Residents from communities that get the Metropolitan District Commission’s water and sewer service, including Windsor and East Hartford, let the MDC know they are hopping mad at a proposal to make users pay Hartford’s annual $11 million contribution if that city is unable to pay it.
Collecting the $11 million “is creating a moral hazard, allowing Hartford basically to back out,” Windsor resident Elizabeth Yetman said at a public hearing Wednesday. “You’re giving them an opportunity to not pay.”
Yetman said Windsor has had trouble passing budgets the last few years, “so if you’re looking at potentially increasing costs to the town, Windsor’s going to be once again in political turmoil.”
Hartford’s cash liquidity issues this year, along with a projected $50 million deficit in 2017, recently prompted the credit rating agencies to downgrade the MDC’s bond rating from AA+ to AA over concerns about the city’s ability to pay its sewer assessment.
MDC Chairman William DiBella said that downgrade alone will cost the MDC — and ultimately its eight member towns — an estimated extra $500,000 in the interest it will pay on this Friday’s $173 million bond sale to fund sewer improvements.
The MDC made the bailout proposal, DiBella said, to avoid a second costly credit rating downgrade that would explode the interest payments on the agency’s billions of dollars in bonds, payments that would end up costing the towns as well.
The so-called $11 million “reserve fund” to preserve the MDC’s credit rating would add $1.3 million to Windsor’s $3.7 million fee for fiscal year 2017-18. East Hartford would have to pony up an extra $1.8 million on top of the $5.1 million it will owe. The other group members — Bloomfield, East Hartford, New-ington, Rocky Hill, West Hartford, and Wethersfield — would make up the rest of Hartford’s $11 million. And with the MDC’s credit rating downgraded, the credit ratings of all the member towns will at least be placed on a review status facing costly downgrades as well because of the extra expense.
Seventeen residents and town officials spoke out Wednesday about the agency’s proposed $167.2 million budget for calendar year 2017, which includes the $11 million reserve fund as well as a 4 percent water rate hike and a 7.7 percent sewer service charge increase.
East Hartford is a distressed community, former mayor Susan Kniep said. “We have high unemployment and a high elderly population, and many folks are poor,” Kniep said. “So I ask that you not increase rates and absolutely, positively not expect the other seven member towns to pick up what Hartford may be leaving on the table if they do in fact file for bankruptcy.”
“What about 2019 and 2020?” Newington resident Gail Budrejko asked. “I fear that this is going to start a dangerous precedent, and this is not the way to solve a problem.”
Instead of draining money from the member cities and towns, West Hartford Mayor Sheri Cantor told the board, it should issue an $11 million short-term tax anticipatory note, or TAN, if Hartford is unable to pay. By statute, if the water company anytime in 2017 issues a TAN, which is based on future revenues, it must pay it off in six months.
“To impose ($11 million in) taxes on that potential situation that may not occur is a decision we face all the time in municipalities, and we just can’t do it,” Cantor said. “So we make sure that we have short-term fixes while we work out a long-term solution to an ongoing problem if Hartford goes bankrupt, because it will be a challenge for all of us.”
There are additional options, Cantor said, including user fees, sewer fees, “and other opportunities for collecting that money.”
But, she warned, once the MDC sends the bill to the towns, including the extra fee, soon after it adopts its calendar-year 2017 budget, “it becomes real for our residents and it will be a huge burden.”
According to Tim Curtis, Wind-sor’s representative on MDC’s board, DiBella, CEO Scott Jellison, and municipality representatives have been working together on the problem since Hartford’s situation became apparent more than three weeks ago. A potential solution that emerged is for the state legislature to grant MDC the ability to borrow money for operating expenses for more than the six months it’s restricted to now.
“What do you do for the next six months?” DiBella asked, with a chuckle. “But we’ve got to go to the legislature to resolve this issue of towns getting in trouble.” This, he said, would enable MDC to borrow operating expenses for a period of one or two years, “so we can spread it out, and the towns don’t have to pay it all up front.”
Cantor, however, said, “There are so many unknowns at the state level, and we are facing very serious potential issues with the state budget.”
Meanwhile, time is running out. The MDC board’s 29 representatives from the eight member municipalities are scheduled to vote on the budget Dec. 5, with a majority required in order to pass the spending plan.
Curtis said that the bailout fee solution would be tough for him to support. “But if Hartford is bankrupt, it affects the MDC’s ratings and our ratings, so that whenever we bond it will cost the residents more,” Curtis said. “So I’m hoping that if we do create a reserve it will be a lot less than anticipated.”
That would be if Hartford not only pays the two quarterly sewer fee installments in January and April, as Hartford Mayor Luke Bronin assured the MDC, but also if the city can contribute something for the July and October payments, which is in doubt.
“We are hopeful that we can all work together rather than shifting this responsibility purely on the seven member towns,” Cantor said. “We are making progress. It is getting better.”
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