Hartford Business Journal

www.HartfordBusiness.com • July 8, 2019 • Hartford Business Journal 19 SPECIAL REPORT: CITIES PROJECT What about city spending? By Matt Pilon and Greg Bordonaro I n this second week of our series, most of the ideas explored as potential ways to shore up the city's finances and lower the mill rate involve raising additional tax revenue or shifting the tax burden from one group to another. Of course, the amount the city spends on municipal and education services correlates directly with how much tax revenue it must raise from property owners. So it begs the question: Can Hart- ford cut additional spending to lower the mill rate in a meaningful way? While Mayor Luke Bronin admits past administrations have made some poor fiscal choices — overborrowing, promising overly generous benefits and performing ill-advised debt restructurings — he insists that since taking office in 2016, his administra- tion has cut spending "to the bone." "There is not $50 million or $100 million to responsibly squeeze out of city government," Bronin said. "A big part of what we've tried to do is restore the confidence in city gov- ernment by Hartford residents and folks all around the state." Bronin has halted new borrowing and entered into tough negotiations with city labor unions. Full-time employee headcount in the city has also fallen. Between fiscal year 2016 and 2018, city and school staffing levels have fallen 9 percent, with city positions accounting for 68 of the 431 total positions eliminated, according to city financial reports. Over those same three years, total expenditures in Hartford, includ- ing on schools, have fallen nearly 8 percent, or about $80 million. Marc Fitch, an investigative re- porter for the free-market think tank Yankee Institute, whose reporting has generally been critical of both unions and government excess in Connecticut, concedes Bronin has taken a tough approach on spending. For example, a recently finalized contract with the 172-member Hart- ford Municipal Employees Association — which went through an arbitration panel — included four years of wage freezes and a shift to a high-deductible health plan, producing estimated sav- ings of $1.3 million within a few years. "Hartford won, hands down," said Fitch, who called the arbitration panel's decision a "warning shot" for future negotiations. One post-bailout example where the city has declined to pare benefits is for non-union workers. Last year, city councilors took no action on a proposal to shift new, non-union hires to a defined-contri- bution, 401(k)-style retirement plan, rather than a pension plan. That drew ire from at least one member of the state-level Municipal Accountability Review Board, which oversees post-bailout Hartford and several other struggling towns. Stephen Eide, a senior fellow at the free-market think tank Manhattan Institute, said he questions whether Hartford can afford a pension system, especially when pension-cost growth has far outpaced grand-list growth. Meantime, the city council just passed the mayor's $573.2 million budget for fiscal 2020 that raises spending by $3.2 million, but doesn't rely on borrowing and keeps the city's workforce — excluding public- safety personnel — 11 percent below 2015 levels. Notably, since taking office in 2016, Bronin has not in- creased the city's sky-high mill rate. The state's long-term debt bailout has helped the city hold the line on taxes. Without the $48 million debt payment the state will make on Hart- ford's behalf in fiscal 2020, the city's mill rate would jump to about 90 mills — essentially a death sentence. Even with the state bailout, Hart- ford's budget will be flirting with deficits in the years ahead, unless the city can sufficiently grow its grand list and continue to restrain spending. One potential cost-cutting stone that's largely been left unturned is regionalism. During his first year in office, Bronin toured and held public hearings in major Hartford area sub- urbs urging residents there to support efforts like combining IT services, dispatch centers or other municipal functions in order to save money. But no local official can make that happen alone. Bronin would need legis- lative and political support from other towns and at the state level. lower the city's mill rate and encour- age more investment. However, homeownership groups and even Mayor Luke Bronin raise a red flag to that idea, fearing it could chase out more of the city's middle class. Hartford already has the lowest home- ownership rate in the state at 23 percent. "I don't think a five- or 10-year [phase-out] period is workable or responsible," Bronin said. "There is a plan in place that moves toward equal- ization in the long term." The formula to phase out the differing assessment ratios incorporates the Con- sumer Price Index and other variables. The homeowner assessment ratio can't decrease go- ing forward, but it also can't go up by more than 5 per- cent annually — something that's happened only twice since 2011. Philip esti- mates that if the city immediately raised the residential assessment ratio to 70 percent, it would allow the city to reduce its mill rate to about 59, slashing the commercial property tax burden by 20 percent. Homeowner taxes, however, would climb 59 percent. A scenario like that would be disastrous, said David MacDonald, executive director of the Asylum Hill Neighborhood Association. "You'd see homeowners flee the city, you'd see abandoned properties all over the city," MacDonald said. He said the biggest challenge for Hartford is its high poverty rate. Low household incomes means it's virtually impossible to attract a sizable supermarket, or even a Chili's restau- rant, to Hartford. He said the city and state should find some way to keep more of the wealth that Hartford employers gen- erate inside city limits, akin to local in- vestments made by gunmaker Samuel Colt and other industrialists of old. "Now, in the modern economy, the profits leave the city," he said. "As long as you're not keeping the wealth in the city of Hartford, we're never going to get out of this conundrum." Philip said Hartford ought to pick a fair and equitable homeowner assessment ratio — somewhere between 35 percent and 70 percent — and adopt it right away, rather than prolonging it over decades. "I personally think residential taxes need to go up," he said. "I don't think where we're at right now is tenable because the grand list isn't big enough to support city government." David MacDonald, Executive Director, Asylum Hill Neighborhood Association Hartford Mayor Luke Bronin has embraced the buzz created by entrepreneurial initiatives like Hartford InsurTech Hub, hoping such programs can be a path to revitalizing the city by drawing new companies and young professionals here. PHOTO | HBJ FILE

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