CT Construction Digest Tuesday January 12, 2021
Keith M Phaneuf The pandemic-induced recession has left Connecticut legislators with one of their tightest credit card limits in recent history — less than one-seventh their 2020 level.
But it remains to be seen whether they’ll accept that or challenge both Gov. Ned Lamont and Wall Street to borrow more to assist colleges, businesses, municipalities and social services.
“I supported the ‘debt diet’ during the beginning of the Lamont administration,” said Rep. Sean Scanlon, D-Guilford, new House chairman of the Finance, Revenue and Bonding Committee. “I thought that what the governor was doing — basically pressing the pause button on bonding — was a good thing. But I think the needs have changed.”
Sen. John Fonfara, D-Hartford, the finance committee’s other co-chairman, said many segments of Connecticut’s economy are hurting.
Many restaurants and other hospitality-related businesses are operating at limited capacity or remain closed altogether.
According to the state Department of Labor, more than 180,000 people continue to receive weekly unemployment benefits. About 120,000 people lost jobs at the peak of the last recession, which ran from December 2007 through mid-2009.
The University of Connecticut as well as the regional state universities and community colleges project major shortfalls this fiscal year. And municipalities estimated last summer that they were out roughly $400 million in revenue.
The state, which faces projected deficits of about $2 billion in each of the next two fiscal years, cannot help these groups without using its credit card, Fonfara said.
“A thorough examination of borrowing and spending needs is well within order,” he said. And while modifying the exceeding the statutory bonding limit is not a certainty, Fonfara added, legislators cannot simply put their credit card away in a crisis. “The legislature must be ready to assert itself. It can’t be afraid.”
Connecticut’s new House speaker, Hartford Democrat Matt Ritter, said shortly after Democrats gained seats in last November’s elections that his caucus also was prepared to use state bonding to assist those hit hardest by the pandemic.
Connecticut borrows billions of dollars annually for a wide array of initiatives including: highway, bridge and rail upgrades; capital projects at colleges and universities’ municipal school construction; state building maintenance; and open space and farmland preservation.
In recent years, the state also has increased its reliance on bonding both to fuel general government grants to municipalities — and even to make payments on borrowing.
Lamont tried to reverse that culture when he took office in January 2019.
Connecticut does have a statutory limit on General Obligation borrowing — the most common form, paid using income tax receipts and other revenues from the budget’s General Fund.
The legislature authorized about $1.5 billion in G.O. bonding one year ago. But the borrowing cap limits them to just $198 million more in the next fiscal year, according to the legislature’s nonpartisan Office of Fiscal Analysis, the Lamont administration and state Treasurer Shawn T. Wooden’s office.
Things could be worse.
The debt limit is tied to state revenues. When General Fund tax receipts rise, more borrowing is allowed, and when they shrink, so does the limit.
During the summer of 2020, when state analysts thought the pandemic-induced recession would take an even heavier toll on state revenues, projections were lawmakers would have to cancel more than $2 billion in bond authorizations.
But since then, income tax receipts — particularly those tied to capital gains and other investment earnings — have been more robust than analysts anticipated. Corporation and sales tax receipts also have begun to rebound.
Lamont has said repeatedly he is willing to listen to all ideas regarding state finances, but also that he remains wary of growing Connecticut’s already sizable debt.
Connecticut has one of the highest bonded debt burdens per capita of any in the nation.
Even considering Connecticut’s great wealth — and therefore its ability to carry more obligations — it also ranks among the national leaders in bonded debt as a percentage of personal income.
Besides its bonded obligations, Connecticut also owes more than $64 billion to its pension and retirement health care programs for state workers and municipal teachers combined.
The top Republican in the House, Minority Leader Vincent J. Candelora of North Branford, also did not draw any lines in the sand, but warned Monday that the GOP would oppose any reckless Democratic borrowing — which he added has been past practice far too often.Republicans particularly have charged Democrats with ordering tens of millions of dollars in annual borrowing to support pet projects in their home districts to bolster their chances for re-election at the state’s expense.
“Given the history of what the Democrats have prioritized as a state,” Candelora added, “I’m not excited to see them lift the limits” on bonding.
- Contractors expect 13 of 16 construction categories to shrink in 2021, with only alternative healthcare facilities, warehouses and water and sewer facilities eking out small gains.
- They also don’t anticipate the business environment to return to pre-pandemic levels at least until the second half of the year, according to the Associated General Contractors of America’s 2021 Construction Hiring and Business Outlook.
- On a webinar covering the results of the survey last week, which canvassed 1,300 construction firms in November and December, contractors lamented the difficulty of finding new projects and the challenges of keeping the ones they already have on track due to COVID-19 mitigation and productivity losses.
The results of AGC’s survey underscored how much work remains before contractors will see any return to “normal” in construction.
“2021 looks to be a difficult year for many construction firms,” said Stephen Sandherr, AGC’s CEO, during the webinar. “The pandemic is prompting many projects to be postponed or canceled, forcing contractors to take longer to build projects and increasing the cost of construction."
Contractors on the call noted the challenges they had in 2020, and the increased struggles they see ahead in 2021.
Michael Kennedy, CEO of St. Louis, Missouri-based design-build contractor KAI Enterprises, said that while existing bond programs had allowed his firm to continue to land jobs, he expected 2021 to display a stark delineation among contractors.
“We're going to see the haves and have-nots,” Kennedy said. “Are you on those big jobs? Are they already pregnant and moving? That’s the haves. The have-nots are the people who are still waiting for some developer to close on something, and unsure about the job.”
Bob Schafer, president of West Palm Beach, Fla.-based road builder Ranger Construction Industries, said that even though unemployment in many sectors is high, he still has challenges hiring killed workers in Florida, where much of his business remained on track throughout 2020 as people from the Northeast flocked to the state.
“Someone suggested to me that now that all these people now are unemployed, I should have no problem finding folks,” Schafer said. “But you can't put a bartender or a waitress on a motor grader.”
He also noted increased costs on the materials side, including steel, cement, liquid asphalt and aggregates.
Rosana Privitera Biondo, president of Kansas City, Missouri-based Mark One Electric Company, said the unanticipated cost of dealing with COVID-19 had significantly impacted contractors’ bottom lines.
“I might have 40 or 50 different general contractors who have a different protocol and requirement,” Biondo said. “We’ve spent a fortune on that, and it’s money that we’ll never see again, that comes right out of the bottom line. You’re talking about hundreds of thousands of dollars.”
Ken Simonson, chief economist for AGC, said the net reading of most construction categories — the percentage of contractors who expected the dollar value of projects to shrink versus expand — was overwhelmingly negative.
Senators Will Haskell, D-Westport, and Alexandra Kasser, D-Greenwich, have filed a bill authorizing the Department of Transportation to install electronic tolls on Connecticut’s interstate highways and parts of Route 15.
The debate over tolls was put to rest in late 2019 after Gov. Ned Lamont and Democrat leaders couldn’t reach an agreement, but with Democrats gaining an even larger majority in both chambers and the loss of revenue due to the pandemic, the table for whether tolls can be passed in Connecticut could be reset.
The Special Transportation Fund went from having a projected positive balance to a $21.5 million deficit by 2024, according to the Office of Fiscal Analysis, as the number of drivers plummeted during the pandemic leading to less gasoline tax revenue.
Both Kasser and Haskell had said they would continue to support tolling highways over the summer, even as former Speaker of the House Joe Aresimowicz said that tolls would never happen in Connecticut.
Whether Lamont or Democrat leaders will have an appetite to return to the tolls debate remains to be seen.
According to the CT Mirror, Lamont said that he would not seek tolls again during the 2021 session and said he was looking into alternatives.
But if the tolls bill finds its way to the Transportation Committee it could mean a resurgence of No Tolls CT, a group that hounded both the governor and toll-supporting lawmakers throughout 2019.
“This doesn’t surprise me,” said Patrick Sasser, founder of No Tolls CT. “These two senators have a fixation on tolls. Instead of looking for ways to cut costs at DOT and reduce spending, they want to take the easy way out by charging to drive work when people in our state are struggling more now than ever.”
Traffic on highways remains lower than average as many commuters remain working from home. Gasoline prices, as well, have remained low leading to less revenue from the Petroleum Gross Receipts tax.
According to the OFA, revenue to the transportation fund is projected to be $140.7 million lower in 2021 than previous projections, although expenditures were also decreased by $79.6 million.
Beginning in 2023, the state will also fully commit sales tax revenue from motor vehicle sales to the STF, after the governor and legislature diverted much of it during for the years 2020 and 2021, but it will not enough to offset the increased cost of debt service payments related to transportation bonds.
One of the governor’s alternatives to tolls, could be the Transportation and Climate Initiative that Lamont signed onto in December.
The agreement with TCI would force gasoline producers and distributors to purchase carbon allowance at auction. The money from those auctions would then be funneled to states like Connecticut, Rhode Island, and Massachusetts – the only states to have signed onto the agreement along with Washington D.C. thus far.
The effect could be to raise gasoline prices by as much as 17 cents per gallon in the first year with possible increases to come in following years as the emissions cap is lowered.
But the optics of pushing for higher costs on residents – whether through tolls or a regionalized gasoline price increase — during a time when unemployment remains high and the pandemic is still preventing businesses and the legislature from fully reopening could prove difficult.
Neither of the senators are listed as serving on the Transportation Committee this year.
John Penney KILLINGLY — With issues continuing to mount at the Killingly Community Center, the Town Council on Tuesday will discuss whether to contract with an engineering firm to get updated cost figures for moving the recreation department to the town’s former high school building.
The agenda item to pull $18,000 from a contingency account was added this week after officials learned a hot water heater in the Broad Street facility burst and squirrels had made their way into the building’s theater space.
Town Manager Mary Calorio said the new study is aimed at updating a 2019 rehab cost analysis for the Westfield Avenue building that currently houses the school district’s central offices and classes for EASTCONN students.
That previous cost break-down led to for bonding $16.1 million to address roof, window and other long-standing issues at the former school, while also paying for modifications to allow a portion of the building to be used for recreation programming.
That proposal fizzled last year, as did one to include $100,000 in the 2020-21 budget for an engineering and evaluation study aimed at pinpointing what work would be needed to keep the Broad Street center’s doors open, at least for the next few years.
Calorio said to accommodate the public at the school, new security doors would need to be built, office space created, bathrooms added and made handicap compliant and electrical systems upgraded.
“Part of this new study will also look at possible grant reimbursements from the state Office of School Construction,” she said. “Those numbers will let us evaluate whether to pursue the grants or decide if the town would cover the costs on its own.”
Calorio said there is a potential downside to accepting any state reimbursements.
“That could come with added upgrade requirements and a slower start time on any work,” she said. “To qualify for the grants, we’d need to get an application in by June 30 and that wouldn’t get to the Legislature until Spring 2022.”
Calorio said the proposed engineering firm, Antinozzi Associates, could get the council fresh cost figures for construction work to the council by March.
What: Killingly Town Council meeting
When: 7 p.m., Tuesday
Access: To view the meeting, go to https://www.killingly.org and click on the blue Facebook Live tab.The community center, built in the mid-1900s, has been plagued by infrastructure and system issues for years, problems that have accelerated in the last year. During the summer, some of the facility air and heating elements failed. Late last month, one of the building’s two hot water heaters died.
And earlier this month, squirrels were spotted in the theater area after presumably making their way through holes in the building’s soffits. That infestation led to the facility’s temporary closure to the public.
“We haven’t yet trapped any of the squirrels — none have even gone after the peanut butter laid out — which tells us they were likely coming in for the warmth.”
Temporarily patches were placed over some exterior holes, though that type of stop-gap work can’t be done everywhere.
“There’s a worry adding a lot of new materials to compromised ones would be detrimental,” Calorio said.
Recreation Director Tracy Mason said the facility is still on schedule to reopen on Monday.