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July 11, 2019

Hartford bailout debate never materialized in 2019

HBJ Photo | Joe Cooper Downtown Hartford.

After dominating the final months of the 2018 General Assembly session, the political battle over Connecticut’s bailout of Hartford dissolved this spring with nary a whisper.

Lost amidst other legislative issues and weakened by a concerted effort to control spending in Hartford, the push to effectively revoke most of the $500 million-plus in debt assistance to the city petered out fairly quickly.

Republican legislators, who spearheaded the push to gut Hartford’s aid, made no serious attempt to revive it this spring.

Majority Democrats, many of whom backed the 2018 GOP initiative, moved on to other issues, like raising the minimum wage and establishing paid family and medical leave.

And Gov. Ned Lamont, who wasn’t in office last year but had criticized the bailout deal on the campaign trail, focused on closing a major budget deficit and boosting municipal aid.

Photo | Contributed
Senate Minority Leader Len Fasano (R-North Haven)

“We had so many things coming at us from all different angles this year and this one just slipped through the cracks,” Senate Minority Leader Len Fasano, R-North Haven, told the CT Mirror, adding Republicans were focused on opposing the minimum wage hike, paid leave and the push to legalize marijuana sales for recreational use. The first two initiatives were enacted but the pot legislation died.

But House Majority Leader Matt Ritter, D-Hartford, said the city’s track record over the past 12 months, coupled with the success of the state’s fiscal intervention program, is why the bailout debate has subsided.

The state’s Municipal Accountability Review Board or MARB “has demonstrated, and that [debt assistance] deal has demonstrated, that this is all working,” Ritter said. “It has made significant changes to the city’s finances. They do have a trajectory and a path forward.”

Fasano and House Minority Leader Themis Klarides, R-Derby, were surprised and outraged in early 2018 upon learning then-Gov. Dannel P. Malloy had signed a deal for the state to pay off most of the city’s bonded debt.

But GOP leaders weren’t the only ones surprised.

Many lawmakers thought they’d authorized no more than $80 million in emergency aid —$40 million each in 2018 and 2019 — to keep Hartford out of bankruptcy. Instead, Connecticut was on the hook for an estimated $530 million in debt — to be paid off over several decades.

Democratic leaders weren’t outraged at the deal, but conceded that wasn’t what they envisioned when the legislature authorized the bailout in November of 2017.

Republicans, who had a louder voice one year ago because they held 18 of the 36 seats in the Senate and nearly half of those in the House, moved quickly.

They crafted a bill that would effectively reduce non-education grants to Hartford annually by an amount equal to any debt payments made on the city’s behalf that same year.

Dozens of Democrats — including Ritter and others from Hartford — voted for the bill, which passed easily with broad, bipartisan support.

Malloy, who wasn’t seeking re-election and who insisted he’d followed the bailout legislation properly, vetoed it. And bailout critics looked forward to 2019 and a new governor.

There were some indications that Lamont was sympathetic to the cause. He said on the campaign trail that he would have liked to have seen some sacrifice on the part of Hartford’s creditors as part of the debt assistance deal.

“Hartford ended up being a bailout for the bond-holders and the bond insurance guys,” Lamont said in early October.

Lamont went on to win the 2018 election, with fellow Democrats regaining their majority in the Senate and expanding their lead in the House. Once the 2019 session got underway in January, the bailout deal didn’t appear to be on anyone’s agenda.

Hartford officials helped their own cause, Ritter said, cutting spending and stabilizing the budget.

“I can’t remember the last time I read an article about the city of Hartford’s finances,” he said. “The city has found a level of stability.”

Though final, audited numbers won’t be available until this fall, Mayor Luke Bronin said they will show the city closed the 2018-19 fiscal year on June 30 with a surplus — some of which will be invested in capital projects and some dedicated toward rebuilding Hartford’s emergency budget reserve.

Two major, Wall Street credit rating agencies, Moody’s and S&P Global, both upgraded the city’s bond rating within the past year.

“We have worked hard to maintain and deserve the trust of all of our partners, from taxpayers to businesses to residents to legislators,” Bronin said. “And I think what we’ve shown is we were honest about the challenges we faced, we were serious about tackling them in a real long-term way and we stuck to our plan.”

Bronin, who inherited debt-riddled city finances when he took office in 2016, added Hartford has incurred no bonded debt during his tenure with one exception: the issue of revenue bonds three years ago by the city’s stadium authority to complete work on Dunkin Park, home to the Hartford Yard Goats baseball team.

Photo | City of Hartford
Office of Policy and Management Secretary Melissa McCaw.

Lamont’s budget director, Melissa McCaw, was Hartford’s finance director under Bronin until this past January.

McCaw said the state program launched in 2017 to target and assist distressed municipalities has been enhanced significantly over the past year.

And while some municipalities remain in tough straits, these steps “have been and will be beneficial to promoting economic growth, preventing fiscal crisis and aiding the recovery of our great cities and towns,” McCaw said.

She added that “this also requires that municipalities be engaged and willing to make the necessary changes to correct their course. We have seen it in Hartford.”

One key enhancement developed by the Lamont administration and this year’s legislature better positions Connecticut to target communities at risk even sooner than before.

Another entity, the Municipal Finance Advisory Committee, has been empowered to identify early indicators of potential distress — multiple years of budget deficits or exhausted fiscal reserves — and to designate those communities for further oversight.

“This is a critical milestone as financial distress often has warning signs that if heeded to go along with strategic corrective actions can mitigate severe financial distress,” McCaw said.

House Republicans did raise the bailout issue once this past spring. As the chamber debated a technical resolution related to state borrowing, GOP leaders proposed an amendment that offered a statement of protest — but little more.

The amendment specifically said it never was the legislature’s intent to pledge more than $500 million in debt assistance to the city. The Democrat-controlled House rejected the amendment.

Deputy House Minority Leader Vincent J. Candelora, R-North Branford, said it was clear the legislature wasn’t going to re-litigate the matter this year.

“I don’t think the Democrats ever intended to undo that deal,” he said, adding lawmakers should revisit the matter before another municipality is at risk of bankruptcy. “I think there should be a greater conversation about this again, since it never was the legislature’s intention to give out that much money.”

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