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Is There Hope for Hartford?

eye on the news

Is There Hope for Hartford?

Connecticut’s capital city teeters on the edge of bankruptcy. May 11, 2016
Economy, finance, and budgets
Cities

In late March, Hartford’s Democratic mayor Luke Bronin asked Connecticut state lawmakers for relief from the strictures of binding arbitration. Bronin, only a few months into his first term, was trying to avoid taking Connecticut’s capital city into bankruptcy. He came before the state’s Finance, Revenue, and Bonding Committee to testify on behalf of a bill that would have created a “financial sustainability commission” for the struggling city. Made up of business, labor, and administration officials, the commission would have had the power to act as final arbitrator if the city and its unions disagreed during contract negotiations. Unfortunately for Bronin, the bill didn’t make it out of committee—lawmakers told the mayor to find more savings in the city’s budget before looking to the state for help.

In his testimony, Bronin made clear that he has little wiggle room, given the city’s dire fiscal circumstances. Plagued by years of fiscal mismanagement, Hartford faces a $50 million gap on a $250 million non-education budget for 2017—a gap projected to get significantly worse. Hartford’s growing bonded-debt payments will grow further, after an ill-considered recent decision to build a minor league baseball stadium, and the city’s pension and retiree health-care costs keep swelling. Previous mayors had used one-time revenue sources and had pushed off debt payments, but these options no longer exist. Even if he eliminated the city’s fire and police departments, Bronin said, it wouldn’t be enough to close the gap.

Hartford’s problems are deep-seated, from high taxes and exorbitant living costs to widespread unemployment and rampant poverty. About a third of the city’s residents live below the poverty line. Wallethub.com recently rated it the worst capital city in America.

Bad policies have played a key role in the city’s demise. Property taxes are particularly oppressive, in part because, at just 18 square miles, Hartford is a small city in terms of area. With many nonprofit and public buildings, its property tax base is smaller still. This is one reason why the city has a bifurcated property tax—commercial property owners pay more than residential property owners. The city’s mill rate—a measure of the amount of tax payable per dollar of assessed value of property—is Connecticut’s highest, and it’s not even close: Hartford’s rate is more than 25 percent higher than the next-highest rate, and it’s seven times higher than wealthy Greenwich’s, which has one of the lowest mill rates. Hartford gives some relief to residents by levying the tax on only 30 percent of a home’s value, while it taxes commercial property at 70 percent of the assessed value.

Motor-vehicle owners aren’t as fortunate: the city taxes cars at 70 percent of assessed value. For a car worth $10,000, Hartford residents pay $520 in yearly taxes. In Greenwich, the tax on the same car comes to $79. To help city residents, the state will cap mill rates on motor vehicles starting in 2017.

Mayor Bronin doesn’t want to increase taxes to solve the city’s fiscal crisis, says Oz Griebel, chairman of MetroHartford Alliance, the city’s business group. What options are left? Bankruptcy, for one, Griebel conceded, though “nobody is jumping up and down saying let’s do it tomorrow.” If Hartford does seek Chapter 9 protection from its creditors, it’s likely to cause a stir. Officials in Pennsylvania’s capital, Harrisburg, nearly declared bankruptcy, but state lawmakers intervened. In Connecticut, municipalities can’t declare bankruptcy without permission from the governor, and in the past, governors have stepped in to block such moves—as in 1988, when the state quashed Bridgeport’s attempt to become the first U.S. municipality to declare bankruptcy. Connecticut may try to intervene if Hartford goes down this road, but the state is not in a good budgetary position to provide financial assistance, having never fully recovered from the 2008 recession. Connecticut already carries the most bonded debt per capita at the state level, and it faces significant pension and other post-employment benefit (OPEB) liabilities.

Meantime, Bronin has begun laying off city employees; he has also asked unions for millions of dollars in concessions. But a Democratic mayor can apply only so much pressure to public-sector unions in a city where the labor-backed Working Families Party exists as the principal alternative to the Democrats. Three Working Family Party members, along with six Democrats, sit on Hartford’s Court of Common Council. The power of the city’s unions helps explain why employee-compensation costs have gotten so far out of hand.

At least Bronin’s prior experience prepares him for these challenges. He worked as the top attorney for Connecticut governor Dannel Malloy and as a deputy at the Treasury Department, specializing in terrorist financing and financial crimes. A former naval officer, he served on an anti-corruption task force in Afghanistan during a deployment there. And he studied at Oxford as a Rhodes Scholar. It’s a long way from Oxford to Hartford, but Bronin seems determined to turn the city around—even if that means a bankruptcy filing.

Photo by Mihai Andritoiu/iStock

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