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“Youthful Mayor Steers New Britain Turnaround.” (Bond Buyer)

Youthful Mayor Steers New Britain Turnaround

By Paul Burton

February 9, 2016
Connecticut Gov. Dannel Malloy’s grim State of the State address last week about state finances resonated with New Britain Mayor Erin Stewart.

“He should have given that speech a long time ago,” Stewart said in a lengthy interview. “It’s similar to what we had to deal with for the past two or three years.”

Over that time, New Britain, a 73,000-population about 10 miles southwest of state capital Hartford, has rebounded from a $30 million deficit and the brink of bankruptcy to a nearly $15 million surplus for fiscal 2105 and A-plus rating from Standard & Poor’s, up four notches.

S&P boosted New Britain’s general obligation bond rating three levels from BBB to A in January 2015, and pushed it up another notch last month to A-plus in advance of the city’s $44.5 million sale of Series 2016A general obligation refunding bonds on Jan. 20.

“We’re growing, that’s for sure,” said Stewart, first elected at age 26 in 2013 and one of the nation’s youngest female mayors. “I can’t tell you how many ribbon cuttings I’ve attended.”

Stewart, who is trying to counter the stereotype of New Britain as a worn-down industrial city, is also behind several economic development initiatives intended to diversify the tax base.

“We’re now the New Hardware City,” she of a city that is home to Stanley Black & Decker Inc. – renamed from Stanley Works after the toolmakers’ 2009 merger – and Central Connecticut State University.

Stewart, a Republican in a mostly Democratic city, overcame skepticism about her age a little over two years ago in unseating Democrat Tim O’Brien after a bruising campaign. Name recognition helped. Her father, Timothy Stewart, was a four-term mayor.

“People would say oh, she’s too young, too wet behind the ears or whatever it was they were saying,” she said.

Stewart easily won re-election last fall, taking with her the first Republican supermajority on the City Council – 10 of 15 members – since the 1970s.

When she took office, Stewart faced a $30 million budget deficit. She recalled meeting with Standard & Poor’s, which could have downgraded New Britain’s bonds to speculative grade. S&P, the only agency that now rates the city, assigned BBB at the time, two levels above junk.

“They were protecting us,” she recalled. “Our debt levels were going pretty much out of control and we were staring at bankruptcy right in the face. The state was telling us they would step in if we didn’t get our stuff together. It was a scary time.

“For me, it was a crash course in municipal finance.”

Stewart and her administration got to work. They cut $16 million from the budget, raised taxes by 11% and issued tax anticipation notes.

“I thought I’d be hung out to dry,” Stewart said of the tax hike. “But we did a good job of educating people.”

Over the past year, the city also converted $40 million in outstanding GO bonds, eliminated a previously issued letter of credit, adopted a structurally balanced budget and eliminated vacant positions. Buy-in from the city’s six labor unions helped the city save on health-care costs by converting employees to high-deductible plans.

“It seems to me like they’ve made some nice improvements,” said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia. “They’re not the wealthiest city, so I think the fact that they have stabilized is a big plus. From a financial standpoint, I’d recommend they stay the course and build the reserves.”

S&P, in its latest upgrade, cited New Britain’s “further improved available reserve position and liquidity profile following the city’s proactive measures to realign recurring operating revenues with ongoing expenditures.”

The Jan. 20 sale, proceeds of which will refund several bond series dating to 2006, attracted several new investors including the city of Waterbury, about 20 miles southwest of New Britain. Waterbury’s portfolio typically includes municipal securities.

“We were really happy that the city of Waterbury expressed confidence in us,” said Lori Granato, New Britain’s new finance director, a 20-year muni finance veteran and a former senior vice president at First Southwest Co.

Granato in the early 1990s oversaw a state panel appointed by then-Gov. Lowell Weicker to reverse West Haven’s fortunes when the city was on the cusp of bankruptcy.

She began the New Britain job on Feb. 25. “I was impressed with the way the mayor and the administration were determined to move the city forward,” she said.

S&P, despite its praiseworthy comments about city management, called New Britain’s economy weak. Moody’s Investors Service, which rated New Britain Baa1 in its last rating for in March 2015, cited a 2010 per-capita income of $21,056, representing only 57% and 77% of state and national averages, respectively.

New downtown development includes the purchase by developer Douglas Bromfield of Capital Restoration Inc. of the long-vacant Berkowitz building for retail and housing; and the $35 million conversion of the historic Landers, Frary & Clark factory building into 169 apartment units under an agreement with developer Ellis Street Holdings LLC.

Costco Wholesale Corp. recently opened a store there as well.

The city’s manufacturing base has a new bent – aerospace. Polymer Precision Inc. just moved in from neighboring Newington and Admill Machine is doubling its size. Both have ties to Poland, which resonates with New Britain’s considerable Polish population. Addaero, which two former Pratt & Whitney engineers started and is turning out parts for the National Aeronautics and Space Administration, also just relocated to the city.

In addition, Central Connecticut State has completed its $82 million dormitory project and student ridership has boosted CTFastrak, the state Department of Transportation’s new express bus service between New Britain and downtown Hartford, to higher levels than projected since its opening last March.

“It looks as though the busway has helped,” said Schankel.

New Britain got more good news last fall when minor league baseball’s Atlantic League awarded the city a franchise that will start play on April 21. The Bees will replace the Rock Cats, who moved to Hartford and will to play as the Yard Goats. Former Bridgeport mayor Bill Finch – the Atlantic League’s Bluefish play in that city – connected Stewart with league officials after the loss of the Rock Cats.

According to Stewart, Rock Cats ownership had told her it was committed to New Britain. “Then I saw them on TV on the steps of Hartford City Hall and they said they were moving there. My jaw dropped to the floor. While I got a crash course in municipal finance, I also got a crash course in backroom baseball.

“But rather than stomp my feet I figured we had to do something.”

The Yard Goats’ opening, by contrast, is in question. A new $56 million ballpark north of downtown Hartford is $10.4 million over budget and might not be ready for the team’s scheduled opening on May 31.

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This story originally appeared in Bond Buyer, here.

 
 

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