Cities and counties float bonds to pay for things. Different agencies rate those bonds. Now, Hartford, one of the formerly wealthiest cities in America’s wealthiest state has the distinction of holding junk bond status.
And yet, while Illinois squirms in the agony of the unknown, another municipality that as recently as a month ago was rumored to be looking at a bankruptcy filing, the state capital of Connecticut, Hartford, no longer has to dread the unknown: on Tuesday afternoon, S&P pulled off the band-aid, and downgraded the city’s bond rating by two notches to BB from BBB-, also known as junk, citing “growing liquidity pressures” and “weaker market access prospects”, while keeping the city’s General Obligation bonds on Creditwatch negative meaning more downgrades are likely imminent.
“The downgrade to ‘BB’ reflects our opinion of very weak diminished liquidity, including uncertain access to external liquidity and very weak management conditions as multiple city officials have publicly indicated they are actively considering bankruptcy,” said S&P Global Ratings credit analyst Victor Medeiros. Hartford has engaged an outside law firm with expertise in financial restructuring. Officials also mentioned that the city would initiate discussions with bondholders for concessions to implement a debt restructuring if it didn’t receive the necessary support in the state’s 2019 biennial budget.
S&P also said that Hartford may be downgraded again if the state passage of a budget is significantly delayed, or if the city were not to receive sufficient support in a timely manner that would enable it to manage liquidity and allow it to meet obligations in a timely manner.
Make room in the roost. The chickens are back.
There’s a reason for all this. There’s a reason why our States, cities, counties, and territories are going utterly bankrupt. It goes beyond financial mismanagement and the economic cycle (which we’re supposed to be riding high now). In a word, the reason is “communism.”
They don’t officially call it that but that’s just what it is. From each according to his ability to pay, these locales have taxed the daylights out of the productive. And they give to each of the unproductive according to his needs via the welfare “services” looted from the taxpayers.
The taxpayers notice this and resent it. They are further burdened with co-existing with those non-productive elements, who rapidly move in to take advantage.
The payers take their wealth and abilities and leave. The cities are stuck with a surly, lazy, uneducable, and criminally disposed population. There’s your “very weak diminished liquidity” problem.
One may notice, if one looks around, that this sort of thing is spreading. It would seem unsustainable because it is.
“Collapse” and “reset” come to mind. The questions are: “When?” and “How?”
NBC / Somebody’s Pinterest.