S&P: Hartford, CT GO Debt Rating Lowered Four Notches To 'BBB' On Lack Of Plan To Address Persistent Structural Imbalance
"The downgrade reflects Hartford's ongoing structural imbalance and our opinion about its lack of a credible plan to restore balanced operations and address sizable out-year budget gaps," said S&P Global Ratings credit analyst Timothy Little, "while the negative outlook reflects the uncertainty regarding the city's ability to enact deficit mitigation measures, coupled with the significant budget gaps the city projects for the next five years."
In our opinion, the rating reflects the city's structural imbalance without a credible plan in place to return to balanced operations. The fiscal 2017 budget is imbalanced, relying on the use of reserves and labor concessions that have not been realized. Currently, it is also unclear how the city intends to adequately address its significant out-year budget gaps in excess of $30 million in 2018 and $50 million in subsequent years.
"Until the city can adopt a credible plan and sustain improved budgetary performance, the rating reflects our weak view of management conditions," said Mr. Little. The outlook is negative as a credible plan to restore balance remains elusive and sizable budget deficits are expected to continue, putting the city's liquidity position at risk.
The city's GO debt is secured by its full faith and credit to levy ad valorem taxes on all taxable property within its jurisdiction without limit as to rate or amount.
The Hartford Stadium Authority's lease revenue bonds are secured by a lease agreement between the city and the authority.
Hartford, the state capital and the largest employment center in Connecticut, has an estimated population of 124,775 and is in Hartford County.
"The negative outlook reflects the ongoing uncertainty regarding Hartford's ability to adopt and implement a credible plan to restore structural balance," added Mr. Little, "and without such a plan in place, the city will continue to face sizable budget gaps materially affecting its financial position and if not timely addressed, significantly affect its liquidity." Any upward rating movement would depend on the city's ability to adopt and implement a plan to return to structural balance.
Continued downward rating action is possible if budget shortfalls are not addressed soon and liquidity worsens. Should liquidity materially deteriorate, we could lower the rating. We will continue to monitor the city's fiscal position over the next year as it works to resolve its structural imbalance, but there is a one-in-three likelihood of negative ration action within the year.