Hartford, Conn. solicits bankruptcy proposals from law firms

By Mike “Mish” Shedlock

Hartford, Connecticut, is on the verge of bankruptcy. It has a budget hole of $14 million this year, and a projected $65 million hole next year.

The city wants $40 million from the state and concessions from unions. The state would be foolish to give Hartford a dime, and unions seldom if ever concede anything.

Hartford is toast.

The Hartford Courant Community reports Hartford Moves Closer to Bankruptcy, Soliciting Proposals From Law Firms.

City leaders have taken a step toward bankruptcy, soliciting proposals from law firms that specialize in Chapter 9, which protects financially strapped municipalities.

Mayor Luke Bronin has hinted for months that Hartford could file for bankruptcy, and said during his budget release in April that he was “not in a position to rule anything out.”

He confirmed Tuesday that the city was looking at firms.

Hartford faces a $65 million deficit next year and a $14 million shortfall this year. Bronin has proposed cuts and concessions from the unions, but is still seeking $40 million in additional state aid to close next year’s budget gap. The city resorted to short-term borrowing to cover costs such as payroll payments this year.

Council President Thomas “TJ” Clarke II, who was briefed by Bronin on the prospect of hiring a bankruptcy lawyer, called the move premature.

“I was told it was possible that a decision would be made before the end of this week,” Clarke said Tuesday. “It’s premature. We haven’t exhausted every option and every avenue for us to go down this road.”

Clarke said that if the city proceeds with legal representation, the council will look to hire its own lawyer. A key question members want answered is whether the mayor must get the council’s approval to file for bankruptcy.

The state statute covering municipal bankruptcy says that a city or town must receive consent from the governor, and that the governor “shall submit a report to the treasurer and the joint standing committee of the general assembly.” It doesn’t specify whether a mayor needs the council’s approval.

State Lifeline?

Reader Mary Pat Campbell discusses the situation in her blog How About Turning Around Hartford?

As I mentioned before, I work in Hartford, CT, and while I’m not part of the handful of billionaires that CT depends upon for so much of its revenue, it definitely gets its thousands out of me each year. I spend most of my weekdays in Hartford, and its roads are bad enough before any bankruptcy.

There are lots of finance-related companies in Hartford. Lots of rich(ish) people working here.

But they don’t live in Hartford. If you know the area, you may know there are quite a few rich(ish) people in West Hartford, which is only a few miles from downtown Hartford. But West Hartford is a separate town.

Population
West Hartford: 63,268
Hartford: 124,705

2015 estimated median household income
West Hartford: $90,777
Hartford: $34,240

2015 estimated per capita income
West Hartford: $50,991
Hartford: $18,525

Percentage of residents in poverty
West Hartford: 8%
Hartford: 28%

Lifeline from the State?

Well, here’s a problem. In my last post about CT finances: [I noted the state] is now seriously in the red and next year’s deficit has ballooned to $2.2 billion.

The state is trying to push off pension contributions to the teachers’ fund to municipalities, and they’re getting threatened lawsuits in return.

One can see why [Governor Dannel] Malloy has no interest in running again. Having to deal with this mess is going to be very nasty.

City Council is Crazy

The city council is crazy. There is no way out of this mess. Postponement would require higher taxes and continual bailouts from the state.

For what purpose? Bankruptcy is inevitable. The sooner the council and the state admit that simple fact, the better off everyone involved will be.

There is only one way to turn around Hartford: bankruptcy. Any other solution is like pissing in the wind.

Illinois Needs Same Choice

Numerous cities in Illinois need the same solution.

For my take on Illinois, please see Puerto Rico Placed in Bankruptcy Protection: Illinois Needs Similar Deal.

 

 

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He also writes a column at Towhall.com/finance. Article appeared at his blog.

 

 

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