Hartford City Workers Nervous Ahead of Potential Bankruptcy Filing
October 22 2017 - 2:42PM
Dow Jones News
By Joseph De Avila
Public-sector workers in cash-strapped Hartford, Conn., are on
edge as city officials have said the state capital could seek
authority to file for bankruptcy as early as November.
State lawmakers, who are confronting their own two-year deficit
of $3.5 billion, will have a big say in how that plays out.
Legislative leaders say they reached a tentative state budget
agreement that would give Hartford additional aid, and they expect
to approve it this week.
But after a series of false starts in the budgeting process,
some are still uneasy.
"It's nerve-racking because obviously the clock is ticking,"
said Larry Dorman, a spokesman for Afscme Local 1716, which
represents about 400 city employees, including those in the
departments of public works, sanitation and parks. "When you've
seen bankruptcy in other cities, it's always taken the biggest toll
on the workers. That's neither right nor fair."
In early September, city officials warned Gov. Dannel Malloy and
state lawmakers that Hartford wouldn't be able to pay all of its
bills within 60 days and could seek authority to file for chapter 9
bankruptcy in early November unless the legislature provided the
city with more cash.
Unions representing public employees say they are worried their
members will be asked to make unreasonable sacrifices to fix
Hartford's financial problems even if the city doesn't proceed with
bankruptcy. Several municipal contracts have expired and need to be
renegotiated.
"It is true that we are asking more from our unions than we have
asked for in the past, and more than they have yet been willing to
give," Hartford Mayor Luke Bronin said. "But I don't think what we
are asking for is disproportionate. The solution will require the
participation of all of our stakeholders."
Mr. Bronin, a Democrat, said the state, bondholders and
employees need to help the city get on better financial footing
over the long term. The city has a deficit of about $50 million,
and Moody's Investors Service says that figure will range annually
between $60 million and $80 million through 2036 without changes.
Moody's downgraded the city's credit rating last month further into
junk territory, down two notches to Caa3.
Rapidly increasing costs for health care, pensions and debt
service have fueled Hartford's fiscal challenges. The city must pay
nearly $180 million -- more than half of the municipality's
non-education budget -- on debt service, health care, pensions and
other costs for the current fiscal year.
The city's tax base isn't large enough to produce the revenue
needed to cover those growing expenses because taxes aren't levied
on more than half of the property in Hartford, such as state
buildings, hospitals and colleges, Mr. Bronin said.
The state reimburses Hartford for some of those losses but not
all. A full payment under the state's formula would give Hartford
an additional $52.3 million in the fiscal year that ended in June,
according to city officials.
Sgt. John Szewczyk, president of the Hartford Police Union, says
the city should focus on getting the funds it is owed by the state
rather than seeking concessions from unions.
"Hartford is not in this financial situation because of labor,"
Sgt. Szewczyk said. "We are vastly underpaid compared to
departments in the area. We are vastly overworked."
The state legislators' tentative budget agreement calls for the
creation of a board that would have an oversight role over
Hartford's finances. Some union leaders say such a board also could
produce bad results for public employees.
"Somehow we become the boogeyman in oversight and or bankruptcy
talks," said Vincent Fusco, president of the Hartford Fire Fighters
Association. "But nobody ever talks about how the greatest amount
of debt is owed by the bond market and bankers, and they want to
take it out of our hide to pay them back. That doesn't even pass
the smell test."
Hartford Fire Fighters is one of the few unions that has renewed
its contract with the city. In the contract that goes through 2020,
the union agreed for its members to make higher pension and
health-care contributions, saving the city $3.5 million, Mr. Fusco
said.
If the city files for chapter 9 bankruptcy, "we would be in
front of a bankruptcy judge saying we have already done our part,"
he added.
Write to Joseph De Avila at joseph.deavila@wsj.com
(END) Dow Jones Newswires
October 22, 2017 14:27 ET (18:27 GMT)
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