Connecticut State Capital Prepares For Bankruptcy Amid Collapse In Hedge Fund Revenue

Tyler Durden's picture

The state of Connecticut has been hit hard by the double whammy of a deteriorating local economy, coupled with a plunge in hedge fund profits - as well as hedge fund managers permanently relocating to Florida - leading to a collapse in tax revenues. According to the the latest Connecticut budget released last week, the state is reeling from the consequences of sliding tax revenue from the super-rich, i.e. the state's hedge fund managers. The latest figures showed that tax revenue from the state’s top 100 highest-paying taxpayers declined 45% from 2015 to 2016. The drop adds up to a $200 million revenue loss for Connecticut.

In a dramatic, if of questionable credibility, soundbite Department of Revenue Services Commissioner Kevin Sullivan says these wealthy people are “dramatically less wealthy than they were before.” He was referring to annual income, not actual asset holdings, because judging by the all time high in the S&P, the local financial elite have never had a higher net worth.

“When you look at the top 75, top 50 ... this is a group of wealthy people who are dramatically less wealthy than they were before,” said Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “These folks, for a number of reasons, are either not realizing as much income or don’t have as much income.”

Just don't expect tears from the general public. Sullivan also noted how several international hedge funds have recently failed, resulting in “significant retrenchment” from investors. That drop in tolerance for risk brings smaller margins and ultimately less personal income for the state to tax, he added. It's fascinating how the Fed's central planning, superficially meant to restore "confidence" in a rigged, manipulated market is having such proound and adverse 2nd and 3rd order effects on state budgets.

Sullivan also acknowledged part of revenue decline can also be attributed to “a handful” of wealthy individuals who moved to more tax-friendly states — an issue frequently raised by legislative Republicans, who argue Connecticut’s tax policies encourage the state’s super-rich to move out.

Of course, for tax purposes it's the actual income that matters, and as a result the steep decline has exacerbated Connecticut’s budget woes. The projected deficit for the new fiscal year beginning July 1 has now jumped from about $1.7 billion to $2.3 billion, while the deficit predicted for the second year of the state’s two-year budget is now about $2.7 billion.

According to AP, lawmakers and the governor have already discussed the possibility of making deep cuts throughout state government, including to state colleges and universities and social services. Meanwhile, there’s a threat of about 4,000 layoffs if a $700 million labor concession deal isn’t reached with state employees. Lawmakers say these latest revenue figures make that agreement even more crucial.

* * *

Meanwhile, in a stark confirmation just how dire the state's economic and fiscal situation has rapidly become, the Hartford Courant reports that city leaders in the state's capital have taken a step toward bankruptcy, soliciting proposals from law firms that specialize in Chapter 9. It adds that the city is reviewing several firms and could hire an attorney as early as this week, sources with knowledge of the plans said.

Facing a $65 million deficit next year and a $14 million shortfall this year, Mayor Luke Bronin has hinted for months that Hartford could file for bankruptcy, and said during his budget release in April that he was "not in a position to rule anything out."  Bronin proposed cuts and concessions from the unions, but is still seeking $40 million in additional state aid to close next year's budget gap. The city resorted to short-term borrowing to cover costs such as payroll payments this year.

The mayor confirmed Tuesday that the city was looking at firms. "We have not engaged bankruptcy counsel, but we have had initial conversations with firms that have experience in Chapter 9 and municipal restructuring," Bronin said. "Given the uncertainty of the state budget process and the depth of the state budget crisis, it shouldn't surprise anyone that we might engage counsel in the near future."

Some, such as Council President Thomas Clarke II, who was briefed by Bronin on the prospect of hiring a bankruptcy lawyer, called the move premature. "I was told it was possible that a decision would be made before the end of this week," Clarke said Tuesday. "It's premature. We haven't exhausted every option and every avenue for us to go down this road."

Maybe not yet, but time is fast running out.  Meanwhile, reminding the state that "we're all in it together", Bronin stressed that the state must be a partner in pulling Hartford "from the brink of financial ruin", noting that more than half of the city's properties are tax-exempt and that Hartford has limited options for revenue.

"We've made clear for more than a year that Hartford's fiscal challenge cannot be responsibly solved at the local level alone with the tools that we have," Bronin said, "and we continue to push hard to build a new partnership with the state of Connecticut to put our capital city on a path to solvency, stability and growth."

However, as noted above, the itself has its own problems, with a more than $2 billion budget gap estimated for next year. It is unclear whether there is support in the General Assembly for bailing out Hartford.

* * *

Clarke said that if the city proceeds with legal representation, the council will look to hire its own lawyer. A key question members want answered is whether the mayor must get the council's approval to file for bankruptcy, the Courant notes. The state statute covering municipal bankruptcy says that a city or town must receive consent from the governor, and that the governor "shall submit a report to the treasurer and the joint standing committee of the general assembly." It doesn't specify whether a mayor needs the council's approval.

In other words, if Bronin intends to go through with it, Hartfort may be in bankruptcy within weeks, if not days.

Hartford wouldn't be the first city in Connecticut to seek Chapter 9 protection. Bridgeport filed for bankruptcy in 1991, but a federal judge dismissed the petition, saying the city was capable of paying its bills. Other cities that have filed include Detroit, Stockton and San Bernardino, Calif., and nearby Central Falls, R.I.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
max2205's picture

Can meets end of the road

Truther's picture

Liberals.... What'd you expect?

AldousHuxley's picture

Connecticut state lawmakers expanded in-state tuition and financial aid to undocumented immigrants

 

GE is moving to Boston.

 

 

JamesBond's picture

How can the city possibly be in bad financial status when they only spend the tax revenues they collect? Something doesn't add up.

jb

DownWithYogaPants's picture

Katey bar the door if Connecticut is going broke.  The other states are poor cousins compared to Richy Rich land.

Delving Eye's picture

Time to legalize pot, like Colorado, and start swimming in cash, like Colorado. Of course, the resulting influx of potheads is another story.

moimeme's picture

"how dire the state's economic and fiscal situation has rapidly become"

Now imagine:

"how dire the country's economic and fiscal situation has rapidly become"

Get the picture?

MalteseFalcon's picture

CT has always been an economic appendix of NYC. 

It used to catch NYC spillover, because it has no income tax.

Then in the early 90s the execrable Lowell Weicker ran as an "independent", so he could institute a state income tax without either party taking a permanent hit.

As a result CT promptly went into a deep recession and missed the entire 90s tech boom.

Over the past decade CT has been catching spillover from NYC hedge fund "community".

What does CT do?

CT institutes a graduated income tax.

Doh!!

 

SolidAssets's picture

S­­­­­­t­­­a­­­r­­­t­­­ ­­­w­­­­­­­­­­­­­­­­o­­­­­­­­­r­­­­­­­­­k­i­­­­­­­­­­­­­n­­­­­­­­­g­­­­­­ ­­­­­a­­­­t h­­­­­­­o­­­­­­­­m­­­­­­­­e­­­­­­­­­ ­­­­­­­­­­­­­­­wi­­­­­­­­­­­­­­­­­­­­­t­­­­­­­­­­­­­­­­­­h­­­­­­­­­­­­­­­­­­­­­ G­­o­­­o­­­g­­l­­e­­­­­­­­­ and ­­­­­­­­­Y­­­­­­­­­­­­a­­­­­­­­­h­­­­­­­­­­­­­­­­­­­­­o­­­­­­­­­o­.It’s the most-financially rewarding I've ever done. On tuesday I got a ­­­g­­­o­­­r­­­g­­­e­­­o­­­u­­­s­­­ ­­­B­­­M­­­W­­­ ­­­a­­­f­­­t­­­e­­­r­­­ ­­­h­­­a­­­v­­­i­­­n­­­g­­­ ­­­e­­­a­­­r­­­n­­­e­­­d­­­ $18699 this month. I actually started five months/ago and practically ­­­s­­­tr­­­a­­­i­­­g­­­h­­­t­­­ ­­­a­­­w­­­a­­­y­­­ ­­­w­­­a­­­s­­­ b­­­r­­­i­­­n­­­g­­­i­­­n­­­­­­g i­­­­­­n ­­­­­­a­­­t­­­ ­­­l­­­e­­­a­­­s­­­t­­­ ­­­$­­­9­­­6­­­,­­­ ­­­p­­­e­­­r­­­-­­­h­­­o­­­u­­­r­­­. visit this site right here...... http://bit.ly/2jdTzrM

nmewn's picture

I've gotta say, I've been incredulously amused by that little corner of hell (really, more generally the entire NE section of the country with the possible exception of Maine) all my adult life. 

The governance tax model seems to be: Hang like an infected oozing hemorrhoid from the anus of Wall Street, through thick & thin and if it gets really thin, use government (Kelo vs New London) eminent domain authority to seize private property owners land in order to (in true crony fashion) increase the tax revenue going to government coffers because (heaven forbid) they might actually have to cut back on the very "government services" used to bribe the craven fools who elect them. 

Which will never do, why, that-could-be-their-heads-in-a-basket.

Meanwhile, what ever happened to that eminent domain land seized, not to mention rights violated and peoples dreams crushed? 

http://dailysignal.com/2015/06/23/dreams-demolished-10-years-after-the-g...

For the "common good" ;-)

Gilnut's picture

Yup, I agree completely.  I grew up in "Downeast" Maine, the natives hate all the conneticunts and massholes coming up and ruining the wildlife and scenery, they do love their money though.  :)

A lot of people don't know that there's been a strong succession movement in Maine for as long as I've been alive (over 50 years) and it's getting stronger lately.  I effectionally think of Maine'rs as northern rednecks.  

nmewn's picture

Yeah, I guess it's like that all over, the local git-r-dones always seem to get the short end of the stick. 

Government needs you to pay taxes's picture

Was in Hartford for a wedding about 1 year ago.  I was SHOCKED by all the decay, not just in downtown Hartford, but all the smaller surrounding towns.  People looking weary and sad, once proud American architecture (commercial particularly) empty and decaying.  I'd rather pay more for things, have them made by Americans in America, and have everyone take a little more satisfaction in their work and communities.

bluez's picture

The visible part of Connecticut is Fairfield County, where they used to (probably still do) commute to Wall Street. The real money is further up north in Litchfield County (where I was born, but I'm not rich). It almost equates to the Rockefeller's Pocantico Hills, N.Y.

The state itself has always been just a shell corporation. If it goes bankrupt Litchfield will not even notice.

Took Red Pill's picture

I was thinking the same thing. CT used to get all the rich New Yorkers because they had no income tax; hence the "gold coast" with towns like Greenwich. So what did they do with all that tax money plus the $ millions in taxes from the casinos when they used to have neither?

Bastiat's picture

Well, hell -- in order to spend other people's money you have to get it, first.

JRobby's picture

Better raise property taxes and "tinker" with income tax rates.

https://www.zillow.com/ct/

 

CharlesBronson's picture

================ ^^ ======================

CK here he is, send him packing

CharlesBronson's picture

=================== ^^ ====================

CK here he is, Show him the door.

AGuy's picture

"Time to legalize pot, like Colorado, and start swimming in cash, like Colorado. Of course, the resulting influx of potheads is another story."

That wouldn't solve CTs problems. CTs has barely saved a dime for its workers Pensions. Workers are retiring and forcing more revenue to pay for their pensions and the this problem is in its early stage. Its likely that the entire state will need to file for Chapter 9 (or worse) in a few years.

As far as growing Pot, CT is last in Agriculture, even Alaska grows more stuff than CT. There are virtually no working farms left in CT. The few farms left are either Horse farms, or rich people applying for Farm land use to get property tax reductions. CT also has terrible soil. its 90% rock and 10% soil. what once was decent farm land was converted into housing development decades ago. The remaining undeveloped land is hillsides and swamp/wetlands.

Everything in CT is expensive, High gas taxes, High Property taxes, High cost of living (food, electricity, NatGas). No one with a sound mind would remotely consider setting up a company in CT.

FWIW: CT is likely going to legalize Pot this year, but its not going to solve its problems.

NoPension's picture

Well, the Government can just go down the list....

Drugs
Prostitution
Gambling
Loan Sharking
Protection Rackets
Amway ( sign up all the kids, schools,cops and firefighters)

There are plenty of ways to earn a buck, when you have the authority to make it illegal for everyone else.

Offthebeach's picture

Does Colorado have a Bridgeport,  a Waterbury,  a Hartford or lovely No Haven?

Uncle Sugar's picture

Not to worry.  The Yard Goats' gate receipts will cover the deficit this summer.

Seriously,  who named that baseball team

GUS100CORRINA's picture

Isn't Elizabeth Warren from Connecticut?

THAT EXPLAINS EVERYTHING!!!!!!

all-priced-in's picture

If you are rich you can get into a lot deeper financial hole than any poor guy could.

 

Case in point - could any government other than the USA borrow $20 trillion?

 

The reason you can borrow is because you are rich - until your not.

 

My guess is Connecticut assumed the good times / cash flow they had would continue forever and they spent every dime they collected - so when the revenue slows down they are fucked.

 

 

 

 

Vatican_cameo's picture

The Shithead Governor of CT, one Dannel Malloy, was destined to be a member of the Hildebeast Cabinet when she won the election.  Remember the last State of the Union address given by the Brown Clown?  Who sat in the box with the Wookie?  Dannel Malloy.  The Magic Negro promised him the world after orchestrating "Sandy Hoax", the greatest tragedy that never was.  He ran Connecticut into the ground with state employee pensions and didn't have a care in the world, because "Mr. Smith was going to Washington".  Since the subsequent defeat of "Satan the Anointed" in the presidential election, Malloy is now stuck in the bed he has made for the State of Connecticut.  I hope they put aside some money for a large Gibbet on the front lawn of the Connecticut State House.  The line of inductees into this Hall of Fame is long and somewhat distinguished (at least in their own mind).  I'd even buy the rope out of my own pocket.

Freddie's picture

Indeed.  there was something seriously demonic at Sandy Hoax - supposedly it was a local area for witches and people involved in the occult. I am not joking.  The school had been closed, "teachers" cars in the parking lot were impound cars parked in one direction with expired tags.

Too bad Connecticut could not get much of China hooked on opium like much of the "old wealth" in Connecticut had done.  Some of them were also involved in the salve trade. 

http://www.alternet.org/drugs/5-elite-families-fortunes-opium-trade

 

StychoKiller's picture

Yeah, Neosporin™ kinda ruined the salve trade! :>D

syzygysus's picture

Some things about Sandy Hook are quite odd, but cars parked in one direction in a lot are not. Go to any large lot where cars drive in one direction and people drive in the slots in the same direction.

I haven't heard of expired tags, care to show them?

SenselessPanic's picture

expired tags are really old as CT stopped using tags ... i'd be interested in seeing that evidence as well ... that's news to me ... sandy hoax all the way in any case

ThisIsMadness's picture

They pass bonds. Here in Texas, the municipalities, and the sheeple, have been passing multi-million dollar bonds to build new schools, etc. The idiot McKinney residents voted to build a $50 MILLION DOLLAR HIGH SCHOOL STADIUM. It has gotten ridiculous. No one is operating on a budget based on income. They are operating on a budget based on projections. My household budget does not work that way.

divingengineer's picture

How can wealth be evaporating everywhere when the stock market is at record highs?

You are right, it doesn't add up.

WorkingFool's picture

Every major city in CT is a DemoRAT run criminal-sanctuary shit hole. The RATs tax and regulate everything.

loves the truth's picture

I dont unerstand why CT has so many problems.. After all they sponsered SANDY HOAX!  Many in that town, school system, state and local police, goverenor all got paid hansomly.. Just run a few more scams on the nation for the gun grab agenda...

Plus the fake families made milliions on their go fund be websites setup and running the day before the Hoax occured. NO ONE DIED!

JRobby's picture

Poll:

Imbecilic fuck is a genetic pre-disposition

Imbecilic fuck is a lifestyle choice

billmill's picture

GE already moved and is in thier new temporay HQ building.

mike_king's picture

Progs, combined with wogs and nogs (Mexicans and blacks) will ALWAYS ruin a city, a state or a country. The US will have a cleansing civil war or will be destroyed. Your choice.

Truther's picture

It must be a Sanctuary state.
Get the shit cannons out.

Never One Roach's picture
TWO DAYS After Governor Declares CT Sanctuary State – Illegal Alien Murders Mother and Kidnaps 6 Yr-Old Girl

 

http://www.thegatewaypundit.com/2017/02/two-days-governor-declares-ct-sa...

 

"Yes we can!"

Keyser's picture

It will be priceless to watch this once great bastion of liberalism burn to the ground, much like the hedge fund profits that supported it in the first place... 

BeanusCountus's picture

Priceless is right. Hartford going Chap 9? Thought that was reserved for Detroit!! Connecticut with budget problems because hedge funds making less and rich folks moving to Florida? Who would have thought!!! Oh well. Pay no attention everyone, things are great. Hey, how did the stock market do today?

Coming to a state near you. Very soon.

847328_3527's picture

I don't know about most stawks but RGR (Ruger) is now over 64 and heading back up to 78 given the strong sales numbers last quarter and "discontent" nationwide.

If the military contract for sidearms with that foreign company is nixed, and instead the military "Buys American," like Ruger or S&W, these stawks can easily double.

One can only hope.

ebworthen's picture

So I'm driving home and listening to "Marketplace" with Kai "Lefty" Ryssdal and they are playing the fiddle about Erie, PA City not being able to support the school district.

They go on to say that the district is the #1 area for Refugees who speak 14 different languages.

Of course the connection is never made, nor dots connected; it is about "more taxes".

More "support" from surrounding Counties.  Sure Kai, you punk, more taxes.

WorkingFool's picture

"Can meets end of road" or "DemoRATs meet new taxes'

This message was brought to you by . . .

The morally bankrupt DemoRAT party. Creating hate, misery and poverty for over 100 years!

Press 1 to hear this in Spanish