"Greatest Fiscal Crisis In Our City's History": Hartford Warns It Will Be Broke In 60 Days

Tyler Durden's picture

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.

“We could not agree more with the urgency of the situation, particularly for the City of Hartford,” a spokeswoman for Mr. Malloy said. “We continue to hope to have a full budget adopted by October to mitigate the harm and avoid having towns or cities go through reorganization.”

As WSJ points out, the state of Connecticut is struggling with unprecedented fiscal challenges of its own. Its leaders must pass a budget to close a $3.5 billion spending gap.

In a situation that echoes President Donald Trump’s struggles with Republicans in Congress, Malloy has found himself butting heads with members of his own party during the budget-negotiation process. To wit, the Democratic

Speaker of the Connecticut State Assembly Joe Aresimowicz has said he will call a vote for the budget plan on Sept. 14 to try and force lawmakers’ hands.

“Democratic Speaker of House Joe Aresimowicz said Wednesday he planned to call for a vote on the budget on Sept. 14 even though lawmakers have yet to reach a consensus on a spending plan. It is unclear if there will be enough votes in both chambers to pass it.

 

House Democrats said calling for a vote on the budget will put pressure on lawmakers to choose between that spending plan, which likely would give more money to cities and towns, or the governor’s executive order, which has made painful cuts to municipal funding.

 

‘If you are not part of the solution, you are voting for the executive order,’ said House Majority Leader Matt Ritter, who represents Hartford.”

Only 64 bankruptcies have been filed by cities, counties, towns and villages since 1954, according to James Spiotto, an attorney who tracks municipalities’ bankruptcies, who told WSJ.

The Californian cities of San Bernardino and Stockton filed for bankruptcy in 2012. The U.S. territory of Puerto Rico filed for a form of bankruptcy that incorporates parts of chapter 9 law, the type of protection used by struggling cities and counties earlier this year. Detroit filed for bankruptcy in 2013, though there was some disagreement in the courts about whether the city was eligible to file. It has since exited bankruptcy.

Hartford likely can’t cut spending to solve its problems, according to a recent report by Moody’s that was cited by WSJ.

“There is very little room for further cuts, given the reductions in services the city has already made and its fixed costs and education mandates,” Moody’s said. “Hartford would likely be eliminating, rather than reducing, core services.”

As with other troubled cities and states, the rising cost of paying out generous health-care and pension benefits for municipal employees are two of Hartford’s biggest fiscal challenges. The city owes nearly $180 million in payments for debt service, health care, pensions and other costs for the current fiscal year, according to WSJ. That’s equivalent to more than half the city’s budget, excluding education.

Rising fixed costs for health care and pensions have been driving Hartford’s fiscal challenges. The city is on the hook for nearly $180 million in payments for debt service, health care, pensions and other costs for the current fiscal year. That is more than half of the city’s budget, excluding education.

Hartford officials said its law firm Greenberg Traurig LLP will engage in negotiations with its bondholders, and asked bond holders to be “part of the solution,” to which we say…good luck with that.

“Our bondholders understand that our debt burden is unmanageable,” city officials said in the letter. “They will need to be part of the solution today, through a serious, sustainable, long-term debt restructuring.”

Despite the city’s fiscal woes, developers are trying to revitalize Hartford’s downtown by building condos, hoping to attract millennial young professionals who purportedly prefer to live in urban environments. Whether this effort is successful at attracting what could be a crucial new component of the city’s tax base has yet to be determined. This summer, the developer of a recently build soccer stadium that was plagued by cost overruns and shady financing scandals has been convicted of fraud and money laundering.

For their part, city officials have asked the state to reimburse it for its nontaxable property, more than half of which consists of state-owned buildings, as well as colleges and hospitals. They’ve also asked the state legislature to create a new board to settle contract disputes with labor unions.

But with the state still struggling with a crisis of its own making, it’s unclear whether any help will be forthcoming.

Like they say: One drowning man cannot help another drowning man.

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Bigly's picture

I can report available decent jobs are absolutely not plentiful. Postings have dropped off the cliff this year.

People still buying homes. Local budgets in turmoil and they cannot plan as they do not know what the state will give them as no budget yet.

NoDebt's picture

Good.  Fuck 'em.  Bankruptcy is the exact thing most desperately needed in these Democrat-run shitholes.

 

GunnerySgtHartman's picture

Amazing how these Democrat-run cities (and states!) never learn that other people's money eventually runs out!

Obadiah's picture

Thing is it HAS paid in spades for these lucifarian bitches, bitchez

Creepy_Azz_Crackaah's picture

WTF?!?!? Just raise property taxes 100%. Problem "solved." Again.

Your population will stay and happily pay it. It's not like it's the property owner's money or anything like that (as Hillary has said), right?

Dormouse's picture

Put everyone on welfare, I hear that stimulates the economy.

Stuck on Zero's picture

And then declare yourself a sanctuary city to attract millions of illegals.

Silvery Dan's picture

It was almost a guarantee for bankruptcy after it got hit by not one but two hurricanes and three 9.5 earthquakes...  what?  That never happened?  Then how'd they go bankrupt?  Ohhhh!

sodbuster's picture

These stood out to me- generous health and pension benefits, debt service, labor union contract disputes, non-taxable state owned property,and a developer convicted of fraud and money laundering. These are all symptoms of the sickness of liberals. And most are still too f'n stupid to figure it out. Most Libtards are still dreaming up new entitlement programs for the Free Shit Army.

govtsucks's picture

Universal basic income, that's the ticket.

Itinerant's picture

Lots of American cities have the same governance problem: the inner city municipality is small, and the tax base has moved to other municipalities in the metropolitan area. Inner city stuck with a lot of costs and people not contributing to the tax base. In other countries they solve such problems by creating regional area governance, making it possible to pay and plan for infrastructure which benefits the whole metro area, or creating transit possibilities that do not require buying tickets from 3 different corporations. American society and political culture lacks the adaptability to renew itself in practical ways to deal with changing realities (like metro areas with millions of people).

TBT or not TBT's picture

Wow. Dude, Americans create suburbs outside city limits in order to flee corruption, crime, bad schools, inadequate infrastructure, third world immigration, homeless. That process IS the adaptation to the problem. "Regionalism" is an authoritarian attempt to bring us under central planners' tyrannical boot, to live with their dependent class, and to pay for it. Fuck that.

CRM114's picture

Just don't give them any credit. Force them to run a balanced budget. They have proved time and again they can't be trusted with credit.

TBT or not TBT's picture

They can be trusted with Insurance though. Why don't they get a piece of the rock?

THEBORG's picture

RIp off their heads and shit down their necks!!!

govtsucks's picture

Other people's money eventually runs out when you don't have access to a printing press.

Déjà view's picture

Rest assured...now that Republicans have control at 'Feral' level...they will not be concerned with "other people's money"...

konadog's picture

Don't kid yourself. That runs out.  US currency decline is already underway. A real currency crisis emerges in the 2020 - 2025 time frame.

ejmoosa's picture

Soon they will be telling Congress that this is as bad as the damage from a hurricane and ask Congress to bail them out.  After all, if CONgress can bestow 15 billion on Houston, why not Hartford?

 

Never One Roach's picture

hartford area is packed with welfare recipients and tons of illegals. It's no wonder they're sinking.

 

Declare bankrptcy, send illegals back home, cut fat salaries and pensions to realistic (private sector) levels.

wildbad's picture

i did some biz there in the late '70s.

even then it was a has-been post industrial cultural null.

do over.

Omen IV's picture

cut the pensions to Zero - there isnt a good reason to pay them - all graft via union deals -

default on the debt - tell the bond holders they made a mistake and should lose everything - will inspire bondholders to collapse the market quickly for all muni's

cut property taxes 80% - to inspire the owners not to abandon the RE

cut welfare 100%  - so they all go elsewhere / set up billboards with instructions on how to get to Chicago

call up ICE and report all illegals and anyone who looks illegal - have them ship out

 

we are close to the collapse everywhere - lets get it over with !

 

what happened's picture

 

 

I currently live in this corrupt God forsaken state, and I would love to have you in our legislature.

lil dirtball's picture

> Democrat-run

I don't do that FIFY shit - it's laziness.

However, did you really need to include the 'Democrat-run' qualifier? Like 'Republican-run' is any better? Do the words 'Republican' and 'Democrat' really mean anything at this point - or are you merely perpetuating CogDis?

Pro tip - clean up your vocabulary.

Giant Meteor's picture

Good point Lil Dirtball, it needed saying ..

This Roman, Empire Rules , is really quite something ..

As Mr. Trump himself, stated recently, "repeal and replace" I've been hearing about that turkey a loooong time ..

Vacuous, meaningless words, by paid political hacks, and syncopant, without exception self enrich and talk shit, while selling fairy tales amd Mother Goose ryhmes to the hapless hopeless plebes  ..

Why there oughta be a law! LoL

The other point is, there is massive wealth to be stolen and exploited in this charade and it has worked spectacularly well so far. There is no political solution, which is why red team, blue team bullshit ... is fake as Pro Wrestling ..

 

NoDebt's picture

Stereotypes exist for a reason.  Not saying there aren't some Republican-run shitholes going broke out there but the number Democrat-run shitholes dwarf them.  And I don't just mean they are CURRENTLY Democrat, I mean they have been for DECADES in many cases.

Unlike the government, I am allowed to stereotype, profile and discriminate against whoever the fuck I want.  And I do.

I'll make you a prediction based on this stereotype:  Philadelphia.  Right in my back yard.  They are a pure, 100% one-party town (Democrat) and have been for decades.  I don't know how or why, but I guarantee you'll be reading an article like this about Philadelphia someday.

 

Buckaroo Banzai's picture

"Not saying there aren't some Republican-run shitholes going broke out there"

Really? Can't think of a single one myself.

lil dirtball's picture

I understand. I was born and raised in Brandywine Hundred, DE. I moved out of that gridlocked shithole almost six years ago and hope I never go back.

I moved to E.C., GA, thinking, it's a Red state ... and that it is. Southern Hospitality notwithstanding, I've been slammed relentlessly by these lovely inbred folk with 'Damned Yankee', while they go all-out on July 4th, waving their R,W & B, while on holiday from their givernment jobs. They love, love, love the Feds.

Meaning ... political labels have no meaning at this point. They've been so corrupted by the media and the parties themselves that they are literally no different than one's favorite sports team ... a bunch of rich assholes getting richer by doing very little, paid for by people who can really no longer afford to support them any longer.

Keep your labels if it makes you more comfy ... but to me, there isn't a dime's worth of difference between them and the things they do. Fucking us seems to be the favorite past-time for both teams.

'Red or blue, what's the difference' ... indeed.

BarkingCat's picture

Yes, there is still a difference.

It is not the sleezy politicians but the people who make the difference.

The republican voters still hold on to some shred of fiscal sanity, at least on the local level

 

pliny the longer's picture

 

“There is very little room for further cuts, given the reductions in services the city has already made and its fixed costs and education mandates,”

 

come on now fuckheads, u can do better than that!!!  out here in the private sector, its called 'learning to do without some things, even when it really, really sucks!!

 

 

Omen IV's picture

there is no good reason to educate anyone with an iQ less than 100 - they are not educable and it serves no purpose at MacDonalds

itstippy's picture

Their vote counts just as much as your vote does.  Their poor decisions in life cost you lots of dollars and make your neighboorhood unsightly and unsafe.  If parents won't or can't educate their kids, and you throw them out of the public schools, the kids will cause no end of problems throughout their lives.

On the other hand, I know plenty of intelligent, educated rascals that ruin the lives of themselves and everyone around them in very clever and creative ways.  Nothing worse than a smart, educated, cunning sociopath.

Bigly's picture

Oh and some are fed up....not the brain dead though.

A nearby town is running a full slate of non-endorsed slate of dems. Even the dems know those currently in charge are corrupt and inept.

Should be interesting. Infighting cat fight!

NoDebt's picture

The voters never learn, Bigly.  NEVER.  If you asked Venezuelans if they would like to move to a more Capitalist system than they have now I bet it would be voted down by an 80/20 margin.  Nobody wants liberty.  They want free shit and promises of other people taking care of them.  Know why?  Because they know they can't care for themselves.  Know why?  Because nobody ever taught them how.  Know why?  Because when Socialists take over they start with the education system.

 

Bigly's picture

Right. But this particular town councIL sold water rights from a reservoir to Niagara bottling at a discount to residents without a hearing. Made huge pissed off reaction including other towns who use the same source. The council refused to listen to residents. 

So the unendorsed dem are running a slate that includes a former cfo and actuary of mass mutual, an accountant....

What I am reporting is DEMS ARE RUNNING FISCALLY KNOWLEDGEABLE PEOPLE!

Huh?

Let's see if they can win the primaries. An experiment of sorts

TeamDepends's picture

We will Barry you!

-Kruschev

Doom Porn Star's picture

" Nobody wants liberty.  They want free shit and promises of other people taking care of them.  Know why?  Because they know they can't care for themselves.  Know why?  Because nobody ever taught them how.  Know why?  Because when Socialists take over they start with the education system. "

 

^^^THAT^^^

roddy6667's picture

Why is it that socialist Scandinavia has much better schools than America?

Never One Roach's picture

I fluncked maff.  If it weren't for all those numbers, i could have done weller.

Delving Eye's picture

You mean you could of done weller. There, fixed it wiff one word. /s/

MANvsMACHINE's picture

Please grant me the opportunity to fix that for you.

Maff

Give Me Some Truth's picture

Re: I can report ...

I can report that the MSM and the Fed and our president report that the economy is thriving, growing, with the best yet to come. 

Ignore any stories about states, territories and cities declaring bankruptcy.

chubbar's picture

If I was a bondholder and was being asked to reduce the value of my investment in order that the city can pay health care and pension benefits that wouldn't exist but for some weak kneed city council  members unwilling to say no to ridiculous union demands, my answer would be "fuck you".

Not sure why more people aren't asking how the fuck this problem exists? Didn't math exist back in the 90's? Every living council member that voted for this shit should be criminally charged and jailed. It was either collusion or criminal negligence.

Now the city can operate under minimum services for the next millenium due to this bullshit and future civil servants will be getting a minimum matching investment into a 401K plan, if even that. These stupid people completely fucked their community.

Omen IV's picture

yes but if the bondholders are fucked then the ripple effect will end muni's expanding to fund the deficits elsewhere - all good

GunnerySgtHartman's picture

Let's talk about muni bondholders getting f*cked.

http://www.crainsdetroit.com/article/20141107/NEWS01/141109896/detroit-bankruptcy-teaches-muni-bond-investors-painful-lessons

Even the Detroit water and sewer bondholders took it on the chin, nevermind that the water and sewer departments were excluded from Detroit's bankruptcy entirely.

Another thing that came out of the Detroit bankruptcy is that general obligation bondholders now play second fiddle to pension fund liabilities.

And while it's not part of the muni question, the GM bankruptcy really gave those bondholders the shaft - courtesy of ObaMao.

The stage has been set, folks.  The next big city or state bankruptcy could easily bring down the entire house.

 

Doom Porn Star's picture

'Fiscal disaster' is about to be equated with natural disaster.

Trump may have colluded with the Democrats in order to set the stage for the begining of the federal bailouts and reorganizations of the municipalities and states in December with the dissolution of the Debt Ceiling.

Damage from a hurricane or a depression?   No matter.  

Look at Detroit and Stockton, Puerto Rico: NOT natural disasters; -financial disasters.

'Disaster' funding, bailouts and the politically expedient picking of very big winners and very big losers is about to commence...

QE sans fiscal stimulus did not invigorate the broad economy.   Now comes the fiscal stimulus.   Bailout style...

chubbar's picture

Of course the stage is being set for fiscal bailouts, they can't do otherwise or the whole shebang collapses. The deficit ceiling will be done away with, all muni bonds will be covered, all pensions will be covered, Social Security will be covered, the US gov't will spend the dollar into oblivion because it has no other choice. I think that they can kick the can a few more years doing it this way and then you'll see a massive devaluation and I'm not dismissing the possibility that this devaluation happens much sooner.

khakuda's picture

Democrats gone wild