Dim economic growth projected in Connecticut through 2019, exacerbated by state budget pressures, may damage an otherwise stable credit condition in the state, according to a new assessment published Thursday by S&P Global Ratings.
Credit quality for Connecticut local governments is generally stable, but “substantial headwinds [are] creating budgetary challenges, particularly for larger cities and towns with high service costs, reliance on state revenue, or limited budgetary flexibility,” said S&P Global Ratings credit analyst Timothy Little.
The recent debt downgrade of the city of Hartford, and the continued budgetary challenges faced by New Haven have exacerbated the situation, Little said.
GE’s move to Boston from Fairfield underscores the economic challenges facing the state, although plant expansions at Electric Boat, Sikorsky’s helicopter operations, and Pratt & Whitney, some of which was induced by state tax incentives, help position the state for growth, the report states.
However, S&P Global Ratings also cites a high property tax burden, potential cuts in municipal aid, and local pension pressures as credit-dampening factors. Municipalities without forward-looking policies or adequate budgetary planning and reserves will be vulnerable to potential rating pressures, the report says.
