OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sHB-5391

AN ACT CONCERNING THE PREPARATION OF A TOLLING PROPOSAL AND SUPPORT FOR TRANSPORTATION INFRASTRUCTURE.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 19 $

FY 20 $

Resources of the General Fund

GF - Revenue Loss

66.9 million

145.6 million

Resources of the Special Transportation Fund

TF - Revenue Gain

66.9 million

145.6 million

Treasurer, Debt Serv.

TF - Cost

See Below

See Below

Note: TF=Transportation Fund; GF=General Fund

Municipal Impact: None

Explanation

The bill requires the Department of Transportation (DOT) to conduct National Environmental Policy Act studies in order to develop electronic tolling on state highways. The bill may result in an initial cost of up to $5 million to the Special Transportation Fund through Special Tax Obligation (STO) bond debt service for the study, although the state may be eligible to use Federal Funds if available.

After the study is completed, the DOT must file the toll proposal with the House and Senate clerks, which must be voted on by the Transportation Committee and the General Assembly. If the toll proposal is accepted by these governing bodies and by the Federal Highway Administration (FHWA), it is estimated that the annual toll revenue may be between $600-$800 million, which is dependent on several factors relating to toll rates and how many miles will be tolled. The bill specifies that the toll revenue will be used according to federal law and be used for any debt service payments on the STO bonds.

The bill also reduces by one half cent annually for five years the motor vehicles fuel tax which includes: (1) the gasoline tax, (2) the propane and natural gas tax and (3) the diesel fuel tax. This tax is currently 25 cents per gallon for gasoline and gasohol; 26 cents per gallon for propane and natural gas; and a rate set annually by the Commissioner of Revenue Services for diesel fuel. For FY 18, the diesel tax is 41.7 cents per gallon. Under the bill, the reduction starts when a 2.5 revenue to debt repayment threshold within the STF is exceeded. The bill requires a single year of exceeding the specified revenue to debt ratio to institute multiple automatic revenue collection rate decreases over the course of 5 subsequent fiscal years and is silent on what happens if revenues decrease below the 2.5 revenue to debt ratio in subsequent years.

The Special Tax Obligation (STO) bonds used to fund transportation projects require a minimum revenue to debt ratio of 2.0. To the extent that the automatic provisions might decrease expected revenues to below the 2.0 ratio requirement, there is the potential for significant increases in debt service costs, expenses related to mitigation of contractual requirements, or similar repayment penalties. Similarly, while the 2.0 revenue to debt service requirement is a required minimum when bonds are issued, bond markets respond to variation in actual revenue levels. To the extent that the bill decreases single year or near future ratio levels below where they otherwise would have been absent the provisions of the bill, or limits the funds ability to reach a ratio beyond 2.5, there is the potential for increased costs of borrowing.

The bill also allows DOT to impose a civil penalty of up to $100 for each violation related to toll evasion which will result in increased toll revenue dependent on the number of violations.

Lastly, the bill starts the five year phase in of the new car sales tax in FY 19 instead of FY 21. This will increase revenue to the Special Transportation Fund by $66.9 million in FY 19 and $145.6 million in FY 20 which will also be a corresponding revenue loss to the General Fund.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future, which will fully phase in the sales tax on new cars to the STF in FY 23. Also, if passed by the legislature and the FHWA, toll revenue will be collected to at least cover the debt service on the construction and maintenance of the electronic toll facilities.