Hartford is the latest American city to be on the point of bankruptcy.
Leaders in the capital city of Connecticut are requests proposals from law firms who specialize in Chapter 9 bankruptcy in anticipation of being strapped for cash in the city budget, according to the Hartford Courant.
The city is facing a deficit of $65 million in 2018, that is on top of a $14 million deficit this year, the newspaper said. Hartford City Hall is now reportedly seeking $40 million in state aid to close the gap.
Mayor Luke Bronin has hinted for months that the filing of Chapter 9 can be a possibility and said during his budget release in April that he was “not in a position to rule anything out,” said the Courant.
Some in the city council apparently feel that asking at a law firm on a possible bankruptcy procedure may not be the right approach.
“It is premature,” Hartford City Council President Thomas “TJ” Clarke II told the newspaper. “We have not yet exhausted every option and every way for us to go on this road.”
The bankruptcy debate has created tensions between the mayor and the city council, where several members have worked together for alternative solutions. Last Wednesday, the board proposed cutting more than $5 million from the mayor of the recent budget. Their suggestions, including the cuts to the police, the library and other areas, would restore a much-needed $4.4 million to the city’s rainy day fund.
Despite their differences, Bronin commended the church in a statement.
“The budget we will adopt represents a serious, responsible approach to our deep fiscal crisis. It makes reductions on top of last year’s nearly $20 million in difficult cuts, but it continues to fund essential services, including public safety,” Bronin said in the statement. “The past year we have faced Hartford with the long-term budget issues directly and honestly.”
“I have appreciated the diligence and the care with which the municipality has approached the budget process, and look forward to our continued collaboration to Hartford on a sustainable fiscal path.”
Hartford is just the latest city to look at the bankruptcy option. Since 2010, a total of nine municipalities have submitted a request for the protection of the bankruptcy—that is on top of an additional 42 utilities, water districts, hospitals and other municipal institutions that have truly full-fledged bankruptcy, according to a study of Governing.com.
Some of the larger municipalities that were forced to file for Chapter 9 were the cities of Stockton and San Bernardino in California and Central Falls in Rhode Island, the Pennsylvania state capital Harrisburg, and the largest urban area on the list – Detroit, Michigan.
It was in July 2013, when the city of Detroit-who was left with almost $20 billion in debt after years of mismanagement and the loss of the industry — was forced to file the largest municipal bankruptcy in U.S. history.
Hartford has faced similar problems in recent years, more than half of the city’s properties are tax-exempt and options for other sources of revenue are limited. Bronin told The Courant that it is of vital importance that the state helps them come back from the brink of bankruptcy.
“We have made clear for more than a year that Hartford fiscal challenge cannot be responsibly resolved at the local level, only with the resources that we have,” Bronin told the newspaper, “and we continue to push hard to a new partnership with the state of Connecticut to our capital city on a path to solvency, stability and growth.”
State House Majority Leader Matthew Ritter, D-Hartford, said that the legislature tries to have the support of the city.
“Hartford going bankrupt would be the most catastrophic financial thing that has ever happened in the state of Connecticut,” he told The Courant.
“We will try everything in our power to hit the $40 million target,” he added. “It keeps us at night as much as it keeps you up at night and go bankrupt … would be terrible for the city. It would be terrible for the state. It is not something that any of us want to see and we are going to work very hard to ensure that it does not happen.”
Only one other city in the State of Connecticut has filed for bankruptcy previously.
In 1991, Bridgeport chapter 9 but their petition was dismissed by a federal judge has determined that the city was able to pay its bills.