🔒Hartford bankruptcy becoming more palatable option

When stocks fail to lose or gain ground following a major economic announcement, like a Federal Reserve interest rate hike or a new jobs report, analysts sometimes say the reaction was already “baked into” the market, meaning investors anticipated the news and previously priced the potential impact into their investment decisions.

The concept can be important to understanding how the stock market works, but it also may be relevant to supporting the notion of a Hartford bankruptcy.

That may seem like a jump in logic, but one can argue that many of the negative effects of a Hartford bankruptcy are already “baked in,” and that there are few risks left to undertaking a responsible debt reorganization.

Like other local media outlets, Hartford Business Journal previously advocated for a plan that shields the Capital City from bankruptcy, but we've reversed course.

At this point, there's only one lifeline left, a bailout from a state government that is broke and no more fiscally responsible than the city itself. Meantime, city government and unions have failed to take steps that would drastically improve Hartford's fiscal trajectory.

Worse yet, the city has already felt many of the nasty aftereffects a bankruptcy might bring.

For example, both Moody's and Standard & Poor's have already downgraded the city's debt to junk bond status, increasing borrowing costs and making it more difficult, if not impossible, to take on future debt.

Meantime, some have argued that filing for bankruptcy would give the city a major black eye, but in many ways Hartford has already lost the PR campaign.

Major national news outlets including the New York Times and Wall Street Journal have chronicled the city's financial woes; Aetna's headquarters move to New York City earned Hartford further negative media attention.

There's no hiding Hartford's problems from important decision makers. A properly planned and executed bankruptcy may actually bring about more private-sector confidence in Hartford if it leads to structural reforms that unshackle the city from overbearing legacy costs, union contracts and a commercial property tax rate (74.29 mills) that far exceeds those of any other Connecticut municipality.

Remember, three insurance companies — The Hartford, Travelers and Aetna — agreed to give the city $50 million over five years, only if there is a comprehensive and sustainable solution to Hartford's fiscal woes. A bail out from the state won't eliminate Hartford's overbearing debt — a bankruptcy could give the city a chance to start fresh.

Even the MetroHartford Alliance has hinted that the business community could back an orderly bankruptcy.

To be clear, there are still plenty of downsides to pursuing a court-assisted debt restructuring. It would be costly and time consuming and could hurt the city's relationships with debtholders, especially investors who are forced to take a hair cut. City residents and workers may also suffer financially, depending on how certain debts — like pensions and retiree healthcare benefits — are restructured.

But supporting bankruptcy isn't meant to be a potshot at Hartford.

In fact, we believe Hartford's best days are still ahead. Beyond the financial quagmire, the city is on an upswing. Those who deny that are either ill-informed or simply not interested in a vibrant urban center.

With the opening of UConn's downtown campus last week, Dunkin' Donuts Park's successful first year in operation, and hundreds of new apartments attracting more people to live in the city, there is a new sense of vibrancy downtown.

That needs to be matched with something Hartford has lacked for decades — fiscal certainty and stability, paired with a competitive tax rate.

State lawmakers will be deciding and writing Hartford's next chapter in the weeks ahead. We support a long-term solution, and increasingly it seems only a bankruptcy may bring that about.