ICC financing plan runs into Assembly snag

The Ehrlich administration's plan for financing construction of the Intercounty Connector highway is in trouble in the General Assembly, with leading legislators questioning its heavy reliance on borrowing.

Defying warnings that they could be putting the project in jeopardy, lawmakers in both houses are drafting alternatives to the administration's proposal to use $1 billion in bonds backed by future federal highway aid to help pay for the highway.

The $2.4 billion project does not need legislative approval, but the administration cannot go forward unless it can persuade the Assembly to accept its financing plan. The seemingly arcane disagreement has significant political ramifications.

The dispute is this: The administration wants to pay for a good chunk of the highway by selling so-called GARVEE bonds that would be repaid with future federal highway grants. But the Assembly imposed a limit last year on the use of such bonds, saying that no more than 13 percent of annual federal highway aid could go to paying them off.

The governor wants to lift that cap. Leading legislators say they are not going to do that.

Senate President Thomas V. Mike Miller, a supporter of the highway, said there are concerns in both parties that Gov. Robert L. Ehrlich Jr.'s ICC plan relies too much on debt. Speaker Michael E. Busch said those concerns are shared in the House of Delegates.

"The House is totally committed to fully funding the ICC, and we're looking at all the options so we incur the least amount of debt," Busch said. GARVEE bonds, he said, are "the worst type of debt we can incur."

GARVEEs - an acronym that stands for Grant Anticipation Revenue Vehicles - are a type of bond that is backed by an agreement to deduct money from future federal payments to pay bondholders. The bonds are an increasingly popular method for states to finance big transportation projects, but critics say over-reliance on them can lead to problems.

In Maryland, many legislators - even ICC supporters - are concerned that committing too large a percentage of future federal payments to repaying GARVEEs will leave less money for projects in their corners of the state.

"I have always been concerned about increasing that percentage to 20 percent from the 13," said Sen. James E. DeGrange, an Anne Arundel Democrat who chairs a Senate budget subcommittee on transportation. His misgivings are significant because the Senate is seen as being more receptive to GARVEEs than the House, where the idea of the limit originated.

In both chambers, legislators are working on alternatives to the administration's financing package, which relies on GARVEEs for almost half of the cost of building the 18- to 20-mile toll road from Laurel to Rockville. Other sources include bonds issued against future tolls on the ICC and other facilities, and cash from the state's Transportation Trust Fund.

"I want the ICC built," said Del. Murray D. Levy, a Charles County Democrat who is working with colleagues to draft an alternate ICC financing plan. "I think it will not be built unless we improve the financial plan."

Levy said new tax increases will not be part of the plan, but he declined to discuss details of what legislators are considering.

Transportation Secretary Robert L. Flanagan is sticking with the current administration plan, which he said was devised by a commission headed by former Transportation Secretary William K. Hellmann. "We've now reached crunch time, and the Department of Legislative Services has come up with four defective ICC funding plans. We can't afford to misstep here," Flanagan said.

He insisted that the administration's plan is the only one on the table that meets Federal Highway Administration guidelines.

The danger for the administration is that failure to reach a consensus on financing could hold up its efforts to get federal approval for the highway - another big hurdle - and throw off a timetable that calls for ground to be broken in the fall of 2006, just months before the next gubernatorial election.

Legislators say the administration's hopes of raising the limit have been complicated by frosty relations between Assembly leaders and Flanagan, whose handling of the recent change in leadership at the port of Baltimore has been unpopular among the majority Democrats.

"The secretary has been extremely ineffective - not because of his intelligence, but because of his aggressive partisan personality," Miller said.

Flanagan rejected that criticism. "Since becoming secretary, I have put forward a bipartisan transportation program that received bipartisan support in the General Assembly," he said.

Del. Peter Franchot, who chairs a House Appropriations subcommittee on transportation, said legislators are discussing the ICC with other Ehrlich aides.

Related topic galleries: Transportation, Thomas V. Mike Miller, Parliament, State Budgets, National Government, Government, Upper House

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