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Connector Plan's Bond Financing Criticized

Legislative Report Cites Drain on Other Projects

By Katherine Shaver
Washington Post Staff Writer
Friday, February 11, 2005; Page B01

Maryland's plan to pay for an intercounty connector largely with bonds would add at least $500 million to the price tag and tie up nearly a quarter of the federal highway dollars the state receives, according to a new study by the General Assembly's analysis arm.

The financing plan for the highway connecting Montgomery and Prince George's counties has a number of potential problems that "call into question its viability," the report by the Department of Legislative Services' Office of Policy Analysis states.

Transportation Secretary Robert L. Flanagan called a report on intercounty connector plans "very shabby." (Bill O'leary -- The Washington Post)

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Those include a high reliance on debt, with 92 percent of the costs being financed through bonds. Retiring that debt could add at least $500 million to the estimated $2.4 billion price tag, the report found.

Almost half of the project would be financed through bonds paid for with money pledged from the state's future federal highway dollars over 15 years, according to the financing plan. That would commit as much as 24 percent of the state's annual federal highway dollars during those years, the report found. State law now limits debt payments to 13 percent of annual federal highway dollars.

"Does the legislature want to commit 20 to 24 percent of its future federal highway aid cash flow to the ICC?" the report asked. "Such a commitment of funding would leave less funding for other major capital projects" and increase pressure to raise taxes or fees to pay for them.

Maryland Transportation Secretary Robert L. Flanagan said he strongly disagreed with the findings of what he called "a very shabby" report. "This was thrown together at the last minute by a group of people who are willing to throw the [connector] overboard," he said. "Not for a minute do I believe this report is from an independent arm of the legislature."

Warren Deschenaux, director of the Office of Policy Analysis, said his office is nonpartisan and has "no particular interest" in the intercounty connector. "We're simply saying that the administration needs to demonstrate that what they're seeking is the most effective way to finance the project," Deschenaux said.

Flanagan called the decision to take on a high amount of debt a "judgment call." The bonds relying on future federal dollars would consume about $100 million annually over 15 years, he said. However, inflation would add $100 million to the project for every year the state waited.

"You make a judgment when you buy a house to get a mortgage and not wait until you have enough cash to buy a house," he said.

Critics of the highway proposal say the report highlights their long-held concerns that Maryland can't afford the project.

"This is government by credit card at its worst," said Brian Henry, intercounty connector campaign director for the Audubon Naturalist Society.

Experts said toll roads such as the intercounty connector are often built with high amounts of debt. The New Jersey Turnpike, for instance, was financed entirely with bonds, said Jack Basso of the American Association of State Highway and Transportation Officials.

"When you ask if the debt is too much, you have to ask, 'Does the state have the resources to effectively manage and pay off that debt?' I think they do," said Basso, a former chief financial officer for the U.S. Department of Transportation who served on a commission two years ago that studied Maryland's transportation finances.

About $1 billion would be funded through so-called Garvee bonds, which pledge future federal dollars to repay to debt. An additional $1.2 billion in bonds would be paid off with toll revenue from the intercounty connector and other Maryland Transportation Authority facilities.

The report also questioned whether the intercounty connector would generate as much toll revenue as projected and whether the state could count on its federal highway dollars to increase significantly.

The six-lane highway would run 18 miles between Interstate 270 and Interstate 95, five to eight miles beyond the Capital Beltway. The State Highway Administration is conducting an environmental impact study and is scheduled to choose one of two routes for the highway in the spring. State officials have said they hope to break ground next year.

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