If the state legislature remains deadlocked on approval of a state budget and the level of municipal aid that would be sent to the City of Hartford, a public forum planned for next Thursday, October 19, may offer a sneak preview of what will come in the days after the headline “Hartford Declares Bankruptcy.”

In a program organized by the City of Hartford with support from the Hartford Foundation for Public Giving, the front-burner topic will be “What Does Municipal Bankruptcy Mean and What Can We Learn From Other Cities.”  Insight will be offered by Kevyn Orr, former Emergency Manager for the City of Detroit; Don Graves, former Deputy Assistant to President Obama and Counselor to Vice President Biden; and Mayor James Diossa of Central Falls, Rhode Island.  Moderator for the forum will be Jay Williams, recently installed as President of the Hartford Foundation for Public Giving, and a former U.S. Assistant Secretary of Commerce for Economic Development, and Mayor of Youngstown, Ohio.

The purpose of filing Chapter 9 bankruptcy is to provide a financially distressed government body protection from its creditors while it reorganizes to make itself more fiscally stable.  Opinions differ on its impact and effectiveness.  In Connecticut history, the city of Bridgeport filed for bankruptcy in 1991, but the filing was withdrawn by a new administration after the incumbent Mayor was defeated.  Years later, action by the state legislature to take over fiscal management of Waterbury prevented a possible bankruptcy declaration.

The 90-minute program on October 19 will be held beginning at 8 a.m. at The Society Room on Pratt Street in downtown Hartford.  The conversation continues at a late-afternoon public forum, with the same panelists, at Hartford Public High School.  

Central Falls, the first city in Rhode Island history to declare bankruptcy, in 2011, came out of bankruptcy in a relatively short 13 months.  Described as one of the hardest hit communities in the great recession, with unemployment reaching 16 percent between 2010 and 2012, Central Falls was considered by 2015 as among communities in the state that, although still struggling, were on the rise.

On July 18, 2013, Detroit, Michigan, became the largest municipality in United States history to file for Chapter 9 bankruptcy.  Detroit’s highly visible bankruptcy is today credited by some observers as a key element in the city’s ability to rebound in more recent years, attracting new investment after shedding considerable liabilities through bankruptcy court.  It is even using its bankruptcy as a plus as it goes after Amazon’s second headquarters – a competition that Hartford also looks forward to entering.

Out of nearly 89,500 municipalities in the country, there were just 239 municipal bankruptcy filings between 1980 and 2010, according to the American Legislative Exchange Council.  That number picked up considerably in the aftermath of the recession, including Detroit, Central Falls, San Bernardino and Stockton, CA; and Jefferson County, AL.

Hartford Mayor Luke Bronin said earlier this month that Hartford would seek Chapter 9 protection if additional state aid was not forthcoming by November. The city is seeking at least $40 million more this year — on top of the $260 million the city is already due to receive -also now in doubt due to the state’s budget stalemate.  The city, facing a $65 million deficit, is expected to run into cash-flow problems this fall, with shortfalls of $7 million in November and $39.2 million in December, according to published reports.

A week ago, in a newsletter to bond holders and other investors, Municipal Market Analytics noted some of the issues that a Chapter 9 petition could pose not only to Hartford, but to jurisdictions beyond the city’s borders, including steeper interest rates when towns in the region borrow for infrastructure projects, and a possible adverse impact on the state’s bond rating.  The report was speculative, but could have an impact on decisions made at the State Capitol in the coming weeks.

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