CT Construction Digest Tuesday January 17, 2023
Despite waiving hundreds of millions of dollars in gasoline taxes since April to help families battle inflation, the state’s transportation program is on pace for a huge surplus.
Yet when Republican lawmakers demanded long-term gas tax cuts and other relief for motorists, Gov. Ned Lamont said Connecticut can’t spare it. Aging highways, bridges and rail lines need a lot of repairs, and that work has to start soon.
That’s the same message governors have used since 2015, when lawmakers moved a huge chunk of sales tax revenues into the Special Transportation Fund. Yet funds for capital projects barely have grown.
And while the tax-cutting debate appears to be unresolved, leaders from both parties, labor and business share a common assessment of the transportation program’s increasingly swollen coffers: Connecticut needs to spend more soon or risk losing not only taxpayer confidence but also its ability to maximize federal aid.
Transportation fund windfall sparks tax-cutting debate
“It’s disingenuous for the majority to claim, when we want to ease the tax burden on families … it’s going to make our roads and bridges unsafe,” said Senate Minority Leader Kevin Kelly, R-Stratford.
The tax holiday, which waived the full 25-cents-per-gallon retail levy on gasoline from last April through December — and portions of it from January until May 1 — will cost the state $330 million, according to nonpartisan analysts. Most of that loss, $240 million, falls within the current fiscal year, which began last July 1. Yet despite that hit, Lamont’s budget office projects the $1.8 billion transportation fund will close $226 million or 12% in the black.
Sales tax receipts are the new engine driving CT's transportation program
Sales tax receipts have surpassed fuel taxes as the single-largest source of revenue for the state budget's Special Transportation Fund. And while fuel receipts have been stagnant for many years, sales tax revenues are rising and are projected to continue doing so. (The fund also receives revenue from various motor vehicle-related fees, a highway mileage tax on large commercial trucks and from federal grants.)
and wholesale fuel tax revenues
revenues for STF
Sales Tax Revenues
Retail and wholesale fuel tax revenues
Total revenues for STF
Fuel tax revenues reduced by temporary gas tax holiday in 2022 and 2023. Figures for 2023 through 2026 are projections.
Chart: CT Mirror Source: Comptroller's Annual Reports, 2019-2022; Nov. 10, 2022 Consensus Revenue Report, Office of Fiscal Analysis and Office of Policy and Management Get the data Created with Datawrapper
Even as the transportation fund is running up black ink, Connecticut has just begun collecting even more revenue for its transportation fund.
A new highway mileage tax on most large commercial trucks took effect earlier this month and will generate about $90 million per year, according to nonpartisan budget analysts.
Critics argue boosting transportation expenses will further inflate rising prices of goods and services and weaken trucking and other businesses.
“Any tax is overhead to a business,” said John Blair, president of the Motor Transport Association of Connecticut, which represents about 500 trucking-related companies. “That overhead gets passed down [to consumers.] It’s simple economics.”
Minority Republicans in both chambers want to repeal this mileage tax, and some say Connecticut can afford to reduce the retail gasoline tax on an ongoing basis, rather than with a one-time holiday.
“The administration has suggested by its own actions that you don’t need that highway use tax,” said Rep. Holly Cheeseman of East Lyme, ranking House Republican on the Finance Committee, who cited the huge transportation fund surplus.
Without the holiday, the black ink would total $466 million, or 26% of the transportation fund.
“We just gave a gas tax holiday — and ended up with more money,” Kelly added. “How does that happen?”
Sales tax transfer bailed out transportation fund
It started to happen way back in 2015 when Lamont’s predecessor, Gov. Dannel P. Malloy, sounded the alarm about the transportation fund.
Created in 1983 in the wake of the Mianus River Bridge collapse in Greenwich, the STF was carved out from the rest of the budget to recontruct an aging transportation system built in the 1940s and '50s.
Powered by fuel tax revenues, the STF initially paid only the debt service on the hundreds of millions of dollars Connecticut borrows annually for its building program.
But over time, legislators also used the STF to cover the operating costs for the departments of Transportation and Motor Vehicles as well as the retirement benefits of their employees.
Improving vehicle efficiency weakened fuel tax revenues, while state officials spent more than $1 billion in pump receipts on non-transportation programs in the 2000s and early 2010s
Eventually, the transportation rebuilding program fell behind.
Connecticut borrowed $700 million for transportation projects in 2016 when the transfers began and paired it with about $700 million in federal construction grants. But DOT officials said that capital budget of $1.4 billion needed to be closer to $2 billion to cover both safety upgrades and projects to reduce congestion.
Malloy and legislators agreed to dedicate a portion of the 6.35% sales tax — specifically one-half of 1 percentage point — to the STF, to cover the debt service on more borrowing. The fund already had been receiving a small portion of sales tax receipts from car transactions.
By the time Lamont took office in 2019, that half-percent transfer was worth about $370 million. Arguing that wouldn’t be enough, the governor asked legislators to approve tolls: first in 2019 on all vehicles and one year later just on trucks.
After both failed, he convinced lawmakers to order the new highway mileage tax on most large commercial trucks.
But since then inflation has skyrocketed, taking sales tax receipts with it.
The $370 million transfer had nearly doubled by 2022. And nonpartisan analysts say it will pump $820 million into the STF this year and $875 million by 2026.
Capital program remains sluggish, DOT remains under-staffed
But while overall revenues for the transportation fund grew 57% after 2015, the capital program didn’t.
Connecticut issued an annual average of $725 million in transportation bonds between 2015 and 2018 under Malloy, according to debt reports from the state treasurer's office. During Lamont’s first term, the annual average ticked upward just 2.6%, reaching $744 million.
With huge new revenues to cover transportation borrowing, why weren’t more projects launched?
Labor says the answers involve long-entrenched problems in key state agencies.
The Department of Transportation has less staff now than in 2010, when a legislative investigation concluded it was struggling to complete projects on time and under budget.
The DOT had 3,398 budgeted, full-time positions when that 2010 study was ordered, compared with 3,361 last fiscal year. And while 3,420 currently are approved for that agency, only 2,965 were filled as of Friday.
The union that represents roughly 900 state transportation engineers, architects and planners says Connecticut is falling behind in the hunt for the talented professionals needed to launch projects.
“It’s a nationwide competition to get these young professionals out of college,” said Travis Woodward, president of CSEA-SEIU Local 2001 and a supervising engineer at the DOT. “Other states are eating our lunch.”
The Department of Administrative Services, which oversees most agency hiring across the Executive Branch, also needs to reform its review processes, which have become too cumbersome, Woodward said, adding it normally took one month to hire an engineer and now can take three.
“They know there’s an issue, but nobody knows how to circumvent it,” he added.
Lamont and Administrative Services Commissioner Michelle Gilman said last summer that efforts are being made to streamline and accelerate hiring processes.
And Chris Collibee, Lamont’s budget spokesman, added Friday that the administration and labor unions “are actively working to recruit and train the next generation of engineers, welders, pipe-fitters and contractors that will deliver on projects that will transform how we travel in Connecticut.”
Collibee added that highway, bridge and rail projects “have significant lead time” but the administration is committed to “ramping up additional projects in the near future, projects that will move Connecticut forward, helping to grow businesses and taxpayers.”
Lamont’s budget office projected it would boost annual borrowing for transportation projects to $1 billion in each of the next two fiscal years and then to $1.1 billion in 2025-26.
Cutting the gasoline tax, or repealing the new mileage levy, would undercut that effort, Collibee said.
Rep. Maria Horn, D-Salisbury, co-chairwoman of the Finance Committee, said it's premature to focus on cutting gas or mileage taxes, noting that even as sales tax revenues grow, fuel tax receipts don’t.
Connecticut is projected to collect $657 million from its retail and wholesale taxes on gasoline this fiscal year. Add to that the $240 million it forfeited this year from the tax holiday and the total reaches $897 million.
Fifteen years ago, those same two taxes generated a very similar amount, $853 million.
Adjust the 2008 receipts for inflation, though, and they represent $1.15 billion in current spending power, according to the U.S. Bureau of Labor Statistics inflation calculator. That makes this year’s tally a 22% decline.
Horn added, though, that it’s essential for the state to find a way to increase its transportation construction projects to justify the revenues currently dedicated to the program.
CT could lose big federal grants if it can’t start more projects
Even if the government should find a way to get more projects off the ground, some state officials have questioned whether Connecticut’s construction industry has the capacity to handle additional work.
Both business and labor in the private sector rejected that suggestion last week.
“You can ask every Connecticut road-builder member, every Connecticut asphalt- and aggregate-producer member, and every Connecticut ready-mix concrete producer member, and they’ll tell you they’ve been operating under capacity and starving for work for over a decade,” said Don Shubert, president of the Connecticut Construction Industry Association.
“We’re more than ready to respond, and we’ve been waiting for this opportunity,” said Nate Brown, political director and business agent for the International Union of Operating Engineers, Local 478.
Shubert and Brown both said Connecticut has lost some construction workers who’ve been forced to find work in neighboring states. That’s unavoidable, Shubert added, “with the lackluster construction prigram from the Department of Transportation that we’ve been living with for over a decade.”
But Shubert and Brown added that Connecticut can’t afford not to revitalize its construction industry with an infusion of new transportation projects.
The much-touted $1.2 trillion federal infrastructure initiative passed in late 2021 does guarantee $5.4 billion in total for Connecticut over the next five years for highway, bridge, transit and other projects.
But those funds can’t be used to supplant state spending.
More importantly, Shubert and Brown noted, states can compete for much more funding, specifically a share of a $12.5 billion Bridge Investment Program and a roughly $16 billion pool for major transportation projects that will provide significant economic impacts.
Connecticut can’t compete for those transformative grants without a more robust capital program, they said.
“We cannot waste these opportunities over the next five years,” Brown added. “We need to get shovels in the ground.”
A new American industry is about to launch from the Port of New London as all the talk about this area serving as a hub for the offshore wind industry becomes reality in a matter of months.
This Spring, barges with massive components for 12 offshore wind turbines will begin arriving at the Port of New London’s State Pier. The turbines will be largely assembled here before crews ship them to a point 35 miles east of Montauk, Long Island, – known as South Fork Wind farm -- in late Summer and Autumn. By next Winter, South Fork is expected to be operational, supplying clean, sustainable energy to approximately 70,000 homes in East Hampton.
That process will be repeated over and over again. South Fork will be followed by Revolution Wind, 32 miles off our coast, and Sunrise Wind farm, 30 miles off Montauk. All three wind farms will be assembled and shipped from New London by the Ørsted and Eversource joint venture to power just over 1 million homes in New York, Connecticut, and Rhode Island.
In anticipation of this, seCTer (Southeastern Connecticut Enterprise Region) ended 2022 by presenting the nation’s premiere offshore wind energy workshop for businesses, educators, and policymakers -- “Foundation 2 Blade.”
Produced by the Business Network for Offshore Wind, this three-day event served as a primer for those interested in becoming part of the industry’s supply chain.
The takeaways were overwhelming and encouraging.
Because offshore wind energy is new to America, we need to provide the manufacturing facilities, construction equipment, and workforce necessary to support it.
Finding enough workers will be a significant challenge. Connecticut, particularly this region, has workers who can pivot into offshore wind. But we know that General Dynamics Electric Boat, the nation’s submarine manufacturer, is having difficulty filling its own ranks. The demand for “Blue Tech” workers will only increase.
We need a fleet of vessels designed to transport equipment and workers to wind farms for installation, operations, and maintenance for decades to come.
We need to produce enough cable to connect turbines to one another, offshore substations, and the onshore power grid.
We need equipment and trained workers to install those cables and then monitor them to ensure they remain buried. As with our existing energy network, maintenance and yes, even repairs, will be necessary.
We need made-in-the-USA components for all of the turbines needed to meet the national commitment to generate 30 gigawatts of offshore wind energy by 2030. Europe and Great Britain have led the way for the past 20 years and have the facilities, engineers, and skilled workers to produce these components. China has ramped up quickly and has the potential to soon lead the world in installed offshore wind energy.
The advanced manufacturing and labor opportunities in the U.S. are enormous. A typical wind turbine blade facility employs more than 500 workers. The nacelle, which sits atop the monopile, is the brain of a wind turbine and converts wind energy into electricity for transfer to the grid. Thousands of precision parts will be needed, from nuts and bolts to high-tech components. While early projects will depend on European suppliers for these large components, the U.S. is ramping up its offshore wind industrial base.
New Jersey and Maryland are building monopile manufacturing plants scheduled to start production in 2024 and 2025, respectively.
But considerable opportunities for Connecticut businesses exist to produce sub-components as well as in shipbuilding and the assembly, shipping, operations, and maintenance of turbines -- and all of the support services necessary for such work.
For example, secondary steel structures such as ladders, stairways, railings, and similar parts can be fabricated here. Lighting, safety items, personal protection equipment, electrical components – and lots of electricians -- will be in demand along with administrative help, and support services. Undersea mapping and monitoring equipment such as that produced by Thayer Mahan in Groton, and training facilities such as Survival Systems in Groton are needed.
Our proximity to the Continental Shelf, our deep-water port, and the Connecticut Port Authority’s improvements to State Pier – with the support of private funding from Ørsted and Eversource -- put our region at the forefront of this new American industry launching from southeastern Connecticut.
seCTer, the Chamber of Commerce of Eastern Connecticut, and the Naval & Maritime Consortium of Groton are leading the way regionally with our partners at the state level to ensure our businesses and workers are prepared for the vast opportunities presented by offshore wind energy.
Paul Whitescarver, Executive Director of seCTer, is a retired U.S. Navy Captain and former Commander of the Naval Submarine Base in Groton. seCTer is the federally designated economic development agency for this region.
Andy Tsubasa Field
MONROE — A building materials supply company has applied to build a rock crushing and screening plant in Monroe.
Monroe Recycling and Aggregates LLC is requesting a special permit to develop land at 467 and 485 Pepper St., where they plan to build the 9,000-square-foot facility. The site would include outdoor storage areas for rocks and construction material.
The project has raised concerns among a few Planning and Zoning Commission members worried about dust impacting nearby wetlands and affecting people using the Housatonic biking trail.
The zoning commission will hold a public hearing on the plan at 7 p.m. on Thursday at Town Hall.
The company has proposed for brick, concrete and asphalt paving fragments and other materials to be crushed by the facility. Along with crushed rock, the project would also make products that include screened topsoil, screened dirt fill and bedding sand.
Engineers hired by the company said the rock will be crushed in the enclosed building, which would house crushing machines and rock screeners — equipment that separate rocks into different sizes.
Inside the facility, conveyor belts would carry the rocks to the machines and form piles that vehicles would pick up and offload into storage bins. That crushed rock material would be sold to area contractors who would use the material for roadways, sidewalks and other construction projects.
It would also be used by the owner, Joe Grasso Jr., head of The Grasso Companies construction company, which serves Fairfield, New Haven and Litchfield counties, along with New York’s Westchester County. The Monroe-based company has worked on a reconstruction of about 4,500 linear feet on Pepper Street for safety improvements.
Water sprinklers over the bins will help control dust. A set of walls made from concrete and boulders would prevent the facility from impacting nearby wetlands, according to a project application.
Even so, some zoning board members have expressed concerns about the proposal in meetings.
Town planners said Monroe prohibits recycling facilities. Leon Ambrosey, a member of the zoning commission, is worried the town’s planning department wouldn’t be able to monitor the facility.
If the dust control sprinklers fail, Ambrosey said in an interview with Hearst Connecticut Media, “there’s no way we can monitor them.”
Ambrosey expressed concern with plans to crush asphalt, which he worries could end up on the Pequonnock River.
“If it gets into the soil and into the water, it’ll end up in the Pequonnock River,” Ambrosey said.
Chris Pawlowski of Solli Engineering, the firm hired by Monroe Recycling and Aggregates, told board members last month that the proposal isn’t for a recycling operation, despite the name of the company.
"It's kind of like Patagonia takes milk jugs and turns them into jackets. We're taking aggregate materials and turning them into finished products," Pawlowski said in an interview. "It's a manufacturing facility."
Pawlowski added that proponents are disclosing a list of materials the facility plans to use. The town's wetlands commission, which approved the proposal this week, is requiring them to give monthly updates on the project. The town's zoning enforcement officer will also be monitoring the project, he said.
"There's multiple levels of inspections that'll be ongoing," Pawlowski said.
MILFORD — As Connecticut heads into the 2023 legislative session, grant funds remain at the top of Mayor Ben Blake's mind.
"For Milford and most towns, maintaining the grants we get from the state is always important during any legislative session," said Blake. "A priority for the city is to get the same amount of grants as we did the previous year as a baseline, with the hope we get even more."
In the most recent city budget, state grants account for about $12 million of the total $238 million, which is about 5 percent, Blake said. But that amount, percentage wise, has fallen over the past decade.
"During the 2010 fiscal year, about $16 million of the city's total $172 million budget came from the state," said Blake. "The amount of state contribution is not as robust as it once was. The hope is always to keep it the same or increase."
State Rep. Frank Smith, D-118th, said he plans to address Milford's coastal resiliency, among other issues, in the upcoming session.
"As a member of the environmental committee, I plan to address what I believe is a crucial problem in dealing with the imminent effects of climate change and the need for greater coastal resiliency along our vast shoreline," he said. "The increased frequency, probability and magnitude of such tropical events will impact our beaches and the entire city and public infrastructure."
This is critical for Milford, Blake said, as the city has projects designed and permitted but still requiring funding to begin the work.
"One of those is a project by Walnut/Wildemere Beach, a project near Crescent Beach, and a couple of other projects for which we need some funding," he said.
A top priority for State Representative Charles Ferraro, R-117th, is electric rates and energy costs. During the 2023 legislative session, one of his goals is to "reel in these energy costs" and make Connecticut more affordable, he said.
"We must balance our state's energy goals by ensuring that our solutions produce sustainable, affordable, and reliable energy," he said. "A House Republican proposal, which I support, would separate the Public Utilities Regulatory Authority from the state DEEP and create independent agencies focused on lowering costs for ratepayers."
Other priorities for Ferraro include increasing penalties for some violent crimes, including domestic violence, and cutting the state income tax from 5 percent to 4 percent for families earning under $100,000 in taxable income and repealing the implementation of a Highway Use Tax.
Smith said he would work to optimize Milford's Educational Cost Sharing grant funding from the state.
"(In addition to) petitioning assistance for permanent school upgrade and maintenance and addressing the continuing issue of staff shortages in our schools, I will again introduce and advocate for enhanced K-12 civics education in our state, and a bipartisan task force to review and advise composition and implementation of such a program," he said.
In addition to education, Blake said the city is also hoping for state funds to complete a series of municipal projects. Blake cited dredging Milford Harbor as a potential use of state grant money. The city already has about $5 million set aside for that project, but the total cost of harbor dredging is estimated at about $7 million.
"So we need a couple more million dollars for that project," Blake said.
Finally, Blake said, transportation issues in Milford remain a priority.
Smith said he would use his new position as a member of the transportation committee to request state assistance for urgent drainage projects throughout the city and request grants for new road and sidewalk repair construction.
"We will also review and address traffic and pedestrian safety throughout the state and areas of particular local interest," he said.
MADISON — A $10 million budget overage has prompted the Board of Education to revise its original plans for the construction of a new elementary school, including shrinking classroom sizes, and may bring a request for additional funds within the next few months.
In a special meeting on December 13, Adam Levitus of Colliers International, the owner’s representative for the project, told the board that the most recent estimates for the project came in at $56.5 million — nearly $10 million above the $46.6 million approved for the cost. He said said the cost hike was due to rapid increases in construction prices and new enrollment projections that required the addition of four more classrooms to the building footprint.
“It’s a difficult situation that we find ourselves in because of the supply chain issues raising costs and inflation raising costs,” Seth Klaskin, chair of the Board of Education, said in a meeting on Tuesday.
In the Tuesday meeting, the board approved reducing the building perimeter by tightening the exterior walls on the building, which would shrink the area of some of the classrooms, including kindergarten through 5th grade general classrooms, a world language classroom and a music classroom. The total decrease in space would amount to about 1,700 square feet out of a 90,000 square foot building area.
The revised plan would also eliminate radiant floor heating in the Pre-K classrooms and as well as kitchen equipment and would combine bathrooms in the 1st and 2nd grade classrooms. The changes will amount to about $3 million in savings. Levitus said the developer made the changes with the goal of reducing learning space as little as possible.
Although the cost savings from changes to the project and the additional appropriation would not address the entire $9.9 million overage, Levitus said it wasn’t necessary to cut the entire $9.9 million now because the design was not complete.
Minutes from the Dec. 13 school building committee meeting discuss the possibility of requesting an additional $5 million from the Board of Selectmen to be added to the project budget.
But Peggy Lyons, first selectwoman of Madison, told CT Examiner in an email on Friday that the building committee was still working through the budget numbers, and that the current design numbers were based on estimates. She said she expected the Board of Selectmen to get a full update on the budget in February or March, when they would discuss any remaining concerns.
“The [Board of Selectmen] would not be taking any formal action, if needed, until things are more final,” Lyons said in her email.