After a drumbeat of downgrades, Standard & Poor’s has increased Hartford’s bond rating, but cautioned that the city’s debt is still “vulnerable to nonpayment.”
The ratings agency bumped Hartford’s rating to CCC, up from CC, following the passage of a state budget that allowed the city — at least for now — to avoid filing for bankruptcy.
Mayor Luke Bronin had warned in September that without a state budget, Hartford would be unable to pay its bills within 60 days. His threat of bankruptcy prompted several ratings companies to downgrade the city.
Standard & Poor’s issued the rating increase last week, but noted that Hartford’s bonds are still vulnerable to nonpayment because “a default, a distressed exchange or redemption remains possible without a positive development.”
The rating remains non-investment grade, or junk status, though the agency has taken the city off of a negative watch. A negative watch signals that more downgrades could be imminent.
S&P listed Hartford’s outlook as “developing.”
“The developing outlook reflects that we could either raise or lower our rating on Hartford over the next year depending on the city's ability to refinance its outstanding debt," S&P credit analyst Victor Medeiros wrote in a report.
The state has agreed to provide Hartford with at least $40 million in extra aid this year — on top of the $270 million it is expected to get — in exchange for being monitored by an oversight board. Some of the money ill come from an account set aside for distressed municipalities and some will come in the form of state-subsidized debt payments.
Hartford’s $600 million in outstanding debt has become a focal point for discussions about its unstable finances. Annual debt payments are set to rise dramatically in coming years, topping $60 million in 2021.
The city council last week authorized the mayor to apply for the oversight and additional funds. City leaders have not yet sent a request to the state.
S&P also acknowledged the recent adoption of two new union deals that together will save the city more than $17 million over the lives of the contracts.
“The ratings action by Standard & Poor’s is a recognition of that fact that we have faced Hartford’s structural budget crisis in a serious, disciplined way — refusing to just kick the can or buy some time,” Bronin, who is considering a run for governor, said in a statement Monday. “Every step of the way, we’ve stayed focused on long-term stability and strength, and that will not change.”