Hartford's recent two-notch rating upgrade from Standard & Poor's reflects two years of sensible budgeting in Connecticut's capital, said the city's treasurer.
The ratings agency elevated the city's general obligation bonds to AA-minus from A, citing revised local GO criteria released in September.
"The mayor and I are pleased that S&P has recognized our efforts. All the people in the administration put in a lot of hard work," Adam Cloud said in an interview.
The outlook is stable.
Standard & Poor's called Hartford's economy, budgetary performance and budgetary flexibility adequate, and described the city's liquidity and management as "very strong."
According to analyst Hilary Sutton, $30.4 million in audited reserves for fiscal 2013 amount to 5.4% of general fund expenditures. The city has no immediate plans to significantly spend down reserves.
Hartford, Connecticut's third-most populous city, has a $542 million annual budget.
"We also believe the city benefits from a stabilizing institution, given its role as the state capital," Sutton wrote in the March 5 report.
Cloud, who succeeded Kathleen Palm Devine in February 2011, set out with Mayor Pedro Segarra to improve the 125,000-population city's financial picture. Segarra had taken office nine months earlier, after predecessor Eddie Perez resigned following his conviction on corruption charges.
"Starting in 2011, we took a very strategic approach to our policies, procedures and best practices relative to our fiscal management. We had to replenish our debt reserve fund and made sure we did not borrow beyond our means," said Cloud, who met frequently with Segarra and all nine City Council members.
According to the S&P report, Hartford's deficit is down to 1.4% for the general fund in fiscal 2013 after it removed $1.7 million of one-time land sale proceeds, while its deficit is 4.5% for total government funds. Intergovernmental revenue, which consists largely of state funding, is Hartford's largest revenue source - 51%, followed by property taxes at 46%.
The city's primary municipal employee pension fund was 79% funded as of July 2012, its last valuation date. Hartford, according to S&P, has fully funded the annual required contribution for the plan for three straight years.
S&P, though, warned of a weak debt and contingent liability profile. It pegged total governmental fund debt service at 5% of expenditures, and net direct debt at 62.5%. Overall debt burden, including Metropolitan District Commission bonds, is 13.9% of market value. The city has self-supporting parking utility debt.
"Like many cities, revenues are hard to capture. I would say that one of our weaknesses is that we have to think creatively how to generate revenue," said Cloud, a former Hartford Redevelopment Agency chairman whose private sector background includes financial advisory and bond underwriting work for Advest Inc. and Loop Capital Markets.
"We can't raise revenue consistently with the same ideas. We have to think outside the box," said Cloud, who favors further exploring the concept of public-private partnerships.
Moody's Investors Service rates the city A1.
Cloud said the city anticipates a GO offering of no more than $50 million in November. In April 2013 it sold $48.2 million of Series B bonds and $64.7 million of bond anticipation notes.
In connection with the bond rating change, Standard & Poor's raised the rating on Hartford's BANs to SP-1-plus from SP-1.
According to Cloud, city officials are still trying to change Hartford's perception as a place for suburbanites to flee after their workdays at insurance companies and state government agencies.
"We don't have enough housing downtown," he said, echoing Gov. Dannel Malloy's assertion that 4,000 housing units could spur retail activity. "Then people would stay out until 11 p.m. and that would change the perception of downtown," said Cloud.
"Change starts with perception. You need better education, resources, public safety and quality of life," he said. "Hartford has excellent arts, theater and food, and is very walkable, but we still has gun violence and quality-of-life issues that we have to solve."
