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Hartford Could Default On Its Debt As Soon As Next Month, Moody’s Says
Hartford Could Default On Its Debt As Soon As Next Month, Moody’s Says
In a report issued Thursday, the ratings agency’s analysts said Hartford, Connecticut’s once-proud capital city, could default on its debt as soon as next month, forcing the capital of the country’s wealthiest state (on a per capita basis) into bankruptcy.
If the city doesn’t change course (and given its shrinking tax base and the departure last year of Aetna, a major insurance company that was founded in Hartford and had located its headquarters in the city for more than 150 years, reforms appear unlikely), receive a state bailout or strike some kind of deal with its creditors, Moody’s says lenders can expect it to run up annual deficits in excess of $60 million through the next 20 years.
Moody’s (along with its rivals Fitch and Standard & Poor’s) downgraded Hartford’s credit rating on Sept. 26 to Caa3 from Caa1, reflecting a view that creditors would only manage to recoup between 60% and 80% of their principal should Hartford default.
Of course, there’s no guarantee that the state government will be there to support troubled Hartford. Four months into the fiscal year, Connecticut is the only state in the country that hasn’t passed a budget as lawmakers the state’s lame-duck Democratic Gov. Dannel Malloy joust over how to close a $3.5 billion two-year budget deficit. In a reflection of the state’s broader fiscal crisis (as is the case in many US states), Moody’s says Hartford’s public employee unions represent a “significant constraint” to cutting the city’s deficit, as the Hartford Courant points out.
Moody’s called Hartford’s unions “a constraint” to trimming the city’s deficit. “Contractual salary increases and employee benefits are significant contributors to the city’s long term structural imbalance,” the report read. Unions would have to make “significant concessions” for Hartford to narrow those deficits, it said.
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“Greatest Fiscal Crisis In Our City’s History”: Hartford Warns It Will Be Broke In 60 Days
“Greatest Fiscal Crisis In Our City’s History”: Hartford Warns It Will Be Broke In 60 Days
Well, that escalated quickly.
Just two months after Standard & Poor’s downgraded its general obligation debt to junk status, warning that the historic Connecticut capital could soon follow other once-proud cities like Detroit into bankruptcy, Hartford city officials confirmed as much when they warned on Thursday that the city could be forced into insolvency within two months if the state doesn’t provide emergency financial relief, the WSJ reports.
“City officials warned Gov. Dannel Malloy, a Democrat, and state lawmakers that Hartford, which has a deficit approaching $50 million, wouldn’t be able to pay all of its bills within 60 days. Hartford officials said it would file for bankruptcy at that point unless the state legislature passes a budget that gives the city more funding or otherwise provides it with more cash.
‘We face the greatest fiscal crisis in our city’s history,’ officials said in a letter signed by Mayor Luke Bronin, Treasurer Adam Cloud and Thomas Clarke II, president of the court of common council.”
Hartford has been plagued by political corruption and a disintegrating corporate tax base – most recently exemplified by health-insurance giant Aetna’s decision to move its corporate headquarters away from the city, which was once proudly called “the Insurance Capital of the World.”
And unfortunately for the struggling capital, political discord involving both lame-duck Gov. Dannel Malloy and leaders in the state legislature suggests that an agreement to save the city won’t be forthcoming.
State legislators won’t return from recess until next week. But according to the Connecticut Mirror legislative leaders have yet to reach a budget deal with Malloy after failing to pass one in late June, forcing the governor to fund the state’s operations using emergency measures, slashing funding for municipal services across the state.
…click on the above link to read the rest of the article…
