STUMP » Articles » More Hartford Woes: Too Many Property-Tax-Exempt Government Properties » 7 June 2017, 06:56

Well, now that the incipient bankruptcy of Hartford is on the radar, what with Aetna moving its HQ, and other issues, all of a sudden it’s getting wider play.

For example, here’s a a piece from the WSJ. Let’s just look at the headline & subhed:

Hartford’s Finances Spotlight Property-Tax Quandary
Despite top property-tax rate in Connecticut, the state’s capital teeters on bankruptcy

I get tired of the use of “despite” in headlines (or even in articles themselves) when there is no contradiction between the two parts… and above that, there’s a clear cause-effect connection. (noted in Taranto’s “Fox Butterfield, Is That You?” riff for years)

I will grab just the part that demonstrates the link:

Since 2000, Hartford has increased its property-tax, or millage, rate seven times. The rate is now more than 50% higher than it was in 1998.

At the current level, a Hartford resident who owns a home with an assessed value of $300,000 currently pays an annual tax bill of $22,287, at rate of 7.43%. A West Hartford homeowner with a similar house pays $11,853 at a rate of 3.95%.

West Hartford, for a suburb, is really close to downtown Hartford.

It’s like calling Jersey City a suburb of NYC — it’s RIGHT THERE.

I’m in an ex-urb of NYC, and I’m about as far away from Wall Street as I am from Hartford.

TOO MANY EXEMPT PROPERTIES

One thing Hartford really suffers from is too much government. To wit: it’s the state capital city, and Hartford can’t tax all those state government buildings.

Back to the WSJ piece:

Hartford, Connecticut’s capital city and hub of the state’s insurance industry, is edging closer to joining a small club of American municipalities: those that have sought bankruptcy protection.

The city’s ​$49.6 million budget hole and the impending departure of one of its biggest employers, Aetna Inc., ​have shined a light on its unusual predicament: Half of the city’s properties are excluded from paying taxes because they are government entities, hospitals and universities.

It has less taxable property than the neighboring suburban community of West Hartford, which has less than half of the population than its urban neighbor. And Hartford’s total property-tax receipts are about 25% below that of the tony community of Greenwich.

“The root of the problem is you have a city built on a tax base of a suburb,” said Mayor Luke Bronin.
The mayor said the small tax base along with growing fixed costs produced structural budget deficits that prior administrations sought to deal with through asset sales, short-term debt restructuring and property-tax increases.

Mr. Bronin is now asking for financial help from the state. “My goal and my hope is that legislators from around the state of Connecticut will recognize that Hartford cannot responsibly solve a crisis of this magnitude at the local level alone,” he said.
……
For capital cities such as Hartford, much of the real estate is held by government departments that don’t pay taxes. Hartford, with a population of about 125,000, is home to the University of Connecticut School of Law, Trinity College, Hartford Seminary and the state Supreme Court.

Other cities in similar situations include Boston, where just over half of the property in the city is tax exempt. In Baltimore, about 32% of the property is tax exempt, and in Philadelphia it’s 27%.

……
Aetna and the other four biggest taxpayers in the city contribute nearly one-fifth of the city’s $280 million of property-tax revenue. Property-tax receipts make up nearly half of the city’s general-fund revenues.

Aetna, Hartford Financial Services Group Inc. and Travelers Cos. Inc., also Hartford’s biggest employers, have said they would collectively give the city a voluntary payout of $10 million annually over the next five years to help avoid bankruptcy. But the companies have said they want to see comprehensive changes that allows the city to stabilize its finances.
…..
The city must pay nearly $180 million on debt service, health care, pensions and other fixed costs in the coming fiscal year beginning July 1. That is more than half of the city’s budget, excluding education.

Mr. Bronin said one-time budget fixes and tax increases won’t cut it anymore. After cutting 15% of the city’s nonuniformed workforce, he said he won’t reduce the number of police officers or firefighters and added that further trimming of city services would be irresponsible.

Democratic Gov. Dannel Malloy last week said Hartford and the state Legislature would have to accept more oversight of the city’s finances in exchange for state assistance. “I do not support additional moneys going to our challenged urban environments without a review process,” Mr. Malloy said.

Connecticut House Majority Leader Matt Ritter, a Hartford Democrat, said everyone in the capital understands that it is in the state’s best interest to make sure the city has a sustainable future.

Bankruptcy “doesn’t just affect Hartford,” Mr. Ritter said. “It would affect neighboring communities, it would affect the state, it would probably affect our credit ratings.”

The big problem, though, is that Connecticut itself is cash-strapped. The state is too dependent on too few taxpayers, just like Hartford is.

It’s just like asking Illinois to try to bail out Chicago.

COMMENTARY

Hartford, Connecticut’s Troubles Mounting; Looking to Invoke Bankruptcy

Past financial “fixes” to close Hartford’s growing financial deficits have finally come home to roost, with a vengeance. Its current deficit is approaching $50 million and on July 1 it faces $180 million in debt service, health care, pension contributions, and other fixed costs. That’s more than half the city’s budget, not counting education.

Part of the problem facing the mayor and his city council is that the city’s 125,000 residents are faced with bearing the financial burden of various non-profits living there. Half of the city’s properties are excluded from paying taxes because they are either government entities, hospitals, or universities. Said Hartford Mayor Luke Bronin wryly: “The root of the problem is you have a city built on a tax basis of suburb.”

…..
When the mayor asked the state for some help, state legislators turned him down by allowing the current session to expire on Wednesday without plans for bringing it to the floor. But the request from the mayor for financial assistance came with an offer: state oversight of the city’s finances. Said the mayor: “My goal and my hope is that legislators from around the state of Connecticut will recognize that Hartford cannot responsibly solve a crisis of this magnitude at the local level alone.”

Members of the city council aren’t interested in any kind of state oversight, claiming that it smacks of a “power-grab” and a takeover. The underlying assumption is that the council is doing just fine without help, that it is exploring many “options” to keep the lights on, and they’ll soldier on in the face of adversity.

One such member, “minority representative” Wildaliz Bermudez, testified against a bill that would have installed an oversight committee for Hartford, stating:

‘This legislation is a complete circumvention of representative government and it fails to offer thoughtful measures to address the ills underlying Hartford’s financial troubles….

‘Putting a control board on a city is a giant “DO NOT MOVE HERE” sign on Hartford. Putting a control board on multiple cities is a giant “DO NOT INVEST HERE” sign on our entire state. Who wants to invest in a state that is in disarray with no actual plan to solve the structural problems? Or move to a city where education budgets are getting slashed?’

It’s too late, Madame Councilwoman Bermudez. Everyone knows the answers to those questions, and they’re getting out of town just as quickly as they can.

Good luck with that.

I can think of some “easy” asks — such as asking the state to charge its employees to pay for parking, and to shunt that money to the city. That seems fair, right?

Bankruptcy for Hartford may hinge on CT tax debate

The money Hartford Mayor Luke Bronin needs to keep his city out of bankruptcy is more than a drop in the state budget bucket — but not that much more.

The $40 million extra Bronin wants is one-fifth of 1 percent of the entire state budget.

Put another way, the deficit in the next state budget is 57 times greater than Hartford’s ask.

Well, it wouldn’t be that huge a burden to add on to the state’s already-growing hole, right?

Nobody Wins If Hartford Goes Bankrupt

For Hartford, the threat of bankruptcy is real. Other cities have structural deficits — where growth in expenditures outpaces growth in revenue. Hartford, however, also faces an immediate cash flow crisis. Structural deficits can be solved over time. Cash flow crises require immediate action so that the city can pay its bills.

Earlier this year, the National Resource Network — a federally funded consortium of urban experts — was brought on to help Hartford identify options to achieve fiscal sustainability. As the General Assembly considers proposals to aid Hartford and the city council debates budget for the fiscal year starting July 1, here are some of our preliminary findings.

Bankruptcy or continued decline in city services would have a negative effect statewide. With more than 107,000 primary jobs, Hartford is home to 7 percent of Connecticut’s jobs. The vast majority of those jobs are held by non-residents — just under 90 percent. When combined, more people living in West Hartford, East Hartford and New Britain work in Hartford than city residents.

If Hartford went bankrupt, made draconian service cuts or adopted higher tax rates, local employers would have to consider whether they want to bear additional cost or risk — or leave. If they left, that would likely further exacerbate the state’s fiscal challenges. Because when high paying jobs leave Hartford, they are likely leaving the state. For example, based on IRS data for 2014 and 2015, 69 percent of resident income leaving Hartford County left Connecticut.

Heck, I don’t even live in the state.

….Hartford can avoid bankruptcy, but all stakeholders will need to address challenges head-on. There is no low hanging fruit left on the vine for the city to reduce cost or increase revenue — certainly not enough to close the projected gap in the next fiscal year’s budget, let alone future projected deficits. Under the current rules, Hartford cannot win. That’s why any solution will require a change to the rules. The only way to increase revenue is through intervention by the state and the only way to achieve increased efficiency is with a new relationship with municipal labor.

Hartford does not have the ability to generate significant new revenue on its own. The city’s taxing powers are largely limited to the property tax and more than 50 percent of the assessed value of property in Hartford is tax exempt. With already high property tax rates, the only way that Hartford can begin to address its budget problem through new revenue is with a combination of increased state aid and new taxing authority to ensure that commuters, non-profit institutions and others in the region and across the state who benefit from costly city services pay their fair share.

Later this spring, the National Resource Network will present a series of recommendations on how Hartford — over the long term — can be more efficient in its operations. In his first two budgets and through negotiations with city labor unions, Mayor Luke Bronin has started to make progress in this area. But the only way to achieve significant and sustainable operating savings is with a fundamental change in the relationship between management and the city’s workforce. Although the city has seen some savings from labor concessions, the trend of modest concessions will not close the fiscal gap.

It’s not really “efficiency” that’s the problem.

I’m not seeing anything here about cutting the already accrued costs… like retiree healthcare and pensions. It has been shown with the Detroit bankruptcy that both of these can be cut in a municipal bankruptcy.

I don’t see that nasty option being mentioned at all.

That would really unshackle the city, eh?

And the “winners” there would be future taxpayers who did not have to pay for service done decades ago.

For right now, Connecticut government isn’t even helping its own fiscal situation on a state basis, so I’m not seeing how their oversight will help the city of Hartford. They definitely don’t have credibility on that score.

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