Members of the Shumlin administration gave lawmakers a sobering rundown on the enormity of the post-Irene reconstruction effort on Monday.
State officials appeared before a joint committee of Senate Institutions and House Institutions and Corrections to outline the scope of the impact of Tropical Storm Irene on state infrastructure and summarize what they have accomplished since Aug. 28 when floodwaters ravaged the state.
In a daylong hearing, administration officials highlighted their dogged pursuit of solutions to the many problems that arose in the wake of the storm, which damaged the Vermont State Hospital, the Waterbury State Office Complex and wrecked $500 million worth of state highways. About 1,500 workers were displaced; 50 severely mentally ill patients were relocated; and hundreds of miles of roads were rendered impassable.
Over the course of less than two months, the Shumlin administration has found temporary settings for state hospital patients, placed 1,000 employees in temporary office space, and with the help of state workers finished cleanup of the state office complex and reopened hundreds of miles of state highways. The state is also raising money and providing direct support to the 1,200 households that have been left homeless.
Jeb Spaulding, secretary of the Agency of Administration, told lawmakers that the state’s liability policy with Lexington Insurance Co., a subsidiary of industry giant AIG, will cover most of the cost of rebuilding the state office complex in Waterbury. The Federal Emergency Management Agency will provide funding for additional expenses, once the insurance company issues a decision in six to eight weeks.
The state has spent $25 million “demucking” and stabilizing the facility. It would cost about $30 million to rehab the damaged buildings on the Waterbury campus. FEMA would pay 75 percent of the state’s costs for the $250,000 insurance deductible and “extraordinary” expenditures for the treatment and relocation of Vermont State Hospital patients.Officials estimated that the maximum amount the state could be liable for at the complex would be $2 million to $4 million.
“Between the insurance and FEMA, we could probably get back into Waterbury as it was; we could probably do that,” Spaulding said. “But we could use this as an opportunity to turn the facility into a state-of-the-art, productive environment for employees.”
The latter, Spaulding said, would go beyond the scope of the reimbursements from Lexington and FEMA, and would have to be built into the capital budget. He has previously said the cost of transforming the 1891-era mental hospital into an energy-efficient, flood-proof and pleasant work environment could be an additional $50 million. That money would likely come out of future capital bills, he said.
The administration is pursuing three different scenarios for the state complex: a new facility in central Vermont, rehab of Waterbury, or a combination of those two options. Spaulding compared the insurance reimbursement rules for Waterbury to coverage for a wrecked car – the state doesn’t have to repair the old vehicle (Waterbury) with the insurance money; it can always apply that money toward the purchase of a new facility.
Spaulding said the decision about where and how to rebuild will have an impact on state government for 30 to 40 years, and lawmakers need to take adequate time to figure out what the options are.
On the other hand, the state faces some urgency. Workers, he said, are now having to commute long distances, and that poses a “real financial and life disturbance for employees,” and “you’ve got morale issues, and that’s not a good thing for taxpayers or productivity.” He also said the disbursement of key workers poses a management problem for departments. Spaulding suggested that the administration and lawmakers come to a decision by Town Meeting Day. About 1,000 of the 1,500 state employees who worked at the complex have been relocated for the duration in state-owned buildings and privately owned office spaces in Chittenden County and central Vermont. The annual cost of the rentals is $3.2 million.
Alice Emmons, chair of House Institutions, warned that lawmakers would be pressured by their peers to favor building or rehabbing facilities in one municipality over another — Thom Lauzon, the mayor of Barre City, for example, has been lobbying for a state presence downtown – and they should be prepared to answer questions about their criteria for determining the ultimate locale of a centralized facility.
Emmons said it’s important for the Legislature to consider more than bricks and mortar as lawmakers deliberate on how a new office space will be used, and she pushed her colleagues to think about devising a strategy to address questions about the location and functionality of the facility.
The institutions committees also heard the following testimony:
* A proposal from Beth Pearce, the state treasurer, to raise the limit on revenue bonding for the Transportation Infrastructure Bond Fund from about $15 million to $83.5 million. Pearce wrote in a memo that “The state has more debt capacity because of low interest rates and higher-than-expected gas and diesel assessment revenues.” The assessments are 2 percent of gas sales and 3 cents on diesel fuel sales. Both taxes are applied at the distribution level. The $83.5 million would cover the anticipated best-case scenario federal highway match (90/10), should Congress decide to provide emergency funding for the state. Under the worst-case scenario, the state would be on the hook for $500 million worth of reconstruction projects.
* Pearce warned lawmakers that the state must remain fiscally conservative in order to maintain its AA+ bond rating. She said the budget stabilization fund must remain flush (also known as the Rainy Day Fund). She recommended that state continue to balance its annual budget and close the gap between tax revenues and expenditures.
* Pearce said borrowing money beyond the $153 million, two-year capital budget passed in the last legislative session to pay for Irene-related costs would hurt the state’s credit rating.
* The other potential threat to the state’s bond score is its pension obligations, particularly to teachers. Though the state has made progress on meeting its long-term pension obligations, Pearce warned that more steps need to be taken to ensure the fund’s solvency.
* Michael Obuchowski, commissioner of the Department of Buildings and General Services, told legislators that the Waterbury facility clean-up is complete.
* Several projects that the institutions committees targeted for funding in the last legislative session have been delayed, according to information from BGS, including the $14 million investment for fiscal year 2012 in a new health lab and the renovation of corrections facilities in Chittenden County and St. Albans.
