Hartford, Conn., on the brink of insolvency, received a lifeline when three major insurance companies -- the city's largest employers -- pledged to donate a combined $50 million over five years.
Chief executives Mark Bertolini of Aetna Inc., Christopher Swift of The Hartford and Alan Schnitzer of Travelers Cos. agreed to contribute $10 million per year, Mayor Luke Bronin said at a news conference on Thursday.
The gift hinges on "a comprehensive and sustainable solution for Hartford," the executives said in a joint commentary.
According to Bronin, the city and the insurers will decide how to parcel out the money. Corporate support, he said, confirms "there is no way to produce a comprehensive, sustainable solution at the local level alone."
Connecticut's 125,000-population capital city, had two four-notch rating downgrades last year, with Moody's Investors Service lowering the city's general obligation bonds to a junk-level Ba2. S&P Global Ratings knocked Hartford to BBB from A-plus, keeping it on the lower rungs of investment grade.
Thursday's development stands to benefit Hartford and the state on several fronts.
It could relieve the state -- grappling with its own budget imbalance and also under the glare of rating agencies -- from a heavy lift on Hartford.
The legislature's nonpartisan Office of Fiscal Analysis on Monday projected a $65.2 million deficit for fiscal 2017, which ends June 30. S&P analyst David Hitchcock said balancing the budget "will involve painful adjustments."
The move could also ease fears of business flight from a city that has long relied on the insurance industry as its bread and butter. Aetna has resided in Hartford since 1853.
"The fact that the insurers stepped up to the plate as they did is of great importance," said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia. "The money is not huge – it's not Bill Gates coming in and reinventing the wheel -- but it's a psychological boost to get that kind of support."
Aetna, Travelers and other major employers have complained about an anti-business climate in state politics, budgeting and tax policy, reinforced last year when Fortune 500 behemoth General Electric Co. moved from Fairfield County to Boston. Aetna officials, before their planned buyout of Humana Inc. of Louisville failed, had even hinted whittling its Hartford presence.
"When Connecticut bumped up their taxes, my thoughts immediately went to the insurance industry because they've been such a part of Hartford's identity," said Schankel.
The city is facing a $48 million gap on a $270 million budget, even despite last year's doomsday budget cuts and layoffs, largely because of moves over 20 years that backfired. They included issuing too much debt, restructurings for which are now due; generous pension agreements; and stop-gap measures such as tapping into the general fund and other post-employment benefit obligations, and selling a downtown garage.
While Hartford's reserves dropped 34% from fiscal 2006 to 2015, its debt per capita escalated 78% during that period, according to a report by the Yankee Institute for Public Policy and the Manhattan Institute for Policy Research.
In addition, Gov. Dannel Malloy's proposed $40.6 billion biennial budget, which lawmakers are considering, would shift roughly $408 million, or one-third of the annual cost of local school teachers' pensions, onto cities and towns.
Bronin, former chief counsel to Malloy and mayor since January 2016, pitched a "regional solution" during town meetings in some Hartford suburbs, including West Hartford and Glastonbury. While short on specifics, options included a possible commuter tax and shared municipal services.
Earlier Thursday, the insurance executives said in a Hartford Courant op-ed column that they are "committed to making the city healthy again and are vested in its success."
The news resonated statewide. State Sen. Scott Frantz, R-Greenwich, called the corporate offer "magnanimous."
"They clearly have a choice, and they have made the right one for now with specific conditions," said Frantz, the co-chair of the legislature's finance, revenue and bonding committee. "It will be up to municipal leadership and the governor to take it to the next step. I am hopeful they all make the right choices."