ANNAPOLIS – A plan to use a type of bonds linked to unallocated federal funding for the Inter-county Connector has sparked debate among key state policy makers.
In a recent report, the Maryland Department of Transportation proposed using Grant Anticipation Revenue Vehicles, also known as GARVEE bonds, as one component of funding for the controversial road planned to join Interstate 270 in Montgomery County with Interstate 95 in Prince George’s County.
GARVEE bonds are backed by and expected to be paid later with federal highway aid, according to Department of Legislative Services staff, which analyzed their use at the Nov. 12 Spending Affordability Committee meeting.
If the GARVEE bonds are actually used to fund the ICC, it would be the first time Maryland has relied on them for transportation, said Erin Henson, spokeswoman for transportation department.
Delegate Michael R. Gordon, D-Montgomery, needs to be “persuaded” that using these bonds is necessary. At a time when the state is considering using them, he said, the administration also wants to tax residents for the same types of projects.
On the other hand, Sen. J. Lowell Stoltzfus, R-Somerset, said he sees the bonds as a responsible way of funding the ICC. He said he thinks Maryland’s federal funding will increase “at a level that will help us pay these GARVEE bonds.”
Maryland residents and lawmakers have been debating construction of the ICC for about 40 years, discussing its environmental impact and economic effects. Last month, state transportation officials identified two routes for the road, largely following the master plan for the roadway, for further study.
The Department of Transportation is looking at ICC funding through a combination of GARVEE bonds, ICC toll revenues and bonds from the Maryland Transportation Authority, said Henson. The actual percentage of each source for funding has not been determined.
Gordon, the House chairman of the committee, is skeptical about the security of the bonds and said he worried it could jeopardize the state’s bond rating. Losing the bond rating would result in a loss of millions of dollars because of interest expenses, he said.
Stoltzfus is “optimistic” and doesn’t think the bond rating will be affected.
“Construction of the Inter-county Connector . . . could raise total net debt outstanding to approximately $4 billion,” according to the Department of Legislatives Services. The department said final repayment of the GARVEE bonds could exceed $2 billion over a 30-year term.
Stoltzfus said that he was “troubled” that the state could owe more money. However, he said he believes the ICC is worth the debt, and the connector would end up almost paying for itself.
Senate President Pro Tem Ida G. Ruben, D-Montgomery, has no problem with using the bonds. The bond, she said, as well as other funds will help to produce a project that will enhance the entire state’s economic development.
Without the ICC, Ruben said, the state would be engulfed in traffic and no one will bring business to the state.
“If we don’t build the projects today, then tomorrow they will cost at least one-and-a-half times as much,” Ruben said. “So in essence we’re saving money.”