Lamont budget calls for CT to ramp up transportation projects

Keith M. Phaneuf

Gov. Ned Lamont’s new budget proposal would keep Connecticut on pace to dramatically accelerate the rebuilding of its aging highways, bridges and rail lines.

But that increase also could leave the transportation program needing new revenues in three years, and some legislators already have begun exploring new ways to pay for it — including a potential surcharge on certain delivered goods.

The $55.2 billion biennial budget that Lamont proposed Feb. 5 includes a nearly $2.3 billion Special Transportation Fund for the 2025-26 fiscal year and a $2.4 billion plan for 2026-27, boosting spending about 4% in each year.

The STF, which represents slightly less than 10% of the state’s overall budget, funds operating costs for the departments of Transportation and Motor Vehicles, supports rail and bus transit services, and covers the principal and interest on the transportation borrowing that, coupled with federal grants, pays for infrastructure construction projects.

Last week, the governor recommended spending an extra $158 million, a bump of nearly 20%, over the next two years on debt service for those loans. This would enable Connecticut to issue $1.3 billion in new transportation bonds in 2025-26 and $1.4 billion in 2026-27. The latter represents a 40% jump over current levels.

“No schedules have slipped,” DOT Commissioner Garrett Eucalitto said. “We are currently holding to those estimates.”

The department has been criticized for decades for not advancing more construction work, a problem many have attributed to insufficient staffing and other resources.

Lamont had been criticized in recent years for amassing hefty surpluses in the transportation fund. Some of the windfalls were attributed to inflation-driven surges in the sales tax receipts that — along with fuel tax revenues — support the STF. But as construction work slowed, the state also borrowed less than planned, leaving budgeted dollars unspent in the debt service line item.

The STF reserve, which holds annual surpluses from the fund, rose over the past three years from $241 million to almost $972 million, according to the state comptroller’s annual reports. That cushion account was slightly larger than 45% of last year’s entire transportation fund.

Gasoline station owners, fuel distributors and others began to press state officials to either do more construction work or cut gasoline taxes or provide some other relief given the huge unused revenues.

In other words: Use it or lose it.

Lamont and the legislature agreed last May to take a huge chunk of that $972 million reserve, more than $530 million, and pay off some transportation bonding early. State Treasurer Erick Russell, who developed this plan, estimates it will save the state about $63.5 million annually in interest costs.

Eucalitto, who inherited these challenges when he took over leadership in January 2023, has prioritized retaining and attracting new engineers and other professional staff.

“We’re at our highest staffing level since 2002 in terms of full-time employees,” he said, referring to the 3,337 full-timers currently in the department.

Travis Woodward, president of the union that represents state transportation engineers and planners, praised the administration for addressing the vacancy rate but said more staffing issues still need to be resolved.

“It’s on the legislature to break us free from our cyclical hiring practices and over-reliance on contracting out to privatized consultants for design, construction inspection and bridge safety inspections,” Woodward said. “Year over year, we see hundreds of millions of taxpayers’ dollars wasted on lower quality work at a higher premium. It’s time we hire enough state employees to do the full scope of work we need done.”

But Don Shubert, president of the Connecticut Construction Industry Association, praised the administration and said that if lawmakers approved the governor’s plan, it quickly would have a positive effect.

“A 40% increase in state bonding is something that the construction has been looking forward to since 2008” and the start of the last recession, he said. “Companies will start hiring, companies will start investing in new equipment, and the economic impact starts right away.”

Administration: Transportation program would need more funds by 2028

But that could create another challenge.

The administration estimates that doing more construction work not only would mean an end to big surpluses in the STF, but it also could trigger a need for more funds. Analysts project that by the 2027-28 fiscal year, the program would run a $177 million deficit.

Lamont proposed increasing bus and rail transit and parking fares; the state already subsidizes these services considerably. But the $29 million extra they raise annually already is factored into the $177 million deficit projection.

Sen. Christine Cohen, D-Guilford, co-chairwoman of the legislature’s Transportation Committee, also praised the governor Tuesday for prioritizing construction work. “I am thrilled at the commitment from the administration and from the Department of Transportation to get these projects done,” she said.

And Cohen said her panel already is exploring new options to keep the transportation fund solvent down the road.

Receipts from wholesale and retail taxes on gasoline largely have remained stagnant for decades, and the sales tax receipts dedicated to the STF tend to surge during periods of high inflation — something no one hopes will happen.

Cohen also said she believes many legislators are reluctant to discourage public transportation use by raising fares, which would further escalate the need for new revenue.

“I think it’s high time that we have this discussion,” she added.

Lamont failed to convince lawmakers in 2019 and 2020 to order electronic tolls on highways, and Cohen said she doesn’t expect that to be proposed this year either.

But the Guilford lawmaker said one option she expects to be included in a revenue bill to be raised in the coming weeks would create a new surcharge on certain delivered goods. She did not disclose details Tuesday but noted that there are some other states that impose such fees.

According to the Tax Foundation, a Washington, D.C.-based fiscal policy group, Colorado first established a 28-cent charge on retail delivery of items subject to sales tax in 2022, and Minnesota imposed a 50-cent charge two years later.

Both states have “significant exemptions,” the tax foundation wrote in an analysis. States normally don’t impose charges against commercial carriers like UPS or FedEx, according to the foundation.

Sen. Tony Hwang of Fairfield, ranking Senate Republican on the Transportation Commiittee, also believes many legislators would oppose boosting transit fares.

Hwang noted that the financial services sector remains one of the linchpins of Connecticut’s economy, and that its workers — who already have absorbed rate hikes in recent years — rely heavily on train service to make the commute from Fairfield County to Manhattan.

“When do we get to a point where we break the camel’s back?” he asked.

Hwang added that while he’s pleased to see the administration focused on getting more construction work going, it also must carefully assess what levels of federal transportation aid Connecticut can expect under President Donald Trump’s new administration.

The Trump administration warned states in late January that it intends, “to the maximum extent permitted by law,” to link federal transportation funding to local compliance with policies on masks, vaccines, tolls and immigration enforcement. 

Eucalitto, who met last week with Transportation Secretary Sean Duffy, declined to speculate on how the Trump administration might interpret the law.

But Eucalitto was hopeful that Washington would continue to collaborate with all states to prioritize transportation construction.

“We all know he [Trump] is a builder. He wants to build,” the commissioner added. “That’s just something we need to wait for.”

DOD halts PLAs on construction projects

Zachary Phillips

The Department of Defense has ordered its contracting officers to halt the use of project labor agreements on “large-scale construction projects,” according to a memo obtained by Construction Dive.

The notice, dated Feb. 7, says contracting officers shall remove PLA requirements created by former President Joe Biden that apply to projects receiving $35 million or more in federal funds.

As part of the memo — signed by John M. Tenaglia, principal director of defense pricing, contracting and acquisition policy for the DOD — contracting officers were ordered to amend solicitations for federal contracts to remove PLA requirements.

Dive Insight:

AGC CEO Jeffrey Shoaf said in a statement that it had anticipated a move like the DOD’s and it proved the AGC’s past assertions that the PLA mandate was not legal.

“We expect all federal agencies involved in procuring construction services to follow suit and drop what is clearly an unlawful mandate from their construction solicitations,” Shoaf said.

The Defense Department did not respond to Construction Dive’s request for more information.

The memo comes a few weeks after a U.S. Federal Claims judge hamstrung the order by ruling in favor of a group of construction companies that filed protests against the implementation of the mandate on specific projects. Judge Ryan Holte said in his Jan. 21 ruling that the implementation of the mandate on seven contract procedures in 2024 ignored federal agencies’ own research indicating PLAs would be anti-competitive and relied on “arbitrary and capricious” policy.

The Associated General Contractors of America helped facilitate the legal challenge to Biden’s approach of a PLA mandate.

Holte’s decision, however, only directly impacted bid protests filed in six states over projects solicited by the U.S. Army Corps of Engineers, General Services Administration and Naval Facilities Engineering Systems Command. Both USACE and NAVFAC are part of the DOD.

The ruling cut off the mandate at the knees, and opened the door for other bid protest challenges, Dirk Haire, Washington, D.C.-based partner at Philadelphia-headquartered law firm Fox Rothschild said at the time. He represented some of the plaintiffs in the bid protest case.

The DOD contracts out billions of dollars worth of construction work each year. For example, in November, the agency awarded roughly $2.3 billion worth of design, engineering and construction work, according to the Construction Broadsheet.

Naugatuck is first to join CT's new Municipal Redevelopment Authority: 'We're way ahead of the game'

Andreas Yilma

NAUGATUCK — The borough is the first town statewide to join the Connecticut Municipal Redevelopment Authority, newly established to help municipalities with transit oriented development.

At its regular Feb. 4 meeting, the Board of Mayor and Burgesses unanimously approved, following a hearing, to adopt a resolution to join the MRDA as a member municipality. The resolution was effective the day of the vote.

MRDA, a quasi-public state agency created in 2024 by state law, is responsible for helping municipalities with transit-oriented development, mainly focusing on the growth of new housing, as defined under state statutes.

"MRDA is a vehicle to help municipalities in transit oriented development downtown projects," Mayor N. Warren "Pete" Hess said. "It just so happens that Naugatuck is very far along in the process."

The borough is developing 7.75 acres at the corner of Maple Street and Old Firehouse Road, known as Parcel B, into a residential and commercial development.

The state Department of Transportation has already made plans and allotted funding to relocate the Naugatuck train station right next to The Station Restaurant at 195 Water St. to the middle of Parcel B where Water Street will be extended. Construction is expected to begin in the spring.

This project will connect the existing downtown area to the Transit Oriented Development project, which adjoins the Waterbury Branch Line adjacent to the location of the proposed new train platform.

Naugatuck grant writer Danielle Goeway said it's free to join and besides funding, the MRDA provides technical support as well.

"We're way ahead of the game," Goeway said. "There's a lot of opportunities here for Parcel B, Parcel A, some of the parking spots downtown."

Hess said MRDA Executive Director David Kooris has come to Naugatuck and borough officials have already met with him twice.

"This funding can apply not just to the municipality but to our development partners as well or for that matter anyone within a half-a-mile radius of the train station downtown," Hess said. "So anything in that half-mile radius is in the new district."

Hess said borough officials are preparing to be the first town statewide to file an application. As workers are beginning phase one of Parcel B, borough officials will be applying for some additional funding regarding phase two for Pennrose.

"This one is something that came at exactly the right moment," Hess said.