Moody's downgrades Berlin bond rating due to state budget impasse

Published on Thursday, 19 October 2017 21:56
Written by Charles Paullin

Staff Writer

BERLIN - A recent bond rating giving Berlin a negative outlook has the town finance director concerned but not worried in the long term.

Moody’s Investors Services gave the rating to Berlin, as well as 28 other Connecticut municipalities, and initiated a review for possible downgrade for 29 other local governments Monday as a result of the state budget impasse.

“In the immediate term it doesn’t impact us,” said Finance Director Kevin Delaney. “What it means is there are some serious concerns about the governor’s proposals of cutting state aid to the town and how we would respond to it.”

According to a release announcing the rating, the negative outlook was assigned because in the absence of state funding or cuts in expenses, the town would need to raise property taxes by 10 percent or more to make up for the decline in state funding from fiscal 2017 to what is provided under the executive order currently in effect.

Because of that reasoning, Delaney said, he isn’t sure the rating is exactly fair since the town wouldn’t necessarily rely fully on a supplemental tax increase to account for any shortfalls in the budget.

“If it’s a small change, like a million loss compared to what we budgeted, the response would likely be different if we took a six million hit,” said Delaney. “We’re looking at every different alternative.”

He said that he he, town leaders, the Board of Education and the police have been meeting regularly, scrutinizing filling any open positions, capital requests and use of any dollars.

“You’re hearing a lot of no around here,” said Delaney.

Without a budget in place, the governor enacted an executive order that cut all $6.2 million of an education cost sharing grant, which was a primary form of state funding, according to Delaney.

The town passed their $85.3 million budget earlier this year, which led to a 2.5 percent tax increase, without factoring in any possible state funding. Had the town done so with the governor’s initial proposal, which cut ECS funding and shifted the burden of paying for one-third of teachers’ retirement pensions to the town, taxes would have increased over 10 percent to cover the difference.

Legislators announced Wednesday that they reached a compromise deal that caused less severe cuts to municipal aid and removed the shift of teachers’ retirement pensions to the towns. The deal also reportedly removes motor vehicle tax revenues in the second year, which would be a $6.6 million, or roughly 9 percent, hit to tax revenue to the town, according to Delaney.

“That’s a fairly big number we’ll have to make up somewhere,” said Delaney, adding he’s hopeful a budget will be passed next week so he and town officials can begin to analyze an actual impact to the town. “We’re running out of options.”

Charles Paullin can be reached at 860-8/01-5074 or cpaullin@centralctcommunications.com.



Posted in New Britain Herald, Berlin, General News, New Britain on Thursday, 19 October 2017 21:56. Updated: Thursday, 19 October 2017 21:59.