The city of Hartford, Conn., has retained the law firm of Greenberg Traurig LLP as restructuring counsel as it weighs whether to file for bankruptcy, officials said Thursday.
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Hartford has a deficit approaching $50 million and has asked the state for help managing its fiscal crisis. But the state has its own budget troubles and failed to pass a spending plan to close a two-year hole of $5.1 billion before the fiscal year ended on June 30.
The city has "advocated for a State budget that puts our cities in a position to be strong and vibrant, for the sake of Connecticut's economic competitiveness," Mayor Luke Bronin said. "In the meantime, as we start a new fiscal year without a State budget and with significant uncertainty, we will have the advice and counsel of an experienced and highly respected restructuring firm."
Gov. Dannel Malloy said Wednesday it appeared that July 18 was the earliest the state Legislature was prepared to vote on a budget.
Greenberg Traurig, led by Nancy Mitchell, one of the co-chairs of the firm's restructuring practice, will help the city evaluate options to put the city on a path to long-term fiscal stability, city officials said. Over the past 18 months, the city has made deep spending cuts and continues to seek concessions from public-employee unions to address the deficit, Mr. Bronin said.
Mounting debt and a declining population are problems for many U.S. cities. Detroit officials had also blamed its financial problems on the loss of residents, who fled in large numbers for its safer suburbs. The 680,000-resident city filed for bankruptcy in July 2013 to negotiate cuts to $18 billion in debt, blaming tax revenue that fell after the real-estate crash.
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Earlier this year, U.S. territory Puerto Rico filed for a form of bankruptcy that incorporates parts of chapter 9 law, the type of protection used by struggling cities and counties. The Caribbean island of roughly 3.4 million people has an unemployment rate that tops 12%, more than twice the U.S. average.
In California, the cities of San Bernardino and Stockton filed for bankruptcy in 2012.
Hartford's fiscal woes have been driven by rising fixed costs on things like health care and pensions. It must pay nearly $180 million on debt service, health care, pensions and other costs for the current fiscal year. That amounts to more than half of the city's budget, excluding education.
Mr. Malloy and other top lawmakers have said it is in the state's best interest for Hartford to avoid bankruptcy, but financial assistance from the state would come with more oversight of the city's finances. As of Thursday, however, it was unclear what sort of assistance lawmakers would be able to provide.
--Katy Stech contributed to this article.
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(END) Dow Jones Newswires
July 06, 2017 15:41 ET (19:41 GMT)