"Funding is so tight that people now feel to get a major project underway, you have to use future highway funds," Kirby said. "Obviously, what raises concern is you place commitments on future revenue. That takes money from other projects."
The $1 billion in intercounty connector Garvee bonds would add at least $500 million in debt service to the $2.4 billion cost of such a highway, the legislature's policy analysis found. The other $1.2 billion in bonds would be paid off through tolls collected on an intercounty connector and other Maryland tunnels and bridges. The rest of the funding for a highway would come from state funds and money earmarked by Congress.
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A federally required environmental impact study is examining the potential effects of an intercounty connector on surrounding communities, historical structures and wildlife habitats. Maryland State Highway Administration officials have said they will pick one of two routes for a highway this spring.
Garvee bonds, or grant anticipation revenue vehicles, were developed in the mid-1990s as a way for cash-strapped states to finance expensive highway and transit projects while saving on inflationary costs by speeding up construction, said Jack Basso, a former assistant U.S. transportation secretary on budget matters.
As of September, at least 15 states and two U.S. territories had issued about $10 billion worth of Garvee bonds, mostly for big highway projects, said Basso, who now oversees financing issues for the American Association of State Highway and Transportation Officials.
"It allows them to do this and still keep the rest of their [transportation] program running," Basso said. "Maryland is a relatively small state. A project like this is a lot of money for them."
Basso said states can bank on a "very, very stable" stream of future federal highway money. Federal highway funding has increased about 30 to 40 percent in each of the most recent six-year reauthorizations by Congress, he said.
"I look at that and say it's a pretty safe bet," Basso said.
But Tom Downs, president of the Eno Transportation Foundation and a former New Jersey transportation commissioner, said Garvee bonds have an "inherent risk" of relying on federal aid that might not be there in the longer term.
The federal transportation trust fund is supported almost entirely through gas tax revenues, Downs said. With motorists turning to more fuel-efficient vehicles as gas prices increase, those gas tax revenues could become stagnant, he said. That could leave states with less federal aid than they might have counted on.
"Garvee bonds assume there will be steadily increasing federal funds coming to each state over the next 15 years," said Downs, whose nonprofit foundation holds educational forums for transportation professionals. "I don't know that that's a rational expectation. If that doesn't happen, what's the outcome? How do you pay [the bonds] off?"
Downs, who said he has no opinion on whether an intercounty connector should be built, said some states, such as New Jersey, have gotten into deep financial trouble by having to commit too much of their transportation budgets to debt payments.
But Flanagan said he is confident Maryland's transportation finances are in better shape than those of states that have had debt problems.
Asked what would happen if the legislature does not approve the $1 billion in Garvee bonds for an intercounty connector, Flanagan said, "Failure is not an option."