By Katherine Shaver
Washington Post Staff Writer
Friday, September 12, 2008
Part of the intercounty connector project will be delayed indefinitely to save money, and a bond sale to finance some of its construction was postponed this week as officials deal with cost overruns and uncertain federal funding, Maryland officials said yesterday.
Maryland Transportation Secretary John D. Porcari said service roads designed to help move traffic on and off Interstate 95 near the connector will be delayed because another part of the project came in $100 million over budget.
He also said the state postponed this week's sale of $425 million in bonds to help pay for the six-lane toll road because of questions about how much federal money states would receive for transportation.
U.S. transportation officials announced last week that the federal transportation trust fund is on the verge of going broke.
An $8 billion relief package passed by Congress this week is expected to resolve the immediate federal funding problems. But the legislation didn't come in time for Maryland's bond sale, which was scheduled for Wednesday. Porcari said his department's Wall Street advisers recommended that the sale be delayed until after the federal trust fund was shored up.
"You don't want to go to market with that kind of uncertainty out there," said Porcari, who added that the sale could be rescheduled soon.
The grim news for the 18.8-mile highway through Montgomery and Prince George's counties added to a rough week for Maryland transportation officials. On Wednesday, Porcari announced that the state must cut $1.1 billion in road and transit projects statewide over the next six years because of slumping revenue. The intercounty connector was not affected by those cuts.
Porcari said the connector's construction remains on schedule and within its $2.4 billion budget.
"We're living with the financing plan we inherited" from the administration of former governor Robert L. Ehrlich Jr. (R), Porcari said. "We'll move ahead with the project, and the project will be within its financial plan."
Some critics said they see evidence that the plan is beginning to unravel.
"The handwriting has been on the wall a long time," said Greg Smith, a longtime connector opponent who follows the project's financing. "We've been questioning the state's ICC cost estimates and its revenue assumptions for several years now. The question is how much worse does this situation have to get before this administration drops this boondoggle?"
The bonded debt for the project is supposed to be paid off in part with Maryland's future federal transportation dollars. If federal funding falls short, Smith said, Maryland will have to make up the difference by raising tolls or diverting money from other services.
"What else will Maryland be able to afford after it pays for the ICC?" Smith asked. "The answer is less and less."
The intercounty connector's financing plan calls for $750 million worth of so-called GARVEE bonds. The debt service on those bonds is expected to consume 10 to 15 percent of Maryland's federal highway funding over the next 12 years, state officials said.
The debt plan was placed in doubt after U.S. Transportation Secretary Mary Peters announced Sept. 5 that payments to states would be rationed until Congress shored up the federal trust fund.
Maryland's financing problems are compounded because, like the federal government, the state largely depends on gas tax revenue for transportation funding. As gas prices soared this year, motorists drove less and bought less gas.
At the same time, Maryland officials said they are being squeezed by sharply rising road-building costs. Prices of diesel fuel and some construction materials have jumped as much as 300 percent over the past five years, industry officials say.
Maryland highway officials said those costs were largely responsible for the latest connector contract -- to build a seven-mile segment through northern Silver Spring -- coming in at $559.7 million, or 22 percent, more than the highest estimate.
The east-west toll road is to run between the Interstate 270 corridor in Gaithersburg and the Route 1 corridor in Laurel.
The part of the project that is being delayed indefinitely involves building three miles of service roads along I-95 north of the connector in Prince George's. The service roads are designed to help move traffic on and off I-95 after an interchange is built about a mile north of the connector. The work, to cost $60 million to $75 million, also entails resurfacing five miles of I-95.
Neil J. Pedersen, the state highway administrator, said the service roads can be delayed until the I-95 interchange has been built at Contee Road. Its construction hasn't been scheduled. Delaying that portion of the project won't prevent the entire highway from being open in 2012, Pedersen said.
John Erzen, a spokesman for Prince George's Executive Jack B. Johnson (D), said county officials are concerned about delays in road projects that would help attract economic development to the area. Erzen said Johnson was already "very disappointed" to learn Wednesday that Maryland planned to cut $125 million worth of Prince George's projects as part of an effort to trim the state's six-year transportation budget. The amount cut in Prince George's was among the biggest in the state.
"We know cuts have to be made," Erzen said, "but the thing that concerns us most is it seems very disproportionate compared to other counties."
Porcari said the state will wait until the president signs the $8 billion funding package before rescheduling the bond sale, perhaps within two weeks. The postponement was first publicized yesterday in the Bond Buyer newspaper.
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