Hartford Mayor Luke Bronin struck a guardedly optimistic tone as he released his $567.3 million fiscal 2019 budget, less than a month after Connecticut’s capital struck a deal for the state to assume its debt.
Under the arrangement, the state-appointed Municipal Accountability Review Board must approve the spending plan.
“We are, for the first time in decades, in a position to project stability in Hartford not just next year, but for the next five years,” Bronin told reporters Monday afternoon at his second-floor City Hall office. “But this remains a no-frills budget. It focuses on retaining core services.”
Bronin, a Democrat and mayor since January 2016, also said he was dropping his exploratory run for governor. Dannel Malloy, a Democrat, is not seeking re-election.
On Friday, S&P Global Ratings elevated Hartford’s general obligation debt to A from CCC while downgrading state GOs to A from A-plus, citing the additional debt Connecticut must carry as a guarantor of Hartford’s roughly $540 million of GO debt.
The city itself carries a junk-level BB-plus issuer credit rating from S&P, after an upgrade from CCC Friday.
Unanswered questions for the state include possible increased aid for Connecticut’s other large cities – Bridgeport, New Haven and Waterbury.
The downgrade to the state "may be a sign of things to come," said Municipal Market Analytics. "The state is challenged to tap its slowing economy and tax base to pay for massive unfunded liabilities while avoiding highly disruptive cuts to local aid, in particular for its poorer urban cities."
S&P analyst David Hitchcock, discussing Friday’s downgrade of the state, said the possible application of other distressed cities for state assistance could further strain Connecticut, a high-debt state whose additional capital challenges could include more transportation debt and smoothing a projected spike in annual teacher retirement system contributions.
On April 4, Moody’s Investors Service boosted Hartford’s GO bonds 13 notches to A2 from Caa3, also citing the city-state agreement. Moody’s also concurrently assigned Hartford its B2 issuer rating, five notches away from investment grade.
“The second dramatic ratings upgrade in two weeks is another signal of that the comprehensive approach to Hartford’s fiscal crisis, combining tough decisions at the local level with a new partnership with the state, is the right one,” said Bronin.
Neither Fitch Ratings nor Kroll Bond Rating Agency rate Hartford’s bonds.
The budget needs approval from the city’s Court of Common Council in addition to the state review board. Excluding debt and other capital expenses, it represents a $2.3 million, or 0.4% decrease from last year. It retains $27.4 million worth of cuts enacted over the past two years and reflects $10 million in revenue savings from agreements with the four of the city’s largest unions.
According to Bronin, the balanced budget involves no asset sales or one-time revenues and fully funds pension obligations. It involves no new borrowing and begins funding capital projects with operating, not capital dollars.
“Our budgets will remain very tight. Our mill rate will not be coming down any time soon,” said Bronin. “While we will work diligently to rebuild our fund balance or, ‘rainy day’ fund, reaching appropriate levels of fund balance will take years."
The city workforce, said Bronin, is 68% smaller than that of 30 years ago, and 80 positions smaller compared with fiscal 2015.
He said Hartford’s pressing needs forced him to discontinue his bid for governor despite encouragement he received while campaigning on nights and weekends.
“I’ve said it’s a critical time for the state, but it’s also a critical time for our city. We’ve made progress, but our progress is fragile and I don’t want that progress to be politicized.”
According to a survey online group Morning Consult released last week, Malloy is the least popular governor in the U.S., with a 72% disapproval rating.
"Ahead of contentious 2018 elections, and noting the continuing unpopularity of the outgoing governor, we expect the thin Democratic majority in the Connecticut General Assembly — not to mention the partisan-balanced Senate — will make the FY19 budget cycle another difficult one," said MMA.
"This suggests tax increases or an [eventually likely] move to toll Connecticut's principal highways may well be off the table, meaning incremental gimmicks and additional rating downgrades."