Under new deal, state will pay off Hartford's debt

Connecticut has agreed to pay off Hartford's general obligation debt — about $550 million over the next two decades or so — as part of the bailout promised to the city under the most recent state budget.

The deal between Hartford leaders and the state calls for Connecticut officials to pick up the city's annual debt payments, which are expected to top $56 million by 2021. Hartford will continue to make payments on its new minor league ballpark, about $5 million per year.

The state will also look to refinance Hartford's debt — reducing annual contributions by stretching payments further into the future. The deal runs over the life of the bonds.

"This is the kind of long-term partnership we've been working for and I'm proud that we got it done," Mayor Luke Bronin said Thursday.

Hartford, Conn., Mayor Luke Bronin

The city council still must approve the contract. The panel is scheduled to vote on it Monday.

Bronin is pressing to have the agreement signed before April 1 — the city's deadline for its next debt payment. If executed by then, the state would pay the $12 million that Hartford owes.

When lawmakers adopted a state budget in October, they pledged to give tens of millions in additional aid to the city, which had threatened to file for bankruptcy. Bronin has pointed to Hartford's rising debt and pension obligations and the lack of taxable property as key factors that pushed the city to the brink of financial collapse.

In exchange for the extra funds, Hartford was placed under state oversight in January.

During the current fiscal year, which ends June 30, the state would cover Hartford's remaining debt — $12 million — and give the city another $24 million to help close a budget deficit. In future years, it will assume the city's full debt payment and it may give Hartford an additional subsidy.

Bronin has asked for about $40 million in extra aid each year, on top of the $270 million the city already receives. So if the state pays $36 million to cover Hartford's annual debt, the city would request another $4 million for its general fund.

The oversight board has restricted how the city can spend its money. Budgets, contracts and other documents must be run by the panel, and the board has final say over new labor agreements. Hartford can't issue new debt without the group's permission.

Under the city's new deal with the state, even if the oversight board disbands, Hartford's spending practices would still be scrutinized. For example, if city leaders fail to make their required payment to the pension fund, they would have to answer to the state treasurer and secretary of Connecticut's Office of Policy and Management.

"Connecticut cannot allow a city to default on its bond obligations or financially imperil itself for the foreseeable future," said Chris McClure, a spokesman for OPM. "This action will ultimately best position Hartford to move into a better financial future."

While the state assistance would help offset Hartford's escalating deficits — projected to reach $94 million in 2023 — Bronin said it won't make the city rich.

"This debt transaction does not leave us with big surpluses," he said. "We're looking to achieve sufficient stability over the next five years, and we can use that period to focus on growth."

Council President Glendowlyn Thames said Thursday that she felt optimistic about the contract, but more work needed to be done.

"This plan is really tight, and it's just surviving," she said. "We have to focus on an economic development strategy that gets us to the point where we're thriving."

Tribune Content Agency
State budgets Connecticut
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