Hartford, Conn., received a one-notch downgrade from Moody’s Investors Service, to Baa1 from A3.
Moody’s cited the state capital’s weak financial position, continued structural imbalance and reliance on one-time revenue sources for Tuesday’s downgrade. Its rating outlook remains negative.
The move affects roughly $550 million of debt. Hartford intends to sell $32.5 million of Series 2016A GO bonds on April 28.
The rating “also incorporates the city's limited financial flexibility due to elevated fixed costs, weak revenue growth prospects and likely challenges in implementing meaningful, ongoing, expenditure reductions,” Moody’s added.
Elevated fixed costs, according to Moody’s, include bonded debt, required pension contributions and other post-employment benefit payments.
Mayor Luke Bronin, Gov. Dannel Malloy’s former general counsel who took office in January, asked state legislators to establish a Hartford financial sustainability commission, saying his administration inherited a $48.5 million deficit for fiscal 2017. The bill died in the General Assembly’s Finance, Revenue and Bonding Committee.
“Hartford’s fiscal situation is worse than we could have imagined,” Bronin told the committee. “The problem only gets worse after 2017.” Several years down the road, said Bronin, the projected deficit is so big that eliminating the entire police and fire departments would not close the gap.
On Monday, Bronin proposed a $557.2 million budget to the Common Council that would close the deficit through steep cuts and cost-saving measures, including 40 layoffs, and with no tax rate increase. It would deplete the city’s $21.5 million rainy-day fund over two years. Bronin projects a $30 million deficit for fiscal 2018.
He also called for regional revenue sharing and increased payments in lieu of taxes by local nonprofits.
Moody’s also referenced Hartford’s reliance on aid from a state that has its own financial problems.
“Hartford is a microcosm of the state of Connecticut,” said state Sen. Scott Frantz, R-Greenwich.
On Tuesday, Democrat Malloy encountered pushback from his own party, even with Connecticut facing a possible $920 million deficit for the biennial budget that begins next year.
House Speaker J. Brendan Sharkey, D-Hamden, refused to meet with Malloy over his revised budget, announced one week earlier, that would make steep cuts on education and hospitals. Sharkey said the legislature should wait for April’s revenue forecasts.