Hartford’s precarious finances drew headlines this year, but other Connecticut cities are unlikely to face similar problems, analysts with Fitch Ratings noted in a report issued Monday.
The company examined the fiscal outlook of several cities, including Bridgeport, New Haven and Waterbury, and concluded that while those communities have some struggles in common with Hartford, none is as troubled.
“The city of Hartford’s prolonged financial troubles have drawn questions from some investors as to whether other Connecticut cities with comparable demographics could experience a similar fate,” the analysts wrote in the study, titled “Hartford Weaknesses Not Common.”
“A new Fitch Ratings report sees that scenario as highly unlikely,” they continued.
The company pointed to Hartford’s “rapid run-up” of outstanding debt and unfunded pension liabilities as issues that set it apart from nearby cities.
It also highlighted Hartford’s use of one-time revenue sources – such as the sale of parking garages and other assets – and failure to obtain “significant” union givebacks as factors that fueled the problems.
Mayor Luke Bronin has pushed for labor concessions, but until recently, only two city unions had agreed to new contracts that include pay freezes and other givebacks. Over the last two weeks, two more signed deals that feature hefty concessions.
Amid the state budget gridlock in September, Bronin warned that Hartford could file for bankruptcy if it didn’t get additional aid within 60 days. Lawmakers passed a budget shortly before his deadline.
But the city’s challenges are far from over. Hartford is facing a $65 million deficit this year, and dramatic increases in debt and pension payments. By 2021, the city’s annual debt contribution is expected to top $60 million.
Hartford is also hamstrung by its lack of taxable property (more than half of the properties are tax-exempt), and by a tax rate that is the highest in Connecticut. City leaders are preparing to apply for state oversight and begin a restructuring of Hartford’s $600 million in outstanding debt.
By contrast, other communities have had more success in winning labor concessions and are less reliant on state assistance, Fitch noted in its report.
“Unlike Hartford, most Connecticut cities have substantial budget flexibility and sound reserves,” the analysts wrote. “Fitch expects their management to be able to use these tools to maintain financial resilience.”
Hartford’s demographics – its high poverty rate, declining population and “below average” wealth levels – limit its ability to increase property taxes, the agency observed.
“In a state with an abundance of high-wealth cities and towns,” analysts said, “Hartford continues to be challenged by poverty and blight.”