Lack of State Bond Package Slowing Local Projects, Could Cost Property Taxpayers, Warns CCM

August 18, 2009 – (RealEstateRama) — Lack of state action on a state bond package is delaying millions of dollars statewide to municipalities, slowing local projects and threatening to cost property taxpayers hundreds of thousands of dollars, according to the Connecticut Conference of Municipalities (CCM), the statewide association of towns and cities.

The fate of the bond package is tied up with that of the state budget, overall, and the impasse between the Governor and legislative leaders continues.  The lack of a bond package means towns and cities have not received:

• The July payment due to them for 50% of funding under the Town Aid Roads (TAR) program, the primary state program for assisting local governments with road and bridge projects.  TAR is traditionally paid for by state general fund or transportation fund dollars but this year is expected to be funded by state bonds. Last year municipalities received a total of $30 million under TAR.
• Approximately $57 million in principal and progress payments due in August under the State Department of Education School Construction grant program and, unless bonding is done by September, another $43 million will not be made next month. The State Department of Education tells CCM that it has no list available now of the individual municipalities and projects affected.

According to CCM’s survey:

• 35% of responding municipalities have delayed projects due to the absence of the July TAR payment, including North Stonington, New Canaan, West Haven, Monroe, and Colchester.
• Others have moved forward with TAR-related projects by tapping into their own general fund money, capital reserve funds or road maintenance accounts. For example, Stamford, Killingly, Bolton, and Hamden.
• 66.7% of respondents already plan to utilize general fund or fund balance dollars to cover the delay in State funding under the  school construction program. If the delays continue this number could increase, or result in municipalities exploring other solutions.
  • Stamford, for example, plans to use general fund dollars to cover the $2.9 million they expected to receive in September from the State. Stamford noted that this will halt interest on the funds used — anticipated revenue that will be lost for the City. This complaint was echoed by other municipalities.
• New Fairfield’s Board of Finance and Permanent Building Committee has decided to put a hold on two new school construction projects until school construction bond funding is authorized.
• New Haven expected to receive approximately $12 million in school construction payments in August and $3.7 million in September. The City will be able to continue its school construction program through September. If payments are not made by September, the city may be forced to suspend construction.
• Hartford expected to receive approximately $12 million in school construction payments in August and $10 million in September. To cover this shortfall the City anticipates making use of short term financing. This decision will result in new interest expenses for the City.

Municipalities have contractual obligations to make payments for ongoing school projects – but if state progress payments are not forthcoming, local governments will be forced to make arrangements for short-term financing, thereby increasing the cost of these projects.

In 2007 there was a similar delay in progress payments under the School Construction program that dragged into October.  Municipalities had to borrow millions of dollars, drain their fund balances and lose interest income, and more.

 “At a time when municipalities themselves are strapped for cash, and jobs are needed to stimulate the state’s economy, the state budget impasse threatens to halt needed public works projects and further penalize hard-hit property taxpayers,” said Jim Finley, CCM’s Executive Director and CEO.

CCM called on the Governor and General Assembly leaders to act quickly on portions of the bond package that affect local governments, noting that during the regular legislative session the State enacted legislation to ensure that state transportation projects went forward no matter the fate of the larger bond package (SA 09-1).

Local leaders’ concerns go beyond TAR and school construction, and include the lack of payments on other critical aspects of the bond package that affect towns and cities, such as the Clean Water Fund, Local Capital Improvement Program (LoCIP), the Local Bridge Program, economic development assistance (Urban Act, Small Town Economic Assistance Program) and other important local needs.

“We understand that state leaders are working hard to resolve the budget stalemate”, Finley said. “But portions of the bond package affecting Hometown Connecticut are not controversial and can be acted upon separately. If not, property taxpayers will pay the price of State inaction and private sector jobs will be lost.”

Attachments (3):

• Municipal Aid Payments and the Governor’s Executive Orders
• Bond Package Proposals: Key Programs for Municipalities
• Impact of the Delay of the Town Aid Road Grant Payment: Survey Results