Other Connecticut cities, while stressed, are unlikely to replicate Hartford's misery, according to a report by Fitch Ratings.
“Although some other urban cities are challenged by comparative demographic weaknesses and a reliance on state aid, Fitch does not believe that the Connecticut cities that Fitch rates are on the path that led Hartford to its recent crisis,” Fitch said on Monday.
Fitch does not rate Hartford. S&P Global Ratings and Moody’s Investors Service rate the city at junk-level CCC and Caa3, respectively.
Mayor Luke Bronin has threatened the city may file for Chapter 9 bankruptcy protection. Hartford received an additional $48 million in aid from Connecticut’s fiscal 2018 budget, enacted Oct. 31, and recently settled contracts with two labor unions.
Bronin said bondholder concessions are also essential to the city’s recovery; Insurers Assured Guaranty Municipal Corp. and Build America Mutual wrap about 80% of the city’s bonds.
A rapid spike in outstanding debt because of scoop-and-toss refundings coming due, and unfunded pension liabilities over the past three years have imposed severe operating deficits for the city.
In addition, half of Hartford’s tax base is tax-exempt and city officials argue that the state has not fully reimbursed it for services it provides to to tax-exempt entities.
While Hartford’s credit slide began around 2014, Gurtin Municipal Bond Management criticized the rating agencies for not red-flagging the city sooner.
“Rating agencies should have expected the city to face budget volatility – in fact, it should have been near guaranteed,” said Gurtin. “Having monitored Hartford closely in recent years and turned it down for credit reasons, even as our portfolio managers saw the city’s bonds trading at attractive levels in the secondary market, we would contend that the city’s credit factors are largely unchanged from recent years, and that the city’s finances have been incredibly weak for a sustained period.”
According to Fitch, many local Connecticut governments lack the same practical revenue constraints as Hartford due to stronger demographics, less reliance on state aid and lower property tax rates. Hartford’s mill rate is by far the state’s highest at 74.29.
“In a state with an abundance of high-wealth cities and towns, Hartford continues to be challenged by poverty and blight,” said Fitch.
Fitch said New Haven, Waterbury, Bridgeport and New Britain, all of which it rates, successfully negotiated union concession on healthcare- and pension-related costs. “Their ability to raise revenues is not as constrained as Hartford’s and their overall expenditure flexibility is stronger,” said Fitch director Kevin Dolan.
New Haven and New Britain receive A-minus ratiings from Fitch, which assigns A and AA-minus to Bridgeport and Waterbury, respectively.
Hartford’s population dropped nearly 23% from 1960 to 2010. While the city has housed major insurance companies, Aetna Inc. early this year announced it would move to New York.
According to state Sen. Scott Frantz, R-Greenwich, Connecticut’s cities need more flexibility to rework labor contracts.
“I hate to say it, but it’s gotten so desperate in so many cases with the municipalities that they really need to be able to have the power go in there and open up contracts – not maybe not even renegotiate them – and just set the terms for the next three to five years, or longer, to make sure that each one of these cities is back on a sustainable track,” said Frantz.
“The costs are smothering them, and their revenue situation has gotten worse because people don’t necessary want to live in those cities as they start to deteriorate even further.”