Hartford gets upgrade from Moody's
Hartford received a boost in the capital markets on Tuesday when Moody's Investors Service uplifted its issuer rating for Connecticut's capital one notch to Ba3 from B1, and assigned a stable outlook.
The new rating is still three notches below investment grade. Moody's interprets the rating as junk-level, subject to substantial credit risk, while the older B1 rating means subject to high credit risk.
Moody's cited Hartford's stable financial operations and improved liquidity through adherence to Hartford’s financial recovery plan, including the benefits of the so-called contract assistance agreement — under which Connecticut in 2018 assumed $540 million of the city's GO debt — and cost saving measures the city took through labor contract agreements and tight expense controls.
The rating, Moody's said, also incorporates strong and continued state oversight through the Municipal Accountability Review Board and contract assistance agreement.
The deal, which helped keep the 123,000-population Hartford out of bankruptcy, put Connecticut on the hook for Hartford’s GO debt through 2036. MARB must approve any spending plan, new bonding and labor agreements. Additionally, city officials must report periodically to the state treasurer and budget director and craft a rolling three-year financial plan.
Moody's also factored in ongoing challenges on Hartford’s path to long-term sustainably balanced financial operations, including rising expenditures and projected weak revenue growth dependent on tax-base growth and state funding. The city has limited revenue flexibility resulting, in part, from the high percentage of exempt properties within the tax base, persistent challenges of high poverty, above-average unemployment, and low median family income.
Hartford’s issuer rating, Moody's said, is equivalent to the city's hypothetical GO unlimited tax bond rating; no outstanding debt is associated with this rating. Moody's maintains an A2 rating on the city's outstanding GO bonds based on the state agreement.
According to Moody's, a continued trend of balanced financial operations and growth in reserves and liquidity could lead to an upgrade, as could modest annual tax-base growth.
Factors that could spawn a downgrade, Moody's added, include a material tax-base decline; deviation from the recovery plan, operating deficits, a decline in overall state aid and a trigger event under MARB oversight or under the state bailout deal.
Last week, HCL Technologies announced it will open a global delivery center in Hartford to serve clients in advanced manufacturing, insurance, aerospace and defense. HCL also said hardware company Stanley Black & Decker, based 10 miles west in New Britain, will be HCL's first anchor client.
Stanley Black & Decker recently opened an advanced manufacturing center of excellence and an advanced manufacturing accelerator in Hartford.