Today it became official. According to sources at Hartford City Hall, one of the major reasons was that Moody's apparently felt that Mayor Segarra was less than truthful when he promised the rating agency last year that Hartford's Rainy Day Fund would be maintained at a level close to $30 million dollars. That apparently didn't happen and is far below that amount. Moody's also cited the City selling off assets to balance the City's budget as a factor.
In a detailed report they felt that the City's actions under Segarra and the Council "put a strain" on the City's abilities to close its deficits. That detailed evaluation can be viewed at moodys.com.
This downgrade will most likely also affect the over $350 million in outstanding bonding the City has out. It most likely will also make it more difficult to borrow money for future projects such as baseball stadiums and schools. Moody's also indicated the rating could most likely be downgraded more if the City doesn't clean up its financial situation.
Below is a release from Councilman David McDonald regarding the downgrade:
Today’s news from the Moody’s that Hartford’s credit rating was downgraded from A1 to A2 with a negative outlook comes at a very inopportune time for our city as we are about to issue $82 million in bonds later this month. This will increase our debt service and negatively affect all future bonding in which several important schools are scheduled for renovation such as Weaver High School.
Also the City Council is currently debating the financially risky development of a baseball stadium in Downtown North. 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.
A downgrade on our credit rating will increase our debt service and cause our already $50 million dollar annual structural deficit to grow even larger. This is why City Council has worked so hard to balance our budgets without using the Fund Balance or mill rate increases. It’s the administration’s responsibility to properly manage the budget to avoid using the Fund Balance. 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.
Rather than being fiscally prudent, this administration has been spending millions on a stadium development proposal, appropriations that Council never authorized. This proposal is extremely likely to increase the city’s annual deficit in Years 5 and out. This proposal is not “budget neutral,” as claimed, and it relies on rosy revenue projections that are not tied to realistic revenue assumptions. It will increase the city’s annual deficit, which will further decrease our credit rating, starting a downward spiral not unlike what Detroit experienced.
The people of Hartford deserve much better from their city government. The news of Hartford’s credit rating downgrade heightens the risk associated with the proposed stadium development.
I urge all of my colleagues on the Court of Common Council to reject this unaffordable and financially risky proposal to build a stadium in Downtown North and instead promote affordable and sustainable development for DoNo and focus on protecting our residents and businesses from any potential need to increase taxes. Hartford has many businesses and residents who are struggling with the current tax rate. People can’t afford any higher taxes, and yet this mayor spends money without regard to the struggles of everyday people in Hartford.
Contact: David MacDonald
Harford City Councilman
NBC Connecticut's Len Besthoff was the first to break this story Thursday