy-duty trucks and posited their notion of a gas tax also being a food tax, even though there’s no indication such a move would do anything to food prices.

They’ve also gotten support from the conservative Yankee Institute for Public Policy. Similar conservative groups are fighting TCI in most of the partnered states. While the funding for the anti-TCI campaigns is not clear, many of the opposition groups receive money at least indirectly from well-known fossil fuel-supporting funders such as the Koch family.

The Yankee Institute is responsible for anti-TCI ads that have run recently on gas pump screens in service stations.

Ken Girardin, the Institute’s director of policy and research, is making a tax argument, as are other opponents, but with a twist. He’s calling it a new tax, which he said needs to be approved by the general assembly. Under the TCI procedure, the actual plan with the price increase that he calls a tax would not go through the legislature.

If the state’s objective is to get people to use less gasoline and diesel fuel, then government should say that, the way it did with tobacco, he said. “Instead we get these euphemisms, he said. “If you want to tax people to change people’s behavior, at least say ‘We’re going to tax you to change your behavior.’”

He and others also point to RGGI funds that were used to plug budget holes on several occasions as an example of what can go wrong with TCI’s likely similar format.

“It’s another slush fund,” said Michael J. Fox, executive director of the Gasoline and Automotive Service Dealers of America. “I just really find it is — appalling isn’t even enough of a word.”

Calling electric vehicles “good things,” his contention is that a modernized infrastructure and an electric grid to supply it should come first. And to pay for it: “The right way to get revenue is tolls,” he said.

If it’s all about climate, which he doesn’t necessarily agree with, everyone should pay, he said.

“Why are they only doing it through only one industry? If it’s climate, let’s put a 1% tax on everything that everybody buys and it goes into a climate fund.”

Candelora, while publicly making charges including “No one in my district is happy about paying another tax under the guise of air pollution control,” and all-but-admitting that the opposition’s gas tax tactic was chosen because it is “a very third-rail item,” was more subdued one-on-one. The differing interpretations between opponents and supporters, he said, is that the intent is to reduce carbon emissions on the front end. But on the back end, folks are looking at the result of how that’s done.

“I think both sides are right,” he said.

He also contended that TCI is not regional because most states haven’t signed on yet. It puts the burden on states like Connecticut to reduce carbon while the other states “can just be reckless,” he said.

The supporters of TCI

TCI supporters have called out such views as misinformation, which some say is being spread with abandon.

Environment committee Co-Chair Sen. Christine Cohen, D-Guilford, and others called the Republican stance frustrating, noting that TCI has always taken a regional approach and has been bipartisan state-to-state all along.

“Connecticut can’t solve for climate change alone,” she said. “Here we have this fantastic strong regional program that is bipartisan, and we’re getting this pushback.”

Sen. Will Haskell, D-Westport, as the youngest member of the senate, has been the voice of young adults. He said student groups he talks to are “shocked that this is controversial.”

“It’s clear to me most of my colleagues believe climate change is a problem. The question is whether they believe we ought to do something about it,” he said. “What we’re up against is a campaign of slogans.”

He said if they have a better program or funding idea, he’s happy to hear it. “The answer cannot simply be ‘no,’” he said.

But approving the pending enabling legislation will set in motion a very intense process that will require a great deal more creativity than just getting more EVs on the road and taking the train.

For Rep. Maria Horn, D-Salisbury, an Environment Committee member, backing the legislation meant getting assurances that the needs of her sprawling rural district in the Northwest corner, which is almost entirely car-dependent with no public transit to speak of, would be considered.

“This is a tough issue for us in rural areas,” she said. “Your gas prices will go up. We will pay the cost but won’t see those benefits directly.”

She is keen on solutions such as using TCI funds for better broadband — something her district struggles with as well. It would give many residents a way to work from home and avoid their cars all together, at least part of the time.

“We’ve got to acknowledge that this is going to be an increase in gas cost and then weigh that as investment. I think of it as an infrastructure investment.”

In the meantime, a large coalition of supporting groups including environmental and social justice advocates such as Transport Hartford/Center for Latino Progress has been quietly fanning out around the state over the last couple of years, educating those likely to feel most of the impacts and picking up support in some unlikely places. The group has its own social equity coalition and a host of major corporations working through Ceres, which works with investors on multiple sustainability issues.

“The way the opposition wins is by scare tactics,” said Amy McLean, Acadia Center’s Connecticut director. “The way we win is putting together constituencies.”

Among their biggest challenges is that there are almost no examples to show how a TCI concept has worked elsewhere. Except California.

The benefits of California’s program

California has a cap-and-trade program, a slightly different animal than cap-and-invest, like RGGI and TCI. It covers the power and transportation sectors — about 75% of emissions overall, although transportation went into effect in 2015, a few years after the power portion. There really hasn’t been time to crunch the transportation data or separate it from the power portion in terms of the emissions impact. The program also started as the San Onofre Nuclear plants shut down, resulting in an emissions increase due to greater use of natural gas at the time.

But Climate-xchange, a research and information group that helps states transition away from fossil fuel, has researched the impacts of California’s cap-and-trade, pointing out that the benefits greatly outweigh the costs in terms of investments. The report also says that TCI states can expect equally robust financial benefits and avoid premature deaths.

The 2020 annual report on California Climate Investments Using Cap-and-Trade Auction Proceeds lists pages of programs that have benefitted, many directly from the transportation sector. California’s experience with how to get those revenues to the folks who need them most is instructive and goes beyond just getting people to buy EVs.

Fact sheets compiled by the Greenlining Institute include giving people money towards emissions repairs for their cars, new or used hybrids or plug-in vehicles, public transit passes worth as much as $4,500, providing hundreds of vanpools for agricultural workers in that state’s large farming areas, setting up community air pollution monitoring systems and planting trees in areas disproportionately impacted by air pollution. The group also developed a Clean Mobility Equity Playbook based on California’s experience.

Dykes will rattle off a laundry list of potential uses of the proceeds from TCI: EV rebates, EV charging systems, electrifying school buses and transit buses, expanding public transportation to rural communities, transit-oriented-development projects, smarter solutions like traffic signals that help reduce idling, bike trails and walking trails to help people get out of their cars, and more robust broadband service so people can stay connected without having to drive to an office if that’s an option.

With the Biden administration likely to provide funding for cleaner transportation, the revenues from TCI could be critical to providing the matching funds that are often needed to get government grants.

Electrifying fleet vehicles is getting some traction from both sides of the aisle. Eucalitto of DOT said fleets tend to have the most miles traveled, and with central charging points, they often don’t require the EV charging infrastructure that personal vehicles do.

“It’s an opportunity to lower costs for businesses,” he said. “Studies have shown when you target those high-mileage fleets, that’s where you get your biggest bang for your buck.”

Eucalitto said he’s been in touch with California officials on their programs as well.

Despite the examples from California, TCI opponents claim that transportation initiatives don’t work and Connecticut won’t meet its goals.

Danny Cullenward essentially says it depends. He is the policy director for CarbonPlan, an independent non-profit climate research organization, an expert in climate policy and carbon markets, in addition to being a lawyer teaching at Stanford.

He admits his views are somewhat oppositional after watching the California program move along. He says the kind of carbon pricing that TCI, like RGGI, is talking about is really pretty low.

“I’m in the camp that says this stuff is way too hard to get right to do anything other than help a little on the margins, which isn’t to say it’s not good,” he said. “These programs aren’t nearly as big as people talk about, but they’re also sometimes pretty good at their modest small scale.

“The fears are overblown. The benefits are typically overblown, too. But they’re there. They’re real. Everything’s just smaller than people make it out to be,” he said.

Cullenward suggests that a lot of the progress should come from local efforts like urban planning, bikeable areas, local zoning, permitting and planning changes that support the large-scale clean and lower carbon transportation policies and goals.

The biggest issue he said is the politics, something Connecticut is seeing first-hand.

“I think in some ways we’ve been emphasizing some of the wrong strategies. This is a good idea,” he said of carbon pricing programs like TCI. “Will the politics be feasible? I don’t know. It’s about the worst political recipe I can come up with. But it’s a good thing if you all get it done.”

New Horizons Inc. 22-unit apartment project almost fully funded

Sean Teehan

Farmington’s New Horizons Village hopes to begin laying foundation for a 22-unit apartment complex this fall, as the nonprofit has nearly all its funding in place for the estimated $7.4 million project.

The state Bond Commission last month approved $2.2 million in bond funding for the project, and New Horizons is currently waiting for a $500,000 state housing tax credit, New Horizons Inc. CEO Carol Fitzgerald said. Once that money comes in, the project will be fully funded, and New Horizons can begin seeking bids from prospective contractors.

"The last piece is a tax credit… all the rest of the money has been spoken for," Fitzgerald said.  

Fitzgerald said she hopes to start sending requests for proposals by late-summer, and laying foundation before winter. If that timeline works out, Fitzgerald said the project could be completed by the end of next year.

New Horizons Inc. opened the 26-acre New Horizons Village in Farmington's Unionville section 35 years ago to provide housing with support services for people with physical disabilities who want to live independently. It has 68 housing units built to be accessible for 101 disabled tenants, about two-thirds of whom shared a dwelling.

Fitzgerald said she wants to invert the current single-to-double ratio so two-thirds of New Horizon clients have private units. That’s why the approximately $20-million-a-year nonprofit with 225 employees — including about 50 at the New Horizons Village complex on Bliss Memorial Road — plans to build the new 22-unit residential complex on its campus.

New Horizons Village operates much like any apartment building, as opposed to a nursing home, Fitzgerald said. Units have features like wheelchair-accessible sinks, showers and light switches. Amenities like transportation are offered, but tenants pay their own bills, do their own shopping and live independent lives. But almost everyone who moves in has to start off in a shared unit because the wait list for a single apartment is between 15 and 20 years.

That delay is unacceptable today, said Fitzgerald, who also stressed the pandemic has demonstrated the need for most New Horizons residents to have their own apartment.

Wall Street Upgrades CT Bonds

Christine Stuart

All three bond rating agencies have now upgraded Connecticut’s general obligation bonds. It’s a first for the state in over 20 years. 

Moody’s Investor Services, S&P Global Ratings, and Kroll Bond Rating have all increased Connecticut’s bonds over the past month. 

Kroll Bond Rating was the latest to upgrade Connecticut’s bonds this week. 

“Connecticut’s third credit rating upgrade over the past 45 day– all occurring for the first time in over two decades – makes it clear that the smart fiscal policies we’ve practiced over the past few years are working and that we must stay the course,” State Treasurer Shawn Wooden said. “As a result, our bonds will continue to generate greater demand, allowing Connecticut to borrow at even more attractive interest rates, saving taxpayers millions of dollars and creating long-term financial sustainability.”

Wooden said it’s an indication that Connecticut has made smart decisions when it comes to its state budget. 

“When I first came into Office in 2019, the markets were performing exceptionally well but I knew this wasn’t sustainable,” Wooden said. “So, we immediately took a number of calculated steps to prepare for a potential economic downturn, all of which put Connecticut in a far better position when compared to many other states following the unanticipated financial distress caused by the COVID-19 pandemic.”

He said the upgrade is evidence that “our smart fiscal policies and management over the past few years are working.”

The rating upgrades come after Wooden and the Office of Policy & Management’s Secretary Melissa McCaw presented information to the agencies about Connecticut’s fiscal controls, as well as economic data. 

Kroll Bond Rating said in its analysis that it upgraded Connecticut because of the progress the state has made over the past three years in building up its Rainy Day Fund to 15.3% of general funds. 

That’s not to say Connecticut doesn’t have its fiscal challenges. 

Kroll Bond Rating cited the unfunded pension liabilities as one of Connecticut’s credit challenges. 

“Unfunded pension liabilities and tax-supported debt burden are high relative to personal income, each exceeding 3.0x the respective U.S. averages,” analysts wrote.

S&P Global Ratings says it upgraded Connecticut’s bonds because of its attempts to continue to moderate its debt. 

“Notably, Connecticut has moderated its debt growth to an average 2.5% annually (fiscal years 2018 to 2020) compared to 7.3% annually (fiscal years 2014 to 2017). We expect that the continued pace of debt issuance, coupled with the already rapid amortization, should contribute to further debt burden moderation,” S&P Global Ratings credit analyst Timothy Little said. 

Little also cited the volatility cap and the revenue cap, created in the bipartisan 2017 budget, as reasons for the upgrade. 

But he also highlighted the risk. 

“We consider Connecticut to have elevated social risks compared to the sector given its older population and higher cost of living. These demographic trends could present long-term credit risks to the state’s economic and budgetary performance,” Little said. “However, we believe Connecticut’s historically strong management and policy framework will help manage this risk.”

The Treasurer’s Office is preparing to offer $1 billion of General Obligation bonds in four different series next week.