Portland Assigned Negative Credit Outlook: Moody's

PORTLAND, CT — Connecticut’s budget woes are now filtering down to municipalities in the form of potential credit downgrades as the more than 100-day stalemate without a budget continues. Moody’s Investors Service has placed 26 cities and towns and three regional school districts under review for a credit downgrade.

A credit downgrade would increase borrowing costs for affected governments. Moody’s has also assigned a negative outlook to 25 other cities and towns and three regional school districts.

Portland was assigned a negative outlook.

“Historically, the State of Connecticut has provided significant funding to its local governments, largely in the form of education cost sharing grants, but also in the form of payments in lieu of taxes (PILOTS) and other smaller governmental grants,” Moody’s said in a statement. “The current budget impasse highlights the ongoing vulnerability of funding that the State of Connecticut provides to its local governments.”

The review list is made up of towns and regional school districts that are facing cuts in state funding that are equal to or more than reserve cash. (Find Your Patch and more news of the day, including our most-read stories.)

“Today’s news makes it clear that shifting more burdens onto our towns and cities is no way to balance the state budget and why I will continue to advocate for a budget that creates stability and protects our municipalities, our schools and our property taxpayers from more burdens, just as they were protected in the budget the legislature already passed,” said Senate Republican President Pro Tempore Len Fasano.

Related: Malloy’s New ‘No-Nonsense’ Budget Proposal: See How Your Town Would Be Affected

Moody’s noted that municipalities have unlimited property tax flexibility, which would allow them to make up the lost amount of any state funding. Moody’s will analyze how towns can make up the lost funding both in the short and long term.

The credit review would take into account any budget that is put into effect. Republican legislators with the help of a handful of Democrats passed a budget, but it was vetoed by Gov. Dannel Malloy.
On Monday Malloy released another budget proposal that doesn’t cut into municipal aid as drastically as previous proposals. Legislative Democrats and Republicans are also working toward a bipartisan solution. Democratic legislative leaders said that they would review Malloy’s proposal

Malloy’s budget office spokesman Chris McClure said that the warning from Moody’s is another reminder that Connecticut needs a budget as soon as possible and that inaction is having consequences, according to the CT Mirror.

Malloy cut funding to the majority of school systems on Oct. 1 under an executive order. Hiring and capital improvement projects have been put on hold in many school systems.

Municipalities under review for a possible downgrade are Ashford, Bolton, Bridgeport, Colchester, Coventry, East Lyme, Ellington, Enfield, Groton, Hamden, Ledyard, Mansfield, Marlborough, New Haven, Scotland, Shelton, South Windsor, Sprague, Stafford, Stratford, Thompson, Torrington, Watertown, West Haven, Wolcott and Woodstock. Regional school districts are Regional Districts, 10, 8 and 19.

Those with a negative outlook are Berlin, Bethany, Canton, Cheshire, Clinton, Columbia, Hartland, Lisbon, Montville, New Fairfield, New Hartford, New Milford, North Branford, Oxford, Plainfield, Portland, Salem, Somers, Sterling, Thomaston, Wallingford, West Hartford, Wethersfield, Willington and Windham. School Districts 4, 13 and 17 have negative outlooks as well.

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