The city of Hartford was dealt a major financial blow today when a well-known credit rating agency lowered the city’s bond rating, which could make it more expensive to borrow money for projects, including the proposed minor league ballpark.
Towns and cities, including Hartford, raise money for things like road repairs and school construction by issuing bonds that they pay back over a long period of time, often several decades.
Moody’s Investor Service, one of the agencies that rates the city of Hartford’s ability to borrow and repay money, lowered the city’s rating one notch, from A1 to A2, which would still be considered an upper medium grade.
However, if the city doesn’t clean up its financial situation, the rating could drop even more.
This could impact the city’s plan to build a new baseball stadium for the minor league Rock Cats franchise, since the city might have to buy and improve property.
Hartford Councilman David MacDonald said the downgraded rating "comes at a very inopportune time for our city as we are about to issue $82 million in bonds later this month."
He said it will increase the city's debt service and could pose problems for future bonding, including school renovation projects and the the Downtown North development.
"This proposal has the strong possibility of further negatively impacting our budget and worsening our already weak financial position, which in all likelihood will lead to further reductions in our credit rating in the future," MacDonald said in a statement.
"It's the administration's responsibility to properly manage the budget to avoid using the Fund Balance," he continued. "The Mayor promised the credit rating agencies that he would not touch the Fund Balance, yet he has done just that, reducing it from $30 million to around $14 million."
Mayor Hartford Segarra, however, is maintaining an optimistic outlook.
“It is tough to hear but we have to keep everything in perspective,” Segarra said in a statement Thursday.
"The City of Hartford has held the line on spending by operating with minimal staff, despite the fact that the need for city services continues to grow," he said. "As far as cities go, we are doing better than most. This is precisely why we need to expedite economic development in our capital city, and why public/private partnerships are a better option than bonding.”
Moody’s says Hartford’s “narrow financial position is expected to weaken further,” which could lower the bond rating even further in the future.
The agency criticized the way the city balanced its most recent budget by using one-time revenue sources and selling off property, calling it an “unsustainable budgetary practice.”
It also noted that Hartford’s $30 million rainy day fund has dropped almost in half, and criticized the city for extending its pension funding schedule by 10 years, which the rating agency believes is “indicative of significant financial strain.”
“While disappointed with today’s actions by the rating agency,” Hartford City Treasurer Adam Cloud said in a statement, "the Treasurer’s Office remains committed to working with the Mayor and his Administration to address the rating agency’s concerns in the budgeting forecast for upcoming fiscal years. Specifically, we’ll work together on addressing the Fund Balance, projected deficits and eliminating one-time revenue sources.”
City officials said Moody’s rationale downgrading the rating was also influenced by unemployment, lack of financial flexibility due to contractual obligations and limited revenue sources and cited strengths that included strong pension fund practices and the city’s status as a regional economic center.