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: 124,7052015 estimated median household income
West Hartford: $90,777
Hartford: $34,2402015 estimated per capita income
West Hartford: $50,991
Hartford: $18,525Percentage 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
From the looks of the population and income data, the only way to turnaround Hartford is to annex West Hartford. Of course, those folks would just move to West-West Hartford to avoid the clutches of the money-grabbing unions.
West Hartford would fight annexation for as long as necessary, and probably win.
No mention of why the budget is blowing out. Revenue crashing? Expenses exploding? Some combination?
I didn’t see where municipal bondholders are in the equation. Do they get bailed in? If it enters bankruptcy, how long will it be before Hartford can borrow to fix its roads and water systems. Or do those just go the way of Flint? Be careful what you ask for.
And why do I have a little pink symbol next to my name instead of a blue one? Does wordpress think I’m gay? Not that there’s anything wrong with that.
Are you thin…neat…and well groomed? LOL..
.
http://www.keyframeonline.com/piq/animprofile/962_a.jpg
Oooh. A Peter Sellers reference. I like it…
🙂 . I started with a green avatar, which was perfectly fine for me . Then one day I comment and it has turned scarlet ( ok, light scarlet but not pink, definitely not pink) . What is a person to do? So I have this way of thinking and I get the last laugh from it because it says ‘fooled ya’ somewhere between where the colour pi…scarlet ( light scarlet) starts and my comment finishes.
If you start calling youself ‘the resident pinko ‘ you’ll know that the colour has really got to you though 😉 .
just did a check of the P&L for city ( round numbers )
Revenues – $550 million
Expenses
Cops&Fire – $75
Schools – $250
Infrastructure – $14
guessing the big red ink next year is due to some big increase in union contracts.
BTW – School budget is $22,000 per student !
$22K per student??? Are they ALL in college !!!!???????
Sorry – cities that allow this to happen can get the $$ from those who live there.
Nobody – NOBODY should pay for another city’s (county’s, states’, country’s) overspendeing….
Department of Educations always fudge their per student costs. they usually just take operating budget and divide by number of students. What taxpayers pay is total budget which is usually double.
Hartford public school system is no different
22,000 students divided by a costs in excess of $470 million
These costs include capital costs, pensions, administration, and outside consultants.
try the same for your town, you’ll be appalled.
I used to have a place in a mediocre school district in middle middle class town in Westchester County NY. In 2002, school budget was $110 million for 4,100 students = $27,000 per student.
Another Socialist Paradise that has run out of “Other Peoples’ Money”.
No such thing. Pure fiction. Maggie was clueless, but very venal.
“The city council is crazy. There is no way out of this mess.”
…
Nah … just time to think out of the box.
Rezone land for disposal of highly hazardous toxic material.
The population – after a while – will even forget they’re wearing full hazmat suits.
A small small price to pay
That the suburbs of Hartford are wealthy compared to the city is typical. I lived in Philadelphia when the people who were better off fled the city. I had exposure to the politics as a late teenager. The democrat party machine was called the Green Machine after its leader and they destroyed the city. Now, most well to do democrats have fled the city as well. What is left is white and black hard core union types who think nothing except for lining their own pockets.
Hmmm, sounds like Detroit
Science tells us humans left Africa 100,000 years ago – I say they should have left sooner and gone farther.
Moon people flee to Alpha Centauri after realty crashes, Caesar masters rocket tech and threatens to invade.
Simple answer to this predicament! Tax the rich, provide free education and health care and allow as many people who want to emigrate here
In all the cities under financial stress the heroes are the major problem. There are cities like Belmont, CA that pay their firemen an inordinate amount of money and have unbelievable pension plans. I have a cousin who retired early from the San Jose, CA fire department and lives high off his pension. The tax incomes support these extraordinary wages in Silicon Valley. The police have the same privilege. The police work harder though as there is almost never a fire. Mostly firemen are responding to old people falling. Really, the private ambulance companies could do most of the the fire departments do at 40% of the cost.
I am in favor of our heroes. But there has to be some balance.
This.
People whine about “government unions” being a problem, but the problem is really very specifically fire and police unions. These guys can retire out at 90% of their pay after 30 years. If they start at age 22, they can retire at 52.
My (younger) brother is a retired cop. Retired at 53 and will make $68k/year for the rest of his life. I have nothing against cops or firemen. They’re good folks mostly. Reality is most firemen will never go into a burning building and most cops will never be assaulted much less get shot at. But the unions are great at promoting a few stories of true heroism as if it were a daily occurrence. It’s not. But regular folks are snookered.
You want to fix local taxes? You have to do the following:
1. Legalize drugs. All of them. Almost all crime is drug related. Legalize drugs and the need for cops collapses.
2. Require hospital districts to run ambulance services. Ambulances are just customer delivery systems for hospitals anyway. They should be paying for them. Push off ambulances, and the need for firemen collapses.
Once you have the population of these folks under control, they won’t have the political power to create these crazy pension schemes.
My daughter is a union school teacher in Florida. She makes $42K/year. After 30 years, the average pay is $58k. In Florida, for a teacher who works 30 years, she can retire out at something less than $27,480. That’s reasonable and fair. Our Sheriff just retired out at $146,000/year, at age 58. That’s not reasonable.
Holy pension scheme, Batman!
Getting $146K /yr is a lot of macaroni in any part of the US.
Since when are cops and firemen heroes? If you measure it by the risks they take (death/injury) then fishermen, loggers and farmers are heroes.
I lived in another city in CT that had it’s finances taken over by the state though we could have easily gone for bankruptcy. CT can’t take over Hartford now because it’s finances are such a mess. Anyways, what got my city in to trouble was the mayors, Democrat and Republican, kept giving the unions what they wanted, in exchange for their support in November. We had employees retiring with obscene pensions. They were able to pad their time with unused sick days, among other things. The city ended up taking out debt to fix the hole in the pension fund – never a good idea. Clawbacks of obscene pensions are the only option.
As for CT – same thing, pensions, though I will point out that employee pensions were never funded properly from Day 1. Over-reliance on the wealthy is a major problem, as is spending. CT was well positioned to be a low tax alternative(see New Hampshire) to NY/Mass. and our government has blown it. We’re just as heavily taxed as those 2 states now.
I reside in NY but work in CT. If all my income were taxed at NY rates, I would be paying 2% more of my income than taxes in CT.
We have property taxes on our cars – if you live in a high tax city like Hartford, you can easily pay $1,000 or more in taxes on a newer car. I once paid $2,000 in property taxes on a new car! I have an 11 year old car and still pay $200/year. I believe you have a small fee on cars in NY.
This link has CT as the 3rd worst state for taxes. NY is #4
http://www.kiplinger.com/slideshow/taxes/T054-S003-least-tax-friendly-states-in-us/index.html
In addition to other problems, Hartford displays the unresolved governance issues that afflict most large American urban areas: the metropolitan area is huge compared to the old city limits, all the people with income have fled the city and live in suburbia or exurbia, avoiding taxes is part of the trade-off for commuting hours every day, and the urban center has become a hole. Often the center has a lot of extra infrastructure expenses to accomodate all the transit, and additionally tends to be a magnet for all the social basket cases and crime.
In other countries they have resolved such issues by introducing other levels of administration between the city and the state/province to deal with the expansion of urban areas from their 19th century foot print. In the US urban areas are pathworks (without transit integration, or any type of integration for that matter) of a run down core surrounded by 30-80 separate cities.
Don’t make promises you can’t keep.
Cool. Always like Tim Hardin. Thanks for that.
Truly a great American artist. Sad how his life ended.
Easy peasy. End welfare. Replace union employees with minimum wage contractors.
Has anyone noticed that every municipality that is in serious financial jeopardy has been governed by Democrats for decades?
Maybe if you ignore all the red states with huge percentages of the population living in poverty and declining life expectancies. And entire states like Kansas where the budget is just as badly f***ed.
You see big numbers in places like Hartford and Chicago because these are big population centers with millions of people. It doesn’t mean all the thousands of crappy little townships and smaller across the south are not any less of a mess. Get on Google Street View sometime and drive around the sticks in North Carolina, or Mississippi, or any other southern state really, and try to tell me with a straight face that Republican governance is working in the South.
Get off Google street map and list comparisons then people might believe you. It’s about data not feelings. Give us the pension debt per capita in Chicago/Detroit/Hartford compared to any of these Red states you consider so awful, for example.
Phil – I live in deep blue CT, but in a deep Red small town. Think we are the 2nd most Republican town in CT. Anyways, my town is very well run. A lot of the small towns in CT are red towns and are very well run for the most part. There are even small blue towns that are very well run. CT government has been pretty much run by Democrats for decades – even when we had Republican governors they were powerless because the legislature was overwhelmingly Democrat. Stop making this about politics – a town or state can be well run by either party.
Why are you talking to me about making it political… read the thread and see who started with the political thing. You should do a better job of following an entire thread. I was replying to somebody who made it about CT being a blue state. I live in a small purple CT town and our governance is fine although when given the chance the local Republicans try to turn our nice rural town into a strip mall. By the way my browser right now is open to an article about the hole in Oklahoma’s budget.
I personally do not believe it is necessarily a democrat only or a republican only issue although it does seem that big Democrat run domiciles are the ones showing the greatest cracks at present. I suspect that this issue is like an iceberg with only 25% visible above water. There is never just one cockroach.
Rockefeller Institute –
“State tax revenue growth weakened significantly in fiscal year
2016, growing only 1.2 percent, a slowdown from 4.7 percent
growth in fiscal 2015.”
The above is for all states. CT collection dropped $1 billion over prior.
http://www.rockinst.org/pdf/government_finance/2017-05-08-By-numbers-brief-no9.pdf
The state will roll over and give Hartford whatever they need.
Don’t forget, The state political system is owned by the unions too!
The Fed is the only entity capable of a bail out. and at no cost to “taxpayers”
Why an I not surprised at the impending bankruptcies in the years to come? Yes, allowing public service unions, which are a conflict of interest and immoral was one of the decisions that eventually lead to bankruptcy. But another decision made early on in the late forties, perhaps in the thirties when FDR swept into power, is the expansion of government services. the unfortunate part is that once a local, county, state, or federal government expands its powers and interests, the genie is let out of the bottle and seemingly cannot be put back in said bottle. Of course the rationale is that your government is working for you but in reality, one is working for it.. How did we exist before extensive planning systems, extensive zoning regulations, extensive consumer protection, business regulations, and all the other “services” our local, state, and federal governments believe we need?
There out to be a constitutional amendment that the local, state, and federal governments are limited to no more than 10% of the national income, be it income tax, sales tax, property tax, or any other form of government revenue. And further, all governments are prohibited from deficit spending or any other financial engineering.
But what do I know, I am only a tax payer.
Exactly.
When you pay taxes you are saying tax is right, you are telling the people you pay that they are better than you, you are therefore asking them to take charge of your life…and they will, little good will it do to say you changed your mind afterwards as they offer no refund, only minor compensation if you will swear loyalty.
When I pay taxes I do not say that taxes are right. I complain that taxes are too high and in many cases unnecessary. You know, all societies exist based on cooperation among individuals and governments exist based on society’s need for assistance with the complexities that large societies engender. Government is the cost of doing business as a population grows in a confined geographical area. On a frontier rugged individualism counts for a great deal in a life based on self reliance. In a crowded city it counts for very little as self reliance becomes a handicap. You mistake complexity for conformity.
When you pay taxes to ends you don’t agree with you are using complexity to hide your conformity.
You are beating a dead horse. There are consequences to not paying taxes as there are to mot paying turnpike tolls and speeding tickets. To say that one agrees with the system because it is far less trouble to pay such taxes, fees, and fines is put words into the mouths of those simply avoiding the consequences of not paying them. Essentially, your assertion is absurd. Unlike commercial transactions such as buying a gallon of milk, government costs are not exactly avoidable. I may balk at paying an extra five cents a gallon for my milk and thus either another seller who offers a cheaper price or I may choose to buy another product or no product at all. The consequence of my actions in a commercial transactions affect both myself and the seller. but the consequences in a government transaction such as paying taxes really only has an adverse consequence to myself if I refuse to pay. You simply have not explored all the avenues of this question and make an assumption that is not warranted. By the way, using complexity to hide conformity is called rationalization. Most of your arguments are merely that, rationalizations.
10% is too much
7% is the proper number. That’s the 1912 figure.
When it comes to the cost of government there is no proper number, it is what the people are willing to pay and since taxes often have the appearance of being indirect and reasonable we seldom connect what we pay with what we get. If government was a business it would go bankrupt the first month of its operation.
The real number is not so much a percentage but an absolute minimum for minimum interference in our daily lives. Government expands to fill the void it perceives in our lives. I never knew how many voids my life had until the government came around.
correct but it is illuminating that in 1912 when we had all the features of modern life plus a big government somehow that big government cost only 7% of GDP
7% of GDP paid for the great white fleet, public schools, police, fire, streets, bridges, electric street lights, and all the big monuments in DC & state capitals.
it’s remarkable that we spend 42% today for less
actually, given inflation over the past century, given the reliance on technological progress in military weapons, the start of consolidation of public schools under increasing government control (first local then state and finally federal), given the propensity of well intentions lawyers to increase government intervention into the daily lives of all Americans under the guise of public welfare and civic duty, well, the list goes on and you get the idea. An old saw that tried to promote wisdom in government is “He who governs least governs best” has been cast aside with the charge that society is perfectible and government run by the expert elites know best. the cost to our government and its taxpayers has become more than a monetary one. I fear for the future for only very hard times can correct such thinking. the leisure classes dream too much and think too little.
Poorly designed systems result in systematic problems. Systems that promise benefits they can’t afford over time will fail. See the latest system fail at providing benefits they could not afford. These systems are mostly supported and driven by democrats promising the world to unions, low wage citizens and other voting blocks. Yes half of republicans do this to which makes this a wide spread problem but worse in more democrat areas as they’ve been going faster.
Either the systematic failures will continue and spread or the bad examples will cause a new change in the system the corrects this error in the future. I’m betting on more and more failures.
We love to blame failures of a civic nature on non personal “things” like the weather, bureaucracy, and systems, as such things relieve us from personal blame. The intangible “They” is another target as “The Man” was in the sixties. The reality is that civic failures are usually more the result of greed and aggrandizement than anything else.
C Northcote Parkinson observed that when a worker has too much to accomplish he will resort to one of two actions. Either he will ask for another worker to be assigned to the work or he will ask for two assistants so that he will be the supervisor. The latter is called empire building.
A cardinal rule for the bureaucrat is never reduce staff, always expand when possible. Another rule is never reduce your budget, always expand it or spend what you have. A third rule is always find new ways to expand and spend. This is why government almost never shrinks but continues to expand and consume more of the public dime. It is human nature and has been ever since man has climbed the ladder of evolution. Unfortunately evolution has not prevented man from descending into the slime where political activity occurs.
As for “reformers”, they do not reform anything. They mere shuffle the chairs around and add a couple more to consolidate their power. Appearance is everything because the reformer needs the public to believe they are getting more bang for their buck even while paying more buck for their bang.
The purpose of government is to create and enforce property rights. In order to accomplish that function, you have to give government monopoly rights on violence. Once you give it those rights, you have no control over how big it can get.
You can either get rid of property rights and get rid of government, which has other consequences, or figure out how to live the best life you can with a bigger than necessary government.
the purpose of government is a social arrangement by a society to aid in the regulation of individuals affairs within that society. Not every government has agreed that there should be individual property rights. Governments are the creation of collective human behaviors, not the other way round.
sorry the monopoly of violence argument is relatively new. Until the 1950s, a monopoly of violence argument would have been thought of as the badge of dictatorship by most americans
Williambean2014….. AMEN brother…
A straight up National sales tax at the retail level of 10%… AND… No Other Taxes of any kind…
Local government gets 4%, State gets 3.5%, Feds get 2.5%
Now that is LIMITED GOVERNMENT as envisioned by the founders..
And I’m Taxed Enough Already
And of course the entire state of CT is also considering bankruptcy. No way they can bail out cities. The poor Gov was planning to move up and serve in Hillary’s Admin. Now he’s stuck in place, facing the accumulated problems of decades of Dem misgovernance.
Way off topic, from a comment on another blog.
“As Emmanuel Macron moved toward his landslide victory in the French presidential election, the fashionable media outlets noticed a stunning reality about Europe’s current political leaders:
– Macron, the newly elected French president, has no children.
– German chancellor Angel Merkel has no children.
– British prime minister Theresa May has no children.
– Italian prime minister Paolo Gentiloni has no children.
– Holland’s Mark Rutte has no children.
– Sweden’s Stefan Löfven has no children.
– Luxembour’s Xavier Bettel has no children.
– Scotland’s Nicola Sturgeon has no children.
– And lastly, Jean-Claude Juncker, president of the European Commission, has no children.
A culture sputtering, dying and in denial, there goes Europe, so very sad….”
Thus they have no stake in the mess they are wreaking on the continent.
Mish,
you act as if the collapse of government is a bad thing.
The people who live in Hartford is on the verge of liberating themselves from the grasping hand of local
government. That’s a good thing.
As far as I can see, looking at America from a distance: Democrats are the party of “Tax and Spend”; Republicans are the party of “Borrow and Spend”. This has resulted in many cities, states, and your federal govt. running into serious financial difficulties, which will continue to be a drag on growth. While this can continue for many more years, the first cracks in the system are beginning to appear. Long term this is unsustainable. As Mish often says, what cannot be paid, won’t be paid, (eventually).
Obviously, the sooner these issues are dealt with, the better. The impediment to solving these problems appears to be your political system. As soon as one election ends, the next campaign begins. Campaigns are often about promising people something for nothing and voters seem unable to be able to see through that. As a result I expect a serious recession/depression sometime in the next 20 years. I take no pleasure in this as I am not interested in seeing people suffer, and a depressed US is a negative for the entire world economy.
Till then I expect the US economy to muddle along at 1-2% growth for many years.
Agreed. And the solution as Mish often points out is simple bankruptcy. Cities, counties and states that have overextended themselves should seek bankruptcy and bring their obligations in line with a sustainable revenue base.
Most places are doing fine. There are a few in real trouble though. And I don’t expect a serious depression anytime soon. My big “unless” is China. I believe their banks are way overextended and I have no idea if the government really can control a bank run. I also don’t know how exposed big American banks are to that.
That might be a generator of a depression, especially if Congress won’t politically allow the Fed to intervene as it did in 2008.
A city that bills itself as the “insurance capital of the world” really ought to have hired better actuaries over the years.
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I occasionally drive through Hartford, and there sure are a lot of high rise buildings that house big insurance companies. $40 million is a rounding error on Aetna’s annual profits alone (~$3 billion). The massive revenues flowing through those firms, all those jobs, all the property taxes on those skyscrapers, this is an exceptional failure and disgrace, even for this day and age.
Hartford, CT is morphing into a new Chicago
This state is RULED by the public sector unions. They will push off all liabilities to the municipalities, who will have no choice except strangle us tax-payers to fund those monstrous pensions. Lest anyone doubt this, consider all the needy folk in CT:
The 25 Highest Connecticut State Pensions being paid (a great many of them UCONN retired professors and admins):
$433,891
305,054
304,151
250,188
233,625
230,000
229,963
229,147
221,422
218,906
217,110
215,260
214,278
205,065
204,197
203,221
201,904
200,906
190,531
188,595
188,499
183,845
181,904
180,948
180,037