Red flags are flying over Hartford.
Bond-rating agencies have hammered Connecticut's capital city in recent months. Its new mayor, Luke Bronin, asked state lawmakers for an oversight panel to rework union contracts and later unveiled a tough-medicine municipal budget with warnings of more doom ahead. A minor-league baseball stadium project, trumpeted as economic development, has become a fiasco.
Any hope of help from the state is muted by Connecticut's own fiscal woes.
"The city of Hartford is in a full-blown fiscal crisis," said Bronin, who took office in January. "Hartford's fiscal situation is worse than we could have imagined.
"The rating agencies are looking at the same numbers we are. The crisis we are in is real."
S&P Global Ratings on March 11 downgraded Hartford's general obligation bonds to A-plus from AA-minus. Moody's Investors Service on April 17 lowered Hartford to Baa1 from A3, its second downgrade for the city in 10 months. The moves affect about $550 million in outstanding GO debt.
Both rating agencies assign negative outlooks, citing elevated fixed costs, limited revenue streams and reliance on stop-gap revenue sources.
While both ratings are still investment-grade, the agencies warned of further action. S&P analyst Hillary Sutton warned of a multiple-notch downgrade "if the city fails to establish a credible plan to address these gaps."
Hartford sold roughly $26.8 million of Series 2016A general obligation refunding bonds on April 28.
Bronin on April 18 submitted to the Common Council a $557.2 million budget that would close a $48.5 million deficit through $16.5 million in union concessions and $15.5 million in service cuts.
It would also deplete Hartford's $11.5 million rainy-day fund and transfer Batterson Park – city-owned but situated in suburban Farmington and whose estimated value is $5 million – to the city's pension fund to offset part of Hartford's required contribution.
Even this doomsday budget may not rescue Hartford, said Bronin, the former chief counsel to Gov. Dannel Malloy. While he skirted around the word bankruptcy, Hartford projects at least a $30 million deficit for next year.
Bronin's call for a state oversight panel died in committee, but the move resonated.
"Here you have a new mayor that waved the white flag and said 'Here's what we need in Hartford.' It was more of a bankruptcy commission that he would chair," said state Sen. Scott Frantz, R-Greenwich, a member of the Finance, Revenue and Bonding Committee. "It was bold and unprecedented."
Speaking before the bonding panel, Bronin said a large portion of the city's $250 million non-education budget is fixed, including $30 million for debt service, more than $40 million on payments into the pension fund, and more than $20 million of utility and other costs he termed "largely fixed."
"When you consider that the remaining 'unfixed costs' include essential services like fire, police and public works, a nearly $48.5 million deficit represents a massive, catastrophic gap," he said.
Bronin said he shaped his budget on no property tax millage increase, realistic projections, sustainable savings, retaining asserts that generate recurring revenue, and maintaining essential services. His budget would eliminate 100 jobs, 40 through layoffs and the rest through attrition.
"None of these proposed cuts are easy," said Bronin, who unseated five-year incumbent Pedro Segarra in the Democratic primary last year and won a four-way general election.
While past spending plans relied on one-time fixes, according to Bronin, his recommended budget covers two thirds of the gap with sustainable savings.
Hartford, with a population of 125,000, is hamstrung with a plethora of government- and nonprofit-owned buildings that limit its tax base. Its link to a state with a myriad of fiscal challenges compounds its problems.
Connecticut's General Assembly is in special session debating a fiscal 2017 budget that may require layoffs of more than 2,500 state employees to balance a deficit of nearly $1 billion.
"[Hartford is] very dependent upon the public sector. And the state has its own sets of issues," said Alan Schankel, a managing director at Janney Capital Markets. "The state is perceived as wealthy but it's been spending beyond its means. In future years, you might see even more of a reduction in state employment."
Frantz called Hartford "a microcosm of what the state is facing."
Bronin inherited not just some bad numbers but years of generous union contracts and haphazard planning, including two sports-related economic initiatives gone awry – a new minor-league baseball stadium and a plan to renovate decrepit Dillon Stadium for professional soccer.
"They have contracts that are way too long and too generous and ventures like baseball stadiums that get very little return," said Frantz. "Does it concern me that our capital city is not doing well? Certainly. If we can't get it together there, can we do it for the entire state? It's doubtful."
Additionally, Hartford has lost its luster as an insurance capital, largely through corporate mergers and cutbacks. While insurance giants such as Aetna Inc. and Travelers Cos. still reside there, its executives last year joined the chorus of discontent over the state's political and business climate, highlighted when General Electric Co. in January announced it would relocate from Fairfield County to Boston.
Even a former governor, Jodi Rell, has moved to Florida. "It is in a downward spiral," Rell, a Republican in charge from mid-2004 through 2010, told Hearst Connecticut Media from her new home.
According to Schankel, Hartford's problems parallel those of comparable northeast cities.
"Hartford has a little more going for it, but the insurers have been leaving bit by bit and it could wind up like another capital, Trenton [N.J.]," he said.
"Trenton has very little left, other than a sign that says 'Trenton makes, the world takes.' "
Hartford had to step in to help cover cost overruns to Dunkin' Donuts Park, the planned new home of the Yard Goats of minor-league baseball's Class AA Eastern League under a deal Bronin inherited from his predecessor. The team is the former New Britain Rock Cats.
The park, sitting on no-man's land between downtown and the blighted North End neighborhood, missed its scheduled April 7 opening, forcing the ballclub to open the season with a long road trip and play "home" games 40 miles away, in Norwich. Team officials hope to open the park by May 31.
Under a compromise Bronin brokered to prop up the ballpark project, the city is sharing an estimated $10 million in overruns with the developers and the team owner. While Hartford will initially cover $5.5 million from bonds issued by the Hartford Stadium Authority, additional tax payments from developers could trim the city's share to roughly $3.5 million.
Hartford in April sued the developers of the Dillon Stadium project, accusing them of a fraudulent scheme to steal city funds. The city awarded a contract in September 2014 to retrofit Dillon, a ramshackle facility at Colt Park in the South End, and attract a professional soccer team.
The city, which a year later canceled the arrangement, claims it lost $700,000 and seeks triple damages from the defendants. Separately, a grand jury is examining possible criminal activity.
According to Bronin, the role of the Hartford region and state must change, in part through increased payments in lieu of taxes, regional revenue sharing and widening options for local revenue generation.
"We must build that consensus quickly, because our looming fiscal challenge is bigger than we can overcome alone," he said.