Twenty-five Connecticut municipalities – including West Hartford – plus several school districts, have now been assigned a ‘negative outlook’ by bond rating agency Moody’s.
By Ronni Newton
The lack of a state budget may have a trickle-down effect on the bond ratings of many Connecticut municipalities, including West Hartford which on Monday was notified that the town has been assigned a “negative outlook” by Moody’s Investors Service.
“The current budget impasse highlights the ongoing vulnerability of funding that the State of Connecticut provides to its local governments,” Moody’s stated in a press release distributed Monday.
In Monday’s announcement, Moody’s indicated that 29 municipalities or school districts in Connecticut are under review to have their ratings downgraded, and another 29 have been assigned a negative outlook.
“We have assigned negative outlooks to ratings of 14 local governments and two regional school districts and reiterated an existing negative outlook on one local government facing cuts in state funding equal to between 75 percent and 100 percent of available fund balance or cash,” Moody’s said in its announcement. “In addition, we have assigned negative outlooks to 11 local governments and one regional school district which, in the absence of other revenue measures or cuts in expenses, would need to raise property taxes by 10 percent or more to make up for the decline in state funding from fiscal 2017 to what is provided under the executive order currently in effect.” The rating of another town that already had a negative outlook has been maintained, Moody’s stated.
The major factor impacting West Hartford is the town’s reliance on revenue received from the state. Under Gov. Malloy’s executive order, under which the state is now operating, the town is not receiving any Educational Cost Sharing (ECS) funds – a reduction of state aid of nearly $21 million compared to what was received in FY2017.
West Hartford Mayor Shari Cantor said in a statement that lack of a bi-partisan state budget is hurting all Connecticut municipalities.
“The legislature needs to do its job and adopt a budget that is balanced and fair; and invests in our future by supporting public education and Connecticut’s cities and towns,” Cantor said.
While the town still maintains the agency’s top Aaa rating and has not been downgraded, the negative outlook from Moody’s is putting West Hartford on notice that if action is not taken, the town could face a downgrade, Town Manager Matt Hart said Tuesday. In addition to being impacted by state funding, Hart said that Moody’s has indicated it would also like to see West Hartford’s fund balance grow from the current 8.1-8.2 percent to 10 percent.
A downgrade would mean that West Hartford might not receive as favorable a rate when it sells bonds to finance capital projects.
Cantor noted that in the statewide ranking of income tax contribution, West Hartford is seventh highest, while on the ECS wealth index the town is 111th. “We rank 128 out of 169 in per pupil spending, yet we are the only municipality to have two high schools in the 2016 U.S. News & World Report ranking of Top 10 Public High Schools in Connecticut and in the top 500 of schools nationwide,” Cantor said.
“West Hartford is a unique community, an inner ring suburb that is vibrant and diverse, efficient and effective,” Cantor said. “We are nationally ranked by multiple organizations as one of the best places to live. West Hartford should be emulated and we should not be penalized for our good governance and fiscal responsibility.”
Cantor said that Moody’s action should be taken as a call to action for legislators and an indication that their inaction is hurting municipalities.
“We’re hopeful Moody’s decision will be reversed once a bi-partisan budget is adopted that supports public education,” Cantor said. “We call on our legislators to act now, in the best interest of the state, its towns, and its citizens.”
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