Over the last year, Waterbury, Conn., has came perilously close to running out of operating funds, was forced to resort to emergency borrowing, and has lost control of its day-to-day financial control. To add insult to injury, the city's former mayor, Republican Philip Giordano, who was already under investigation for municipal corruption, was arrested and indicted on child-sex charges.
The downpour of troubles may be slowing to a trickle in Waterbury, though. On Tuesday, the city elected a new mayor, Democrat Mike Jarjura, and yesterday it settled lengthy and arduous negotiations with the fire department and other blue-collar unions.
At the same time, the state oversight board, which took control of the city's finances in March, is close to completing a three-year financial plan, and an audit of the city's finances is set to be completed by December. In addition, a budget deficit estimated as high as $70 million may be closed with long-term bonds as early as January.
"There are still things that we have to do to get the borrowing going along, but we are making good progress," said Linda Savitsky, director of municipal finance services for the state Office of Policy and Management. "In order to do the bond financing, you have to have an audit, a balanced budget, and a three-year plan, and we are making progress on all of them."
The city has been downgraded by all three rating agencies because of its problems. However, two of the rating agencies have not downgraded city debt issued since 1993 to junk status because of a state intercept program.
While Fitch rates Waterbury BB, Moody's Investors Service rates it Baa3 and Standard & Poor's rates it BBB-minus. An analyst at Fitch said that though it is not good that any credit uses deficit financing, Waterbury must do something to close its deficit.
"Any time an issuer borrows long-term to finance its current operating budget needs, we definitely don't look on that as a sign of credit strength," said the analyst, Joe Mason. "However, Waterbury faces a sizable deficit over a couple-year period, and they need to do the deficit borrowing to get back to square one and move on from there."
Waterbury is the fourth municipality in Connecticut to have its finances taken over by the state. Bridgeport, West Haven, and Jewett City have since regained control of their own finances.
The takeover allows the city to issue up to $75 million in state-guaranteed, 20-year deficit reduction bonds. In addition to the city's acting mayor, Sam Caligiuri, Waterbury Board of Aldermen president, the other members overseeing the city's finances include OPM Secretary Marc S. Ryan, who serves as the board chairman, and state Treasurer Denise L. Nappier.
The mayor-elect, Jarjura, a lifelong Waterbury resident, defeated two other candidates, taking less than 40% of the 24,154 votes cast. He first entered the Connecticut legislature in 1992, when he was elected to the House of Representatives for Waterbury's 74th District.
