Hartford Moves Closer to Bankruptcy, Soliciting Proposals From Law Firms

Hartford Moves Closer to Bankruptcy, Soliciting Proposals From Law Firms - Courant Community

http://www.courant.com/community/hartford/hc-hartford-bankruptcy-lawyer-20170509-story.html

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

Hartford Mayor Luke Bronin answers questions from the public about the 2017-18 city budget. Bronin stood his ground with different agencies trying to keep funding for their interests.

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

The city is reviewing several firms and could hire an attorney as early as this week, sources with knowledge of the plans said.

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."

"We have not engaged bankruptcy counsel, but we have had initial conversations with firms that have experience in Chapter 9 and municipal restructuring," Bronin said. "Given the uncertainty of the state budget process and the depth of the state budget crisis, it shouldn't surprise anyone that we might engage counsel in the near future."

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."

Bronin has stressed that the state must be a partner in pulling Hartford from the brink of financial ruin, noting that more than half of the city's properties are tax-exempt and that Hartford has limited options for revenue. But the state has its own problems, with a more than $2 billion budget gap estimated for next year. It is unclear whether there is support in the General Assembly for bailing out Hartford.

"We've made clear for more than a year that Hartford's fiscal challenge cannot be responsibly solved at the local level alone with the tools that we have," Bronin said, "and we continue to push hard to build a new partnership with the state of Connecticut to put our capital city on a path to solvency, stability and growth."

Talk of bankruptcy has fanned tensions between the mayor and city council. Several council members said they are against the approach, and have advocated for alternatives, such as taxes on nonprofits or the consolidation of services with Hartford's board of education. Clarke on Monday suggested a citywide hiring freeze, though new police officers and firefighters would be exempt.

Lawmakers from Hartford met with council members at the state's Legislative Office Building Tuesday to discuss the city's dire outlook.

Councilwoman Cynthia Jennings asked for a review of how bankruptcy would affect the region.

"We don't need a summary or a study," House Majority Leader Matthew Ritter, D-Hartford, replied. "Hartford going bankrupt would be the most catastrophic financial thing that ever happened in the state of Connecticut."

"We will try everything in our power to hit the $40 million target," he said. "It keeps us up at night as much as it keeps you up at night and going bankrupt … would be terrible for the city. It would be terrible for the state. It's not something that any of us want to see and we're going to work very hard to make sure it doesn't happen."

Asked about the bankruptcy attorney, Ritter said: "Our goal is to make sure these lawyers never come to Hartford or bill an hour on behalf of the city of Hartford, and that the services they provide would be unnecessary."

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.

Hartford wouldn't be the first city in Connecticut to seek Chapter 9 protection. Bridgeport filed for bankruptcy in 1991, but a federal judge dismissed the petition, saying the city was capable of paying its bills.

Connecticut State Capital Prepares For Bankruptcy Amid Collapse In Hedge Fund Revenue

by Tyler Durden
May 11, 2017 5:46 AM

The state of Connecticut has been hit hard by the double whammy of a deteriorating local economy, coupled with a plunge in hedge fund profits - as well as hedge fund managers permanently relocating to Florida - leading to a collapse in tax revenues. According to the the latest Connecticut budget released last week, the state is reeling from the consequences of sliding tax revenue from the super-rich, i.e. the state’s hedge fund managers. The latest figures showed that tax revenue from the state’s top 100 highest-paying taxpayers declined 45% from 2015 to 2016. The drop adds up to a $200 million revenue loss for Connecticut.

In a dramatic, if of questionable credibility, soundbite Department of Revenue Services Commissioner Kevin Sullivan says these wealthy people are “dramatically less wealthy than they were before.” He was referring to annual income, not actual asset holdings, because judging by the all time high in the S&P, the local financial elite have never had a higher net worth.
ADVERTISING

“When you look at the top 75, top 50 ... this is a group of wealthy people who are dramatically less wealthy than they were before,” said Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “These folks, for a number of reasons, are either not realizing as much income or don’t have as much income.”

Just don’t expect tears from the general public. Sullivan also noted how several international hedge funds have recently failed, resulting in “significant retrenchment” from investors. That drop in tolerance for risk brings smaller margins and ultimately less personal income for the state to tax, he added. It’s fascinating how the Fed’s central planning, superficially meant to restore “confidence” in a rigged, manipulated market is having such proound and adverse 2nd and 3rd order effects on state budgets.

Sullivan also acknowledged part of revenue decline can also be attributed to “a handful” of wealthy individuals who moved to more tax-friendly states — an issue frequently raised by legislative Republicans, who argue Connecticut’s tax policies encourage the state’s super-rich to move out.

Of course, for tax purposes it’s the actual income that matters, and as a result the steep decline has exacerbated Connecticut’s budget woes. The projected deficit for the new fiscal year beginning July 1 has now jumped from about $1.7 billion to $2.3 billion, while the deficit predicted for the second year of the state’s two-year budget is now about $2.7 billion.

According to AP, lawmakers and the governor have already discussed the possibility of making deep cuts throughout state government, including to state colleges and universities and social services. Meanwhile, there’s a threat of about 4,000 layoffs if a $700 million labor concession deal isn’t reached with state employees. Lawmakers say these latest revenue figures make that agreement even more crucial.

Meanwhile, in a stark confirmation just how dire the state’s economic and fiscal situation has rapidly become, the Hartford Courant reports that city leaders in the state’s capital have taken a step toward bankruptcy, soliciting proposals from law firms that specialize in Chapter 9. It adds that the city is reviewing several firms and could hire an attorney as early as this week, sources with knowledge of the plans said.

Facing a $65 million deficit next year and a $14 million shortfall this year, 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.” Bronin 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.

The mayor confirmed Tuesday that the city was looking at firms. “We have not engaged bankruptcy counsel, but we have had initial conversations with firms that have experience in Chapter 9 and municipal restructuring,” Bronin said. “Given the uncertainty of the state budget process and the depth of the state budget crisis, it shouldn’t surprise anyone that we might engage counsel in the near future.”

Some, such as Council President Thomas 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.”

Maybe not yet, but time is fast running out. Meanwhile, reminding the state that “we’re all in it together”, Bronin stressed that the state must be a partner in pulling Hartford “from the brink of financial ruin”, noting that more than half of the city’s properties are tax-exempt and that Hartford has limited options for revenue.

“We’ve made clear for more than a year that Hartford’s fiscal challenge cannot be responsibly solved at the local level alone with the tools that we have,” Bronin said, “and we continue to push hard to build a new partnership with the state of Connecticut to put our capital city on a path to solvency, stability and growth.”

However, as noted above, the itself has its own problems, with a more than $2 billion budget gap estimated for next year. It is unclear whether there is support in the General Assembly for bailing out Hartford.

* * *

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 Courant notes. 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.

In other words, if Bronin intends to go through with it, Hartfort may be in bankruptcy within weeks, if not days.

Hartford wouldn’t be the first city in Connecticut to seek Chapter 9 protection. Bridgeport filed for bankruptcy in 1991, but a federal judge dismissed the petition, saying the city was capable of paying its bills. Other cities that have filed include Detroit, Stockton and San Bernardino, Calif., and nearby Central Falls, R.I.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.