Chris Powell: As in Detroit and Central Falls, bankruptcy could finally make Hartford responsible

Constitution Plaza, in downtown Hartford.

Advocates of a financial bailout for Hartford city government warn that a bankruptcy filing by the city will be a "black eye" for Connecticut, as if the state isn't already mortified by the failure of Gov. Dan Malloy and the General Assembly to enact a budget three months into the new fiscal year.

But last week a series of investigative reports by Eric Parker of WFSB-TV3 in Hartford examined the recent municipal bankruptcy reorganizations in Detroit and Central Falls, R.I., and concluded that the cities have greatly improved as a result.

Hartford's situation is much like those in Detroit and Central Falls before their bankruptcies, with debt and pension obligations outpacing revenue. Indeed, the two federal judges who handled Detroit's bankruptcy reviewed Hartford's financial data and recommended bankruptcy. While Hartford's city government would lose authority during a bankruptcy, the Detroit judges suggested that Mayor Luke Bronin could be appointed the city's emergency manager, thereby preserving some democratic supervision in the process.

Detroit, which long had been losing population and was becoming a giant slum, dragging its suburbs down with it, began to revive at the moment of its bankruptcy filing, Parker reported. That's when businesses gained confidence that management of the city would become responsible. Downtown is prospering again and real estate values in the city and its suburbs have risen sharply.

Detroit's bondholders and bond insurers absorbed huge losses, pensioners smaller but still substantial loses. The blow to pensioners in Central Falls was harder. But there probably won't be much private-sector investment in Hartford until the city, which is not only broke but riddled with corruption and incompetence, is reorganized both financially and politically, and that can't be done without pain.

After all, just in the last few weeks former Hartford Mayor Eddie Perez pleaded guilty to bribery and a developer, James C. Duckett Jr., was convicted of defrauding the city of hundreds of thousands of dollars in the guise of building a soccer stadium. Of course, Hartford's new minor-league baseball stadium was completed last year at $30 million or so beyond its $50 million budget even as city government had become insolvent and had stopped maintaining its schools.

The $50 million Mayor Bronin wants in additional aid from state government so that the city might avoid bankruptcy -- and probably only postpone it -- would pass the bill for the stadium along to municipalities that are not quite as corrupt and incompetent as Hartford is.

Far from giving Connecticut another "black eye," bankruptcy for Hartford would restore virtue to the city's bondholders and unionized employees, who long have been operating as if the city will be rescued financially no matter how incompetent and corrupt it becomes. For the bondholders and unions have enough political influence to prevent incompetence and corruption. Instead the bondholders have been indifferent and the unions have encouraged city government to keep giving the store away, especially to themselves.  

Imagine how different Hartford might be if, instead of assuming that state government would underwrite its corruption and incompetence forever, the bondholders and the unions were compelled to audit city government constantly to maintain its fiscal responsibility, thereby insuring their bonds and pensions.

But while cities can file bankruptcy, states can't, and the way things are going, Connecticut state government soon may be little more than a pension and benefit society cannibalizing public services.


Chris Powell is managing editor of the Journal Inquirer, in Manchester, Conn.