Hartford Business Journal

20 Hartford Business Journal • August 28, 2017 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Hartford bankruptcy becoming more palatable option W hen stocks fail to lose or gain ground following a major economic announcement, like a Federal Reserve interest rate hike or a new jobs report, analysts sometimes say the reaction was already "baked into" the market, meaning investors antici- pated the news and previously priced the potential impact into their investment decisions. The concept can be important to understanding how the stock market works, but it also may be relevant to supporting the notion of a Hartford bankruptcy. That may seem like a jump in logic, but one can argue that many of the negative effects of a Hartford bankruptcy are already "baked in," and that there are few risks left to undertaking a responsible debt reorganization. Like other local media outlets, Hartford Business Journal previously advocated for a plan that shields the Capital City from bankruptcy, but we've reversed course. At this point, there's only one lifeline left, a bailout from a state government that is broke and no more fiscally responsible than the city itself. Meantime, city government and unions have failed to take steps that would drastically improve Hartford's fiscal trajectory. Worse yet, the city has already felt many of the nasty aftereffects a bankruptcy might bring. For example, both Moody's and Standard & Poor's have already downgraded the city's debt to junk bond status, increasing borrowing costs and making it more difficult, if not impossible, to take on future debt. Meantime, some have argued that filing for bankruptcy would give the city a major black eye, but in many ways Hartford has already lost the PR campaign. Major national news outlets including the New York Times and Wall Street Journal have chronicled the city's financial woes; Aetna's headquarters move to New York City earned Hartford further negative media attention. There's no hiding Hartford's problems from important decision makers. A prop- erly planned and executed bankruptcy may actually bring about more private-sector confidence in Hartford if it leads to structural reforms that unshackle the city from overbearing legacy costs, union contracts and a commercial property tax rate (74.29 mills) that far exceeds those of any other Connecticut municipality. Remember, three insurance companies — The Hartford, Travelers and Aetna — agreed to give the city $50 million over five years, only if there is a comprehensive and sustainable solution to Hartford's fiscal woes. A bail out from the state won't eliminate Hartford's overbearing debt — a bankruptcy could give the city a chance to start fresh. Even the MetroHartford Alliance has hinted that the business community could back an orderly bankruptcy. To be clear, there are still plenty of downsides to pursuing a court-assisted debt restructuring. It would be costly and time consuming and could hurt the city's rela- tionships with debtholders, especially investors who are forced to take a hair cut. City residents and workers may also suffer financially, depending on how certain debts — like pensions and retiree healthcare benefits — are restructured. But supporting bankruptcy isn't meant to be a potshot at Hartford. In fact, we believe Hartford's best days are still ahead. Beyond the financial quag- mire, the city is on an upswing. Those who deny that are either ill-informed or simply not interested in a vibrant urban center. With the opening of UConn's downtown campus last week, Dunkin' Donuts Park's successful first year in operation, and hundreds of new apartments attracting more people to live in the city, there is a new sense of vibrancy downtown. That needs to be matched with something Hartford has lacked for decades — fiscal certainty and stability, paired with a competitive tax rate. State lawmakers will be deciding and writing Hartford's next chapter in the weeks ahead. We support a long-term solution, and increasingly it seems only a bankruptcy may bring that about. n OTHER VOICES Prevailing wage: Good for workers, good for business By Kimberly Glassman G ov. Malloy and the legislature are consid- ering deep cuts to municipal aid in order to rectify an over $3 billion budget defi- cit. Connecticut's Conference of Municipalities (CCM) is rightfully concerned, and looking for other means to keep municipal budgets balanced. One of its main proposals is to raise the thresholds as to when our state's prevailing wage law is triggered on public construction projects. C o n n e c t i c u t ' s current prevailing wage thresholds are $400,000 for new con- struction and $100,000 for renovations. If a proj- ect falls below that threshold, then workers only have to be paid the minimum wage. When CCM proposes an increase to the thresholds, they're proposing that more construction workers be paid the minimum wage rather than the family sustaining prevailing wage. The truth is CCM's proposal will make Con- necticut less competitive. Our neighboring states, Massachu- setts and New York, have a zero threshold on prevailing wage, meaning that the wage protection is triggered on dollar one on pub- lic works projects. Rhode Island's pre- vailing wage thresh- old is $1,000, which is less than the federal threshold of $2,000. And New Jersey's threshold is $15,444. We don't want to lose skilled workers to our surrounding states. Opponents to prevailing wage perpetuate a misconception that the wage protection somehow only benefits union workers or union companies. But that is not true. Non- union contractors also perform work on pub- licly funded projects. And all construction workers, regardless of union affiliation, ben- efit from the prevailing wage law. Prevailing wage rates are based on surveys conducted by the U.S. Department of Labor of what local contractors actually pay workers on public works projects in the state. CCM has argued that the state and munici- palities could save up to 30 percent if there was no prevailing wage requirement. That is simply not true. Labor costs account for only 22 percent of total construction costs. In fact, Indiana State Rep. Ed Soliday, a Republican whose state repealed its prevailing wage law in 2015, was quoted this past April referencing the claim that opponents made that repeal of the law would save taxpayers 22 percent in construction costs. "[They claim] there's some magic state out there that's going to send all these workers into work for $10 an hour and it's just not going to happen. There's not 22 percent savings out there when the total cost of labor is 22 percent. It's rhetoric. So far, I haven't seen a dime of savings out of it." Two professors of economics at the Univer- sity of Utah, Peter Phillips and Cihan Bilingsoy, conducted a study in 2010 entitled "Impact of Prevailing Wages on the Economy and Commu- nities of Connecticut," which found that repeal of the prevailing wage law would result in the loss of $21.6 million in income tax revenue. Other studies have shown that every dollar spent on a prevailing wage project generates a $1.50 in economic activity — that's money spent at local businesses such as restaurants and auto body shops. Prevailing wages keep workers off public assistance and allow them to contribute to our local economies. In April of this year, the Midwest Econom- ic Policy Institute conducted a study entitled, "Prevailing Wage and Military Veterans in Connecticut," which found that a weakening of prevailing wage would hurt our returning veterans, which account for 6.6 percent of Connecticut's construction workforce. The study found that if we increase thresh- olds, the average income for veteran blue-col- lar construction workers would decline by over $5,100 annually, and that approximately 270 employed veter- ans would lose their employer-provided health plan and another 160 would fall below the pov- erty line and qualify for food stamps. Further, there is already a shortage of skilled tradespeople in the construction industry. Recruit- ment and retainage of construction workers will become more challenging if governments continue to lower their wages. On July 24, 2017, the Bristol Press published an article in which Stephen E. Sandherr, chief executive officer of the Associated General Contractors, said: "The need for more craft workers in fields like con- struction is growing every month." To be clear, if the legislature capitulates and increases the thresholds of our prevail- ing wage law, it will be a symbolic gesture at best. CCM and our elected officials are under no illusions that weakening wage standards for construction workers won't realize any significant savings for our municipalities. If CCM were actually committed to lowering the cost of public construction, they would look to our arcane procurement code or exor- bitant permitting fees. This proposal is merely a political foot- ball. We need our legislature to craft a budget that works for all people, not play games with middle class families' livelihoods. n Kimberly Glassman is the director of the Foun- dation for Fair Contracting of Connecticut. HARTFORDBUSINESS.COM POLL Is Hartford a college town? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Should the state of CT eliminate its tax-free week to save money? 55.9% Yes 44.1% No Kimberly Glassman ▶ ▶ Opponents to prevailing wage perpetuate a misconception that the wage protection somehow only benefits union workers or union companies.

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