FILE PHOTO – The Connecticut State Capitol pictured here in Bushnell Park, Hartford, Connecticut, U.S., August 17, 2017. REUTERS/Hilary Russ
March 26, 2018
By Hilary Russ
NEW YORK (Reuters) – Hartford, Connecticut’s fiscally distressed capital city, would get a much-needed lifeline on Monday if its city council approves a deal to have the state pay its debt.
The agreement, part of a broader state oversight plan passed in October, calls for Connecticut to take over the city’s roughly $540 million of general obligation debt.
The oversight deal and bailout helped Hartford avoid a bankruptcy filing. The aid was included in the state’s biennial budget passed in October, nearly four months overdue.
It would come just in time for the state – which currently has its own financial problems, including a $193 million budget shortfall – to make Hartford’s April 1 debt service payment of $11 million.
Mayor Luke Bronin presented details of the aid package on Thursday to the city council, which is expected to vote on the deal at its regular meeting Monday night.
After slashing spending and renegotiating labor contracts, the debt agreement “is the last step to put the city on a more sustainable path,” Bronin said.
Bronin has often stressed that half of the capital city’s property is tax-exempt because of its high concentration of state, nonprofit, university or hospital-related property.
“Even with this agreement, the city’s budgets will remain very tough and very tight for years to come,” Bronin said.
In exchange for the bailout, Hartford must agree to have its state-run review board approve its fiscal 2019 budget. The city must also provide ongoing financial reports to state officials and limit its borrowing so that years down the road it has only $100 million of debt outstanding.
Most of Hartford’s general obligation bonds are insured.
Build America Mutual insures $103.2 million of the city’s general obligation debt, and Assured Guaranty Ltd <AGO.N> another $339 million as of the end of December, the most recent information available.
Both insurers declined to comment on the agreement.
The plan “would help Hartford gain a path toward fiscal stability and sustainability while giving the state strong oversight capabilities and tools to protect its investment,” State Treasurer Denise Nappier said in an emailed comment to Reuters. Nappier is co-chair of the city’s oversight board.
(This version of the story has been corrected to change day of mayor’s presentation to Thursday in fifth paragraph)
(Reporting by Hilary Russ; Editing by Dan Grebler)
