Fitch assigns an 'A+' rating to the City of Hartford,
CT's approximately $69.8 million general obligation (GO) bonds, 2006
series A. Scheduled to be sold on or about June 7 via negotiation
through a syndicate with Loop Capital Markets, LLC and Siebert
Brandford Shank & Co. as co-managers, the bonds will mature July 15,
2007-2025. Bond proceeds will fund school construction and other
capital improvement projects. Fitch affirms the 'A+' rating on the
city's approximately $218.4 million outstanding GO bonds. The Rating
Outlook is Negative.
Hartford's 'A+' rating continues to be supported by the city's manageable capital needs and rapid principal retirement, its fully funded pension plan, and status as the state capital and a financial and employment center of regional importance. The city has seen some success in development projects led by the opening of the Adriaen's Landing convention center and hotel, with additional retail and residential development expected. However, credit concerns stem from the city's thinly balanced financial operations, heavy reliance on state aid, low income levels and persistently high unemployment rates. Insurance sector employment was largely reduced during the last recession, and ongoing credit vulnerability remains with the potential for further industry consolidations. The Negative Rating Outlook reflects Fitch's concerns that recent incremental improvements in economic and financial operations may not be sustainable. Maintenance of the 'A+' rating and stabilization of the Rating Outlook depends on (but is not limited to) achieving the following: further incremental improvements in the city's economic and employment levels, including the ability to absorb any further declines in the insurance sector; continued improvement in financial performance as evidenced by progress in meeting policy reserve levels; and maintenance of improved tax collection rates.
Located mid-way between New York and Boston, Hartford is the state capital and remains a financial and employment center of regional importance. Reversing a 13% population loss during the 1990's, 2004 estimates show 2.7% growth in the city's population over the 2000 census, outpacing the growth rate for the county and on par with that of the state. With the on-time opening in June 2005 of the convention center and hotel portions of Adriaen's Landing, officials report that other elements of the development project remain largely on track, which should bode well for the city's future economic prospects. Although the state government's presence provides a degree of stability, the city's economic and employment base remains vulnerable to any future consolidation activity in the financial services and insurance industry. The city's unemployment rate in March 2006 was a high 9.6%, twice the state and national averages, and income levels by all measures remain low, between 45%-60% of state and national averages.
Following five consecutive years of general fund drawdowns, the general fund posted surplus operations as expected for fiscal 2005, largely due to a one-time transfer from the city's parking enterprise fund upon a recent refunding of its revenue bonds. Boosted by the transfer, the unreserved general fund balance rose in tandem to 6.6% of spending, but remains below the city's policy goal of 7.5%. The adopted budget for 2006 incorporated a minimal use of fund balance, which is not likely to materialize based on year-to-date results. The adopted fiscal 2007 budget represents a 6.5% increase over 2006 and prudently does not incorporate the use of fund balance. Although current projections do not include any use of fund balance through fiscal 2008, financial operations are projected to be thinly balanced. This will make it difficult for the city to make progress toward achieving its fund balance policy goal. However, the city's tax base is poised to rebound upon the end of the three-year moratorium on revaluations. Preliminary estimates indicate notable gains in the taxable grand list for October 2006, the growth of which will be phased in over the next five fiscal years. While tax collections have improved, the revaluation will shift the tax burden more towards residential taxpayers which, given the city's low income levels, may jeopardize future tax collection rates. The city also retains a degree of budget vulnerability with state aid as its largest revenue.
The city's debt profile remains a credit strength, supported by its manageable capital needs, rapid principal amortization rates, and affordable debt service burden on the budget. Overall debt levels are $1,414 per capita and 3.5% of market value, and debt ratios should improve further given gradual population growth and expected gains in taxable grand list in coming years. Future borrowing needs are manageable and are further moderated by the city's receipt of construction progress payments by the state, which reimburses approximately 91% of the $717 million the city plans to borrow through fiscal 2016. Despite an above-average principal amortization rate at 66.5% in 10 years, debt service claims an affordable 4.5% of spending, below the city's policy threshold of 5%.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Hartford's 'A+' rating continues to be supported by the city's manageable capital needs and rapid principal retirement, its fully funded pension plan, and status as the state capital and a financial and employment center of regional importance. The city has seen some success in development projects led by the opening of the Adriaen's Landing convention center and hotel, with additional retail and residential development expected. However, credit concerns stem from the city's thinly balanced financial operations, heavy reliance on state aid, low income levels and persistently high unemployment rates. Insurance sector employment was largely reduced during the last recession, and ongoing credit vulnerability remains with the potential for further industry consolidations. The Negative Rating Outlook reflects Fitch's concerns that recent incremental improvements in economic and financial operations may not be sustainable. Maintenance of the 'A+' rating and stabilization of the Rating Outlook depends on (but is not limited to) achieving the following: further incremental improvements in the city's economic and employment levels, including the ability to absorb any further declines in the insurance sector; continued improvement in financial performance as evidenced by progress in meeting policy reserve levels; and maintenance of improved tax collection rates.
Located mid-way between New York and Boston, Hartford is the state capital and remains a financial and employment center of regional importance. Reversing a 13% population loss during the 1990's, 2004 estimates show 2.7% growth in the city's population over the 2000 census, outpacing the growth rate for the county and on par with that of the state. With the on-time opening in June 2005 of the convention center and hotel portions of Adriaen's Landing, officials report that other elements of the development project remain largely on track, which should bode well for the city's future economic prospects. Although the state government's presence provides a degree of stability, the city's economic and employment base remains vulnerable to any future consolidation activity in the financial services and insurance industry. The city's unemployment rate in March 2006 was a high 9.6%, twice the state and national averages, and income levels by all measures remain low, between 45%-60% of state and national averages.
Following five consecutive years of general fund drawdowns, the general fund posted surplus operations as expected for fiscal 2005, largely due to a one-time transfer from the city's parking enterprise fund upon a recent refunding of its revenue bonds. Boosted by the transfer, the unreserved general fund balance rose in tandem to 6.6% of spending, but remains below the city's policy goal of 7.5%. The adopted budget for 2006 incorporated a minimal use of fund balance, which is not likely to materialize based on year-to-date results. The adopted fiscal 2007 budget represents a 6.5% increase over 2006 and prudently does not incorporate the use of fund balance. Although current projections do not include any use of fund balance through fiscal 2008, financial operations are projected to be thinly balanced. This will make it difficult for the city to make progress toward achieving its fund balance policy goal. However, the city's tax base is poised to rebound upon the end of the three-year moratorium on revaluations. Preliminary estimates indicate notable gains in the taxable grand list for October 2006, the growth of which will be phased in over the next five fiscal years. While tax collections have improved, the revaluation will shift the tax burden more towards residential taxpayers which, given the city's low income levels, may jeopardize future tax collection rates. The city also retains a degree of budget vulnerability with state aid as its largest revenue.
The city's debt profile remains a credit strength, supported by its manageable capital needs, rapid principal amortization rates, and affordable debt service burden on the budget. Overall debt levels are $1,414 per capita and 3.5% of market value, and debt ratios should improve further given gradual population growth and expected gains in taxable grand list in coming years. Future borrowing needs are manageable and are further moderated by the city's receipt of construction progress payments by the state, which reimburses approximately 91% of the $717 million the city plans to borrow through fiscal 2016. Despite an above-average principal amortization rate at 66.5% in 10 years, debt service claims an affordable 4.5% of spending, below the city's policy threshold of 5%.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.