April 26--A robust state bailout for Hartford will help the city tread water financially, but its leaders must find new ways to raise revenue and boost economic development, according to a report by Moody's Investors Service.
"State assistance can reduce the risk of default but won't pave the way for a lasting turnaround unless challenges such as a stagnant tax base, sluggish economy and limited revenue growth are addressed," the agency said.
"The Hartford bailout reduces the city's long-term liabilities by nearly 40 percent, but sustainable financial health will not be achieved without improved revenue growth, managing expenses and a more diversified economy."
The assessment, released Monday, comes weeks after Hartford leaders announced that the state would pay off the city's $550 million in general obligation debt, a subsidy that could exceed $750 million with interest over the next two decades. The bailout was arranged to help Hartford avoid Chapter 9 bankruptcy. Legislation adopted in October permits the state to enter into debt assistance contracts with cities and towns.
In exchange for the aid, city officials have agreed to be placed under state oversight. The oversight panel monitors Hartford's budgets, labor agreements and contracts, and can reject any of them. The city can't issue new debt without the board's approval.
Moody's noted in its report that a surge in city bailouts is unlikely given the oversight panel's strict requirements. Any community that seeks additional aid is subject to state monitoring.
"Other struggling municipalities such as New Haven and Bridgeport could seek and receive large aid packages, but they would have to accept the loss of control over finances that can come with a bailout," officials with Moody's said.
Following Hartford's bailout, the agency this month raised the city's bond rating 13 notches, to A2. It had downgraded the rating to junk status last fall after Mayor Luke Bronin threatened to file for bankruptcy.
Hartford has created a five-year financial plan that is now being weighed by the oversight board. The plan relies on additional state funding -- about $40 million extra per year for the next several years -- to keep the city afloat. Most of that aid comes through the debt assistance.
Bronin last week unveiled a $567 million budget for 2018-19 that cuts spending but avoids layoffs. The oversight board is reviewing the plan and must sign off on it.
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