Bond Buyer: Upgrade a Sign of Progress in New Britain

The Bond Buyer

October 21, 2016

NEW BRITAIN, Conn. – The second bond-rating upgrade in 10 months for New Britain, Conn. is further proof the city is moving in the right direction, said Mayor Erin Stewart.

 “We’re a city on the rise and we’re very well managed,” Stewart said days after Fitch Ratings elevated the central Connecticut city to A-minus from BBB-plus Oct. 14, citing the benefits of revenue-raising measures, “significant” cost cutting and $3.5 million of savings from a roughly $60 million debt restructuring.

Fitch also revised its outlook to stable from negative. Cost and revenue improvements, said Fitch, included moving labor unions to high-deductible health plans; a higher-than-expected tax collection rate; and productive efforts by management to curb spending.

 “This is another piece of great financial news for the city,” said finance director Lori Granato.

S&P Global Ratings in January boosted New Britain’s general obligation bond rating to A-plus, following a three-notch rise from BBB to A one year earlier.

 Over three years, New Britain, a city of 73,000 about 10 miles southwest of Hartford, has rebounded from a $30 million deficit and the brink of bankruptcy to a nearly $10 million surplus for fiscal 2015. Bond premiums of $3.7 million contributed to the surplus, said Fitch.

 “We did what we had to do,” Stewart, first elected at age 26 in 2013 and one of the nation’s youngest female mayors, said in an interview at the 130-year-old City Hall. “We’ve set the bar high for other Connecticut cities.”

Fixed costs for debt service, pensions and other post-employment benefit contributions represented 16% of government spending in fiscal 2015, which Fitch called manageable. “Debt-service costs will grow next fiscal year but the level of growth was controlled through a recent bond restructuring,” Fitch said.

 State-run CTfastrak, New England’s first bus rapid transit system, which connects Hartford and New Britain, opened up development opportunities and won over Stewart, who had been wary about the transit project.

“I was critical and I was a skeptic, but I have to say I’m its biggest cheerleader now,” she said. “I’ve seen the opportunities we have generated through mass transit. It’s driven development exponentially.”

Transit-oriented development — so-called value capture – is trending nationally. Examples in larger cities include the Hudson Yards project in New York and the proposal by developer Boston Properties to renovate Back Bay Station in Boston and develop above it.

Other New Britain development projects are completed or in the pipeline.

 A Costco opened in October 2015, and in July, the city unveiled a $58 million downtown project with Xenolith Partners to develop its old police station site. A dialysis center, meanwhile, will occupy the former New Britain Herald press building.

Vacant buildings still dot Main Street around the corner from City Hall, a reminder that New Britain’s comeback is still unfinished.

“Each property has a different story,” said Stewart. Some landowners are sitting on vacant parcels, she said, holding out for a perceived windfall should development spike.

According to Stewart, the pending Beehive Bridge project, a remake of the bridge that carries Main Street over state Route 72 from downtown to the Little Poland neighborhood, could help undo the city divide that the Route 72 construction caused.

“Broad Street thrived and Main Street died,” she said.

The city intends to use “beehive” design elements among other features, which include widening the sidewalks from eight to 20 feet and creating two pocket parks on the north side of the bridge.

“We want to do something of quality to make sure when people get off CTfastrak, they feel comfortable walking to either end,” she said. The CTfastrak terminal is nearby.

Stewart credits the high tax-collection rate to new software systems, a streamlined tax collector’s office and police-car scanning technology that spots the license plates of the worst tax delinquents.

 A shadow, however, looms over New Britain and Connecticut’s other cities: the state’s own fiscal problems. Last week, the state General Assembly’s Office of Fiscal Analysis projected a roughly $78 million budget deficit for fiscal 2017.

Connecticut’s budgetary pressures and dim economic growth could jeopardize local credit quality, S&P said in a report Thursday.

“If I didn’t say that it was my number-one concern, I’d be lying,” said Stewart, a Republican in a mostly Democratic city. “We can’t get away from the fact that our mother government is faltering. Urban centers are reliant on state government.”

Property tax revenues account for only 51% of New Britain’s $239 million fiscal 2017 budget.

In an attempt to fend off the industrial stereotype of yesteryear –the city has long been home to toolmaker Stanley, now Stanley Black & Decker – the city has hired a marketing firm. According to Stewart, the city has modernized its industrial bent.

“Instead of hammers and nails, it’s Sikorsky Aircraft parts and precision manufacturing,” she said.