Hartford is veering out of control toward bankruptcy and needs help from an already wobbly Connecticut government, according to a report on Connecticut's cities.

"State government is almost certainly going to have to get involved in the case of Hartford," the Yankee Institute for Public Policy and the Manhattan Institute for Policy Research said in a commentary released Wednesday. "Hartford may need a bailout to restore solvency."

Hartford, though, is not alone, said the report, which also examined the financial plight of three other poor Connecticut cities – Bridgeport, New Haven and Waterbury -- against the backdrop of the state's financial stress.

"The budget and debt struggles of Connecticut state government are now almost as notorious as those of New Jersey and Illinois," said author Stephen Eide.

Those four cities owe nearly $5 billion in retirement-benefit related obligations, the report said, citing official estimates. All four spend heavily on health insurance for retired workers, a practice nearly phased out in the private sector. Their combined annual expense on retiree medical is $120 million, their unfunded liability $2.7 billion.

The mill rates of all four rank among the state's highest and all four have increased their bonded debt burden over the last decade while their reserves have dwindled.

Budget imbalance prompted bond rating agencies to downgrade Connecticut's general obligation bonds three times in 2016. Additionally, S&P Global Ratings on Nov. 30 lowered its outlook on Connecticut GOs from negative to stable. State officials project a deficit of up to $1.4 billion for fiscal 2018.

S&P, Fitch Ratings and Kroll Bond Rating Agency assign Connecticut AA-minus ratings while Moody's Investors Service assigns an equivalent Aa3 rating. Moody's has a negative outlook while Fitch and Kroll have stable outlooks.

Hartford had two four-notch downgrades last year, Moody's dropping it to junk-level Ba2. Less than 1% of the local governments that Moody's rates are below investment grade. Additionally, Moody's assigned a negative outlook to Hartford and cited the risk of further downgrades "over the medium term."

Moody's rates Waterbury, Bridgeport and New Haven A1, A2 and Baa1, respectively. New Haven is only three notches above from junk.

"For the time being, Waterbury and Bridgeport, and most likely also New Haven, can continue to muddle through without the need for extraordinary support from the state," wrote Eide. "The same cannot be said for Hartford."

Among the four, only Waterbury's reserves have increased over the last decade. Kroll called that city's financial condition strong, "based on a history of balanced financial operations and maintenance of a stable reserve position in the general fund."

Hartford faces a $48 million gap on a $270 million budget – despite last year's doomsday budget cuts and layoffs -- thanks in part to moves over 20 years that backfired. They include issuing too much debt, restructurings for which are now due; generous pension agreements; and stop-gap measures including tapping into general fund and other post-employment benefit obligations, and selling the downtown Church Street garage.

While Hartford's reserves dropped 34% from fiscal 2006 to 2015, its debt per capita escalated 78% during that period, according to the report.

"The city used every trick up its sleeve to try to keep the lights on," said Luke Bronin, Hartford's mayor since January 2016. "I think all of those were mistakes, but in a big sense they're a symptom of the problem, not the problem itself."

The root cause, said Malloy, is reliance on the property tax.

Bronin, former chief counsel to Gov. Dannel Malloy, has broadly pitched a regional solution approach in a series of town meetings in the suburbs including West Hartford, Simsbury and Rocky Hill.

"I didn't come to make a specific ask," he said at West Hartford Town Hall. "I'm not saying 'West Hartford, I need you to pony up.' "

Bronin did say regional cooperation – a tough sell, given longstanding parochial divides in a state that proudly calls itself the Land of Steady Habits -- could include shared services or revising state formulas for education and health funding. State Superior Court Judge Thomas Moukawsher last fall ordered Connecticut to revise its educational aid-distribution formula to better serve students in low-income communities. Connecticut Attorney General George Jepsen is appealing the ruling.

Malloy, aiming comments at Hartford without identifying it in his Jan. 4 State of the State speech at the capitol, said a fairer distribution of the state's limited funds could help teetering communities avert bankruptcy.

State aid should also come with strings attached, he added.

"If the state is going to play a more active role in helping less-affluent communities – in helping higher-taxed communities – part of that role will be holding local political leadership and stakeholders to substantially higher standards and greater accountability than they've been held to in the past," said Malloy.

"We should do it so that increased aid doesn't simply mean more spending on local government."

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