In December 2017, the City of Hartford requested Tier 3 designation under the Municipal Accountability Review Board (MARB) in order to access additional tools in achieving long-term fiscal sustainability in exchange for significant accountability and oversight. The City was approved as a Tier 3 municipality in 2018. As a Tier 3 municipality under MARB oversight, the City of Hartford is required to submit and present at a public meeting monthly financial reports to ensure the City is operating with fiscal diligence in conformity with the annual budget and broader financial plan. The City’s General Fund Recommended Budget must be reviewed by the MARB on an annual basis and the revenue assumptions must be approved by the MARB. Any union tentative agreements must also be reviewed by the MARB.
In March 2018, the City entered into a contract assistance agreement with the State of Connecticut to service the approximately $540 million in current general obligation debt service until such debt was retired. This agreement is backed by the full faith and credit of the State of Connecticut. As part of this agreement, the City of Hartford is subject to considerable financial oversight and is precluded from going into the bond market for at least the next five years. There are also limitations on the issuance of new debt for a ten-year period following the end of MARB oversight. Under the contract assistance agreement, the City must fully fund the Municipal Employee Retirement Fund (MERF) actuarially determined employer contribution (ADEC) and is precluded from accumulating general fund operating deficits above 1% or more per the most recently completed fiscal year’s independent audit. The City is also precluded from having an operating general fund deficit 1.5% or greater of average general fund revenue over two consecutive years, or having a cumulative unassigned fund balance deficit of 1.5% or more. Lack of compliance with such requirements would trigger a default, thus placing the City in Tier 4 full oversight.
The City of Hartford provided a 5-year Municipal Recovery Plan to the MARB in March 2018, which identified revenue and expenditures assumptions, contract assistance for debt service, labor concessions, economic development goals and initiatives to generate Grand List growth, as well as revenue and expenditure initiatives, the combination of which provided a pathway to fiscal balance. Such plan required the City to shift to a pay-as-you-go Capital Improvement Program, whereby the capital expenditure program is funded primarily from the General Fund. Such plan was reviewed in detail by the full MARB and a subcommittee thereof and approved in June 2018. The City will resubmit an updated Five-Year Financial Forecast annually in concert with the Mayor’s Recommended General Fund Budget.