Lawmakers Defend Hartford Debt Service Payments

HARTFORD, CT — Following criticism from local elected officials, legislative leaders tried to explain the state’s financial commitment to Hartford to help the city avoid bankruptcy.

House Majority Leader Matt Ritter, D-Hartford, said he wanted to clarify the help that Hartford is receiving because some lawmakers have gotten the impression that it’s a 20-year guarantee of basically the same amount of state aid they receive now.

He said that’s not what lawmakers approved when they passed a budget in October that gave tens of millions of dollars in additional aid to the city to help it avoid filing for bankruptcy.

Hartford was placed under state oversight in January. That oversight entity — the Municipal Accountability Review Board — controls $48 million a year to assist financially distressed municipalities with their existing debt service. The city of West Haven is currently under the board’s oversight as well.

The board is authorized to make the debt payments and ensure that Hartford restructures its debt. Those debt payments are expected to be under $40 million per year.

“After two years there is not a guaranteed appropriation for the city of Hartford on top of that debt service payment,” Ritter said.

Specifically, the debt service agreement basically means that the state — which has lately been providing about $270 million in aid to Hartford annually — is guaranteeing that the first $35 million or so for the city each year will go directly to Hartford’s bondholders for 20 years. However, the agreement was not a guarantee that the state will appropriate Hartford’s debt service payment in addition to other aid each year. The total amount of aid to Hartford would still be subject to legislative debate.

In order to get the debt assistance and avoid bankruptcy, the city had to “give up a significant amount of autonomy,” Senate President Martin Looney, D-New Haven, said. “In fact the loss of new bonding authority for projects they may want to decide to do on their own, which they can no longer do without state approval. There’s a significant price they knew they had to pay.”

House Minority Leader Themis Klarides, R-Derby, said the commitment to Hartford is only over the biennium budget and the money that is allocated.

“We certainly take them at their word,” Klarides said.

She said they all decided at the end of the day to help the city of Hartford one last time.

The debt assistance contract, which hasn’t been signed yet, is a 20-year contract through 2037. The state is expected to guarantee payment of the debt for 20 years under the agreement, but is not guaranteeing the amount of state aid to the city at its current levels.

“It’s fair to say the state of Connecticut was very clear: no one is stiffing bondholders,” Ritter said. “The mere mention it alarmed many people over here because of the impact it would have on the state of Connecticut.”

The debt service payments do not go to the city’s general fund but go directly to pay the debt.

Despite Hartford’s debt projections that could exceed $50 million per year in the near term, the refinancing options could drop those debt service payments to approximately $35 million annually — well below the appropriated amount in the budget, according to the Office of Policy and Management.

The city’s $5 million in annual debt service payments for the Hartford Yard Goats stadium is not part of the agreement — the state is not covering that.

Bridgeport Mayor Joe Ganim and New Haven Mayor Toni Harp issued a joint statement to express their disappointment at the treatment Hartford is receiving.

They said they are still “evaluating the state’s new, half-billion-dollar bailout of Hartford” but at first blush the plan seems to “shortchange New Haven and Bridgeport — its two largest cities, with comparatively stable finances, while rewarding the past practices of other cities that put them on the edge of financial collapse.”

The mayors added: “Connecticut requires comparable support for its two most populous urban centers and an economic development strategy for the Bridgeport/New Haven region.”

Former Trumbull Mayor Tim Herbst, who is running for governor, said the money for Hartford “is the latest slap in the face to struggling Connecticut taxpayers for Gov. Malloy and his insider allies in Hartford to hand an irresponsibly managed city a $550 million bailout, while simultaneously proposing new damaging tax hikes and fees and further savage cuts to education for dozens of well-managed municipalities to close the state budget deficit.”

Shelton Mayor Mark Lauretti, who is also running for governor, tweeted Friday morning: “On the same day as Hartford gets a $550 million bailout, Mayor Lauretti of Shelton submitted his 10th straight budget without a tax increase to Shelton residents.”

Hartford Mayor Luke Bronin defended the state’s action.

“I think the budget passed last fall reflected a bipartisan recognition that if you want to compete for jobs and growth, you have to have cities that work,” Bronin said. “The bottom line is that our Capital City is built on the tax base of a suburb, and after cutting tens of millions from the city budget and negotiating extraordinary labor savings, there were two and only two responsible ways to deal with that broken fiscal structure — bankruptcy, or a long-term partnership like this, that requires continued discipline and comes with serious accountability.”