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Cities Forced Into Big Loans

By MARK PAZNIOKAS And DON STACOM, Courant Staff Writers

September 29, 2007

Hartford, New Haven and Bridgeport have had to borrow $55 million to keep school construction projects going while Gov. M. Jodi Rell and Democratic legislative leaders remain deadlocked over a $3.2 billion bond package.

The Connecticut Conference of Municipalities released a survey Friday showing that the state's three largest cities are incurring unexpected interest payments because school construction reimbursements from the state have been delayed by the impasse. The political stalemate also threatens to hurt more communities if it continues far into October, CCM said. Rell wants to meet with Republican and Democratic leaders Monday.

"Every community is going to be affected by delays if this goes on. We're hoping for a breakthrough on Monday," said James Finley Jr., CCM's executive director.

Rell has promised to veto the borrowing package, saying the state cannot afford to take on so much debt over the next two years. Democrats say the spending is necessary and well within the state's means.

School construction grants are a major piece of the general-obligation bond package: $705 million in the first year and $603 million in the second year of the two-year spending plan.

While they negotiate over the total package, Rell has asked Democrats to send her pared-down authorization for the schools. Democrats have refused, knowing that they would lose leverage needed for the rest of the borrowing.

CCM released its survey Friday to increase pressure on the Republican governor and Democratic legislature. So far, the state has missed $108 million in payments in August and September, forcing dozens of communities to tap into reserves and take short-term loans to pay contractors. The state pays part of the cost to renovate or replace local schools, and towns and cities based their 2007-08 budgets on the guarantee of those revenues.

New Haven had to use a $29 million line of credit at a cost of $256,000, Hartford is paying $100,000 in monthly interest on $12 million in emergency borrowing, and Bridgeport has paid $130,000 on $14 million in loans, CCM said.

The delay has forced Bridgeport to pay bills from reserve funds that could have earned nearly $100,000 in interest this summer. And if the holdup continues into mid-October, the city will have to take steps toward a massive bond sale that could cost more than $1 million in borrowing expenses, Finance Director Michael Lupkas said late Friday.

"If this keeps up, we'll have to talk to the [city] council about short-term borrowing. The scary part is that could cost $1.6 million [in interest expenses]," Lupkas said.

Rell has invited Democratic and Republican leaders to meet Monday to discuss a compromise, but House Speaker James A. Amann, D-Milford, refused. He wants a meeting with only Rell and Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn.

Williams has agreed to meet with Rell, House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, and Senate Minority Leader John McKinney, R-Fairfield.

"Not to bruise their egos, we want to talk to the chief executive," Amann said. "I don't need to talk to Larry Cafero or John McKinney."

Amann said the crisis is artificial, since Rell could sign the bonding bill and still choose which projects ultimately get funded. The legislature can only authorize the bonding, and the governor has the final say on allocating, or borrowing, the money.

"If there is such an emergency concerning school construction, she should sign the bill and only allocate the school construction funding next week," Amann said.

Amann said he spoke with Rell by phone Thursday and indicated areas in which he would compromise.