A bill enabling Connecticut to claw back emergency debt assistance for capital city Hartford through aid cuts beginning in mid-2022 cleared the state Senate.

During a rare Saturday session, the Senate passed the measure 28-6 in bipartisan vote. It needs House of Representatives approval and Gov. Dannel Malloy’s signature.

Should it materialize, its effect would hinge on party control of the General Assembly at that time, given the open-endedness of the legislation.

The bill would enable the state to reduce non-education aid to the capital city by an amount equal to the debt deal. It would authorize the legislature to pare non-education grants to Hartford if the city’s deficit exceeds 2% of annual operating costs in a fiscal year, or a 1% gap for two straight years.

Still, the legislature would be free to restore other funds.

Hartford Mayor Luke Bronin
"I fully understand and respect legislators’ desire to revisit the agreement after five years," said Hartford Mayor Luke Bronin.


“This in no way binds future legislatures to stick to this,” said Alan Schankel, a managing director at Janney Capital Markets. “It’s a little disturbing that the Senate moved backwards, although it doesn’t seem to threaten the state’s deal to pay Hartford’s [general obligation] debt.

“It looked like some political thinking was behind this.”

The so-called contract assistance agreement, which Gov. Dannel Malloy, state Treasurer Denise Nappier and Hartford Mayor Luke Bronin signed in late March, calls for Connecticut to pay off the principal on Hartford’s roughly $540 million of GO debt over 20 to 30 years.

The state’s new Municipal Accountability Review Board, to which Hartford must answer, recently approved Bronin’s five-year plan.

Schankel said the clawback bill could prompt bond rating agencies to re-examine Hartford. “Even though the GO debt is covered, they may sense other issues.”

Rating agencies reacted favorably toward Hartford after the debt deal.

S&P Global Ratings elevated Hartford GO bonds to A from CCC, while raising the city's issuer credit rating to BB-plus, still junk level, from CCC. Moody’s Investors Service boosted city GOs 13 notches to A2 from Caa3. Moody’s also concurrently assigned Hartford its B2 issuer rating, five notches away from investment grade. Neither Fitch Ratings nor Kroll Bond Rating Agency rate Hartford.

S&P downgraded the state to A from A-plus, citing the additional debt Connecticut must carry as Hartford guarantor. Fitch and Moody’s rate Connecticut GOs A-plus and A1, respectively. Kroll rates them AA-minus. All four agencies lowered the state last year.

The Senate agreed to the five-year stipulation in a compromise, after Republican leaders sought two years. Top lawmakers had been upset that state officials did not consult with them about the debt deal, which many said went far beyond the aid package they passed as part of last year’s budget.

The Senate is divided 18-18 between Democrats and Republicans. Democrats hold an 80-71 House advantage.

“I think on balance it’s good for the city of Hartford,” said state Sen. Doug McCrory, D-Hartford, who helped negotiate the compromise bill. “It’s fiscally responsible, and at the same time it gives Hartford the ability to fix its budget problems and remain financially stable.”

Senate Republican Leader Len Fasano of North Haven cited the need to balance state and city interests.

“If we don’t do this, we’re stuck with a 30-year deal,” he said. “It is a chance. It is a risk. No doubt about it.”

Bronin said after Saturday’s vote that Hartford said dramatic reductions after five years could imperil the city at that time.

“That said, I fully understand and respect legislators’ desire to revisit the agreement after five years, and my commitment is that we will continue to work hard to earn the confidence our the legislature and the state as a whole as we move our capital city in the right direction.”

The bipartisan cooperation could bode well as Wednesday’s adjournment date looms for the General Assembly. “The bipartisan part is always encouraging,” said Schankel.

Tweaks to the $41.3 billion biennial budget, which passed four months late last year, are on the table. A recent surge in income-tax collections could help offset a $380 million current-year deficit.

The Senate is also debating legislation that would call for the state to develop and issue a request for proposals for a $500 million casino. The House passed it 77-73.

Bridgeport and New Haven lawmakers support a casino in Bridgeport in the face of objections from Connecticut’s southeastern delegation, which fears financial risk to the area’s two tribal casinos, Mohegan Sun and Foxwoods Resort Casino.

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