S&P Global Ratings raised its long-term rating on Hartford, Conn.'s general obligation bonds to CCC from CC – still deep into junk -- while removing the ratings from credit watch with negative implications.
The rating agency late Thursday took similar action with the Hartford Stadium Authority's lease-revenue bonds, which backstop the minor-league baseball Dunkin’ Donuts Park, which opened earlier this year after many cost overruns and delays.
"The CCC rating reflects our opinion that the bonds are vulnerable to nonpayment because a default, a distressed exchange, or redemption remains possible without a positive development and potentially favorable business, financial, or economic conditions," said S&P analyst Victor Medeiros.
About $48 million in aid through Connecticut’s fiscal 2018 budget, enacted Oct. 31 and four months late, is alone not enough for a further ratings bump, said Medeiros.
The developing outlook, Medeios added, reflects that S&P could either raise or lower its rating on Hartford over the next year depending on the city's ability to refinance its outstanding debt, and realize any contract assistance support from the state.
Moody's Investors Service rates the city's general obligation bonds Caa3.
The City Council last week forwarded Mayor Luke Bronin’s request for Tier III state monitoring under the new Municipal Accountability Review Board. Lawmakers baked its creation into the budget. The board, which met for the first time on Dec. 8 and could keep Hartford out of bankruptcy, would oversee the city’s budgeting, contracts and bond transactions.
State Treasurer Denise Nappier and budget director Benjamin Barnes will co-chair the oversight panel.
Connecticut's own fiscal struggles have provided a backdrop. The state, subject to a series of downgrades over the past two years, has projected a $208 million deficit only six months into its new budgetary biennium.
The council also passed a bond resolution that would allow the city to refund all of its outstanding debt obligations.
Additionally, the council approved new labor contracts with the City of Hartford Professional Employees Association and the Hartford Police Union that management projects will save the city more than $18 million over five years.
The police deal, said Bronin, would save the distressed capital city nearly $2 million in this fiscal year and calls for long-term structural changes.
That agreement “represents another big step toward our goal of fiscal stability,” said Bronin.
The employee contracts and state aid, said Bronin, were essential to keeping the 123,000-population city out of Chapter 9 bankruptcy. The mayor also wants concessions from bondholders.
Insurers Assured Guaranty and Build America Mutual wrap about 80% of the city's outstanding bonds. Hartford, in its most recent comprehensive annual financial report, for the year ending June 30, 2016, reported $683 million of general obligation debt.