Commentary: Councilman Wants City To Declare Opinion on State Government Issue

Submitted by Gerry Daley, Councilman
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Tonight at a Special Meeting called for 6:00 PM, the Common Council will consider a Resolution I submitted opposing the Governor's current proposals to implement tolling systems.

While I believe some form of tolling systems may be part of a long term approach to adequately addressing our future transportation infrastructure needs, the current proposals put forth by the Governor's office, especially viewed in the context of revenue measures included as part of the Governor's proposed biennial budget, raise serious concerns about the effectiveness, fairness, and transparency of the current approach we are seeing from the Governor's office.  This is a summary of my concerns about the Governor's proposals:

Effectiveness in maintaining / improving our transportation infrastructure -

• as part of his budget proposal the Governor removed the $250 million in general obligation bonds the current bipartisan budget had earmarked for transportation infrastructure. He also capped the amount of new car sales taxes going into the Special Transportation Fund, which will make the Special Transportation Fund almost insolvent by 2022.
• according to an internal DOT memorandum that came out in February, found that the limit on bonding would “have significant impacts on our Capital Program, severely constricting the number of new projects that advance in the current, and future years.
• that same memorandum stated, "The development costs for such an extensive toll system are significant –approaching $300 million. The time to plan, gain regulatory approvals, design and construct a toll system has been estimated to take 4 years, with partial revenue service in Years 5 and 6. Full revenue operations would be achieved in Year 7."  This begs two questions - how do we pay the $300 million in development costs, and what happens with our transportation structure while we are waiting 5 to 7 years for revenue from tolls to start?
• despite the evidence in the memorandum that funding for transportation infrastructure is already inadequate, after the memorandum was written, the Governor redirected funds from the sales tax on new cars.  Current law diverts 8% of the sales tax on new car sales to the Special Transportation Fund with scheduled increases to 33% on 7/1/2019, 56% on 7/1/2020 , 75% on 7/1/2021, and 100% on 7/1/2022.    The Governor's FY-20 / FY 21 budget proposal repeals the increases scheduled to occur starting 7/1/2019 - in effect freezing the amount of sales tax on car sales that goes to the Special Transportation Fund at 8%.   According to the governor's web site, this reduces revenue to the Special Transportation Fund by $91 million in FY-20 and by $175.8 million in FY-21 - a total of $266.8 million reduction to the Special Transportation Fund in the two year budget biennium.   This is akin to owning a house with a leaking roof but spending on other things for the next four or more years while the leaks get worse.

Fairness to working people, small business, middle income retirees, and local municipalities -

• the Governor's proposed biennial budget for FY20-FY21 would benefit Connecticut's wealthiest individuals by retroactively eliminating the gift tax portion of the Gift and Estate Tax effective 1/1/2019, and delay the filing date for the estate tax return from six months to nine months.  The Governor’s office has estimated that these two measures relating to gift and estate taxes would reduce taxes on Connecticut’s wealthiest individuals by $51.6 million over the budget biennium.   This is money that could be used to partially offset the reduction in revenues for the Special Transportation Fund.
• the Governor's proposed budget retroactively repeals the increased exemption for Social Security benefits from the income tax included in the FY 2018 –2019 biennial budget and scheduled to take effect for the 2019 income year, retroactively repeal the phased in exemption for pension and annuity income included in the FY 2018 –2019 biennial budget and scheduled to take effect beginning in the 2019 income year, retroactively and permanently caps the amount of teachers’ pensions that is exempt from the income tax at 25% (this amount was slated to increase to 50% in income year 2019 under current law).   These exemptions were promised as "middle class tax relief" and are being repealed while taxes for the wealthy are being reduced.
• the Governor's proposed budget eliminates the popular August "tax free" sales week that many parents rely upon to get their children outfitted for school and that retailers rely upon to boost sales.
• the Governor's proposed budget eliminates the 5 year, $500 tax credit for STEM college graduates that is intended to encourage pursuit of STEM education and retain graduates in Connecticut.
• the Governor's proposed budget repeals the sales tax exemption for text books, college, and professional schools, as well as bicycle helmets, child car seats, and safety apparel.
• the Governor's proposed budget repeals a number of other exemptions currently in the sales and use tax code, including massage therapists, electrology services, renovation and repair of residential property, non-prescription drugs, text books, newspapers and magazines, Connecticut credit unions, campground rentals, bicycle helmets, child car seats, vegetable seeds, safety apparel, and repair or maintenance of vessels effective 1/1/2020, repeals exemptions for trade-in of vehicles and the lower sales tax rate of 2.99% on sales of vessels 7/1/2019,  repeals the exemption for winter boat storage effective 10/1/2019, increases the sales and use tax rate on digital goods (i.e. electronically accessed or transferred audio works, visual works, reading materials, ring tones, and software applications) from 1% to the standard 6.35% rate, effective 10/1/2019, expands the sales and use tax to encompass professional services including legal, accounting, architectural, engineering, interior design, and real estate activities and agents effective 1/1/2020, expands the sales and use tax to encompass personal services including veterinary services, barber shops, beauty salons, dry-cleaning and laundry services, parking, sports/recreation instruction and industries, horse boarding and training, travel arrangement and scenic transportation, services to buildings and dwellings, and waste collection effective 1/1/2020.
• the revenue enhancements proposed as part of the Governor's budget place added burdens on working people, families, and students while diverting  $266.8 million from the Special Transportation Fund and providing $51.6 million in tax reductions for the State's wealthiest individuals.
• it is likely that local roads will experience increased traffic congestion and municipalities will incur costs for traffic control and road maintenance as drivers find ways to use local roads to avoid tolls on limited access highways.

Transparency -

• the Governor's newly appointed DOT Commissioner has said they are still revising their overall plan in relation to the Governor's proposal to redirect the funds from sales taxes on new cars and were unable to say what projects were reprioritized as a result and that DOT will have an “ongoing dialogue” with the Governor's budget team regarding what projects will advance and which may be delayed.
• the Governor's budget proposal does not address how to pay the $300 million expected costs for developing an electronic tolling system.
• he Governor's web site describes his proposal for tolls as a, "broad proposal that does not fix the type of vehicles tolled or the toll amounts."
• the Governor's proposal on tolling systems calls for tolls on Interstate 84, Interstate 91, Interstate 95 and portions of Connecticut Route 15 (Merritt Parkway), but does not specify at what mileage intervals tolls would be installed, what the per mile cost would be, what discounts would apply to in-state drivers, regular commuters, etc., whether all lanes would be tolled or only new lanes, whether "congestion" / peak traffic tolling would be implemented.
• the Governor's proposal specifically allows DOT to enter into agreements with outside entities to construct/service the tolls, raising the possibility of privatizing the tolling systems and/or developing them via a public/private partnership has raised the possibility of private entities profiting from public infrastructure.
• although the Governor's proposal limits tolls to Interstate 84, Interstate 91, Interstate 95 and portions of Connecticut Route 15 (Merritt Parkway), there is no explicit prohibition on expanding tolls to other roads in the future.

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Gerry Daley

Common Council - City of Middletown