Op-Ed: Nobody Wins if Hartford Goes Bankrupt
For Hartford, the threat of bankruptcy is real. Other cities have structural deficits — where growth in expenditures outpaces growth in revenue. Hartford, however, also faces an immediate cash flow crisis. Structural deficits can be solved over time. Cash flow crises require immediate action so that the city can pay its bills.
Earlier this year, the National Resource Network was brought on to help Hartford identify options to achieve fiscal sustainability. As the General Assembly considers proposals to aid Hartford and the city council debates budget for the fiscal year starting July 1, here are some of our preliminary findings.
Bankruptcy or continued decline in city services would have a negative effect statewide. With more than 107,000 primary jobs, Hartford is home to 7 percent of Connecticut’s jobs. The vast majority of those jobs are held by non-residents — just under 90 percent. When combined, more people living in West Hartford, East Hartford and New Britain work in Hartford than city residents.
If Hartford went bankrupt, made draconian service cuts or adopted higher tax rates, local employers would have to consider whether they want to bear additional cost or risk — or leave. If they left, that would likely further exacerbate the state’s fiscal challenges. Because when high paying jobs leave Hartford, they are likely leaving the state. For example, based on IRS data for 2014 and 2015, 69 percent of resident income leaving Hartford County left Connecticut.
Additionally, bankruptcy is a costly option. Bankruptcy would cause the city to spend millions in legal and other fees. It would limit the city’s ability to borrow and make the long term investments needed to grow the economy. And the time and attention of elected leadership would be diverted for the foreseeable future.
Hartford can avoid bankruptcy, but all stakeholders will need to address challenges head-on. There is no low hanging fruit left on the vine for the city to reduce cost or increase revenue — certainly not enough to close the projected gap in the next fiscal year’s budget, let alone future projected deficits. Under the current rules, Hartford cannot win. That’s why any solution will require a change to the rules. The only way to increase revenue is through intervention by the state and the only way to achieve increased efficiency is with a new relationship with municipal labor.
Hartford does not have the ability to generate significant new revenue on its own. The city’s taxing powers are largely limited to the property tax and more than 50 percent of the assessed value of property in Hartford is tax exempt. With already high property tax rates, the only way that Hartford can begin to address its budget problem through new revenue is with a combination of increased state aid and new taxing authority to ensure that commuters, non-profit institutions and others in the region and across the state who benefit from costly city services pay their fair share.
Later this spring, the National Resource Network will present a series of recommendations on how Hartford — over the long term — can be more efficient in its operations. In his first two budgets and through negotiations with city labor unions, Mayor Luke Bronin has started to make progress in this area. But the only way to achieve significant and sustainable operating savings is with a fundamental change in the relationship between management and the city’s workforce. Although the city has seen some savings from labor concessions, the trend of modest concessions will not close the fiscal gap.
The $50 million pledge of Aetna, Travelers and The Hartford won’t solve the city’s budget challenge. But it is an example of how stakeholders can come together to prevent bankruptcy and build a future for the city and its residents. They recognized that if Hartford goes bankrupt, there are no winners.https://www.courant.com/opinion/op-ed/hc-op-eichenthal-keep-hartford-solvent-0507-20170505-story.html