Hartford Mayor Says City Needs to Reduce Its Debt BillsBy and
In interview, he declines to rule out losses for bondholders
City debt rallied after state approved rescue from bankruptcy
Hartford Mayor Luke Bronin said the Connecticut capital will negotiate with bondholders and the state to “end up with a debt-service burden that is manageable over the long term,” though he declined to say whether that may impose losses on owners of its debt.
“You use the terms restructuring, refinancing, rescheduling, refunding and there’s probably a Venn diagram where they overlap and then there are ways in which they differ," he said in an interview on the sidelines of a panel discussion Monday about Connecticut’s finances. "The terms of any bond deal will have to be negotiated and, again, they will depend to a large extent on what the state is willing to do as part of a long-term solution.”
Hartford’s bonds rallied last week after Connecticut lawmakers passed a budget by a veto-proof majority that would provide the city with a financial rescue to keep it out of bankruptcy. Bronin had said he would need to seek court protection from creditors if Connecticut didn’t step in.
The budget would give Hartford as much as $48 million, enough to cover almost all of its current deficit, and lend the state’s backing for a debt refinancing. Refinancing some of the city’s $620 million debt at lower rates would allow it to avoid a spike in interest and principal payments starting in 2021 by extending maturity dates on the securities. About $225 million of Hartford debt wasn’t insured against default when it was issued.
“When the budget is enacted, the immediate cash-flow crunch will be resolved for a number of months,” Bronin said. “But the long-term deficits remain until a deal is concluded with the state and with bondholders.”
The state’s intervention will allow the city to look at solutions short of bankruptcy, Bronin said. He said the city will be able to make debt payments in November and December.
The longer term strain on the city hasn’t receded. Hartford is facing deficits of $60 million to $80 million per year through 2036, according to estimates by Moody’s Investors Service.
Bronin said he’s focused on finding long-term solutions for Hartford, such as making up for the revenue lost on state buildings and other property that’s exempt from real estate taxes. The mayor said that more than half of the city’s property is non-taxable.
"The challenge is that Hartford is a city built on a tax base of a suburb," he said during the panel discussion.
— With assistance by Martin Z Braun