A new annual report from Truth in Accounting found Connecticut has $67 billion in bonded debt and unfunded retirement costs, making it the third most indebted state per taxpayer in the nation. The total debt, which amounts to $50,700 per taxpayer in the state, is based on Connecticut’s 2019 financial ...
Is Stamford the last big city standing?
Bridgeport, New Haven, Waterbury and Hartford all face mounting debt coupled with high taxes, high rates of poverty and declining services, according to a forth-coming study entitled Connecticut’s Broken Cities.
However, Stamford remains the one major Connecticut city that does not qualify as a “distressed municipality.”
Mayor David Martin says that Stamford struggles with the same challenges as those cities. “Every large municipal city is in trouble except for Stamford,” he said.
Much like Danbury, Stamford is one of the few Connecticut municipalities bucking several state-wide trends. The city has experienced population growth, enjoys a triple-A credit rating due to low debt and continues to end the fiscal year in the black.
The city is defying state trends in nearly all measurable areas except for its pension and retiree benefit funds, which remain underfunded due to almost ten years of the city neglecting to pay the full annual required contribution.
According to the 2016 actuarial report the city’s pension fund was 75 percent funded, down from 97 percent in 2010. The report indicates the previous year’s loss was due to “net investment losses” and “administration deductions.”
But the OPEB benefits for the city’s employees is only 19.5 percent funded.
Although, dismally low, the OPEB fund is actually higher than it was in 2015 as the city takes steps to deal with its consistent underfunding. In 2010, Stamford was only paying 40 percent of the annual required contributions to OPEB.
In 2015, Martin pledged to begin fully funding the pension and OPEB costs. Martin said funding the OPEB “was never even done” until now. “This is the first year Stamford has ever paid the full ARC.”
Martin espouses a philosophy of “financial integrity” and says the city is planning for the long term rather than just transferring payments from one fund to another, such as the pension fund, year over year to make a budget work on paper. “Just because you’re paying for it from a different fund doesn’t mean it doesn’t cost anything,” Martin said.
Martin added that he is “working hard” with the city’s labor unions to change contracts in the future to ensure long-term sustainability and says the city has been “making progress with our unions.”
Despite the liabilities, the city is growing faster than the rest of the state and even the country. Stamford’s population has grown 5.1 percent, which has spurred more housing investment, which has led to more employment and property tax revenue.
Stamford’s grand list of taxable properties has increased 2.5 percent since 2015 and accounts for 73 percent of the city’s revenue. In 2016, Stamford raised the mill rate on taxable property in the city to 25.76, an increase of 2.5 percent. But the city still taxes property at a far lesser rate than Hartford, New Haven, Waterbury or Bridgeport.
Stamford’s unemployment rate is lower than the state as a whole and residents have a higher median income. As of 2016, Stamford’s unemployment rate was 4.1 percent compared to the state’s 5.1 percent and the city’s median income was $79,359 as opposed to the state median income of $70,331.
But the city also has some of the highest living costs in the nation. Stamford’s cost of living is 60 percent higher than the rest of the nation according to Sperling’s Best Places, a database for municipal statistics.
The city’s proximity to New York City and Metro-North access has consistently kept the city more expensive by attracting investment companies, boasting some of the largest hedge fund management companies like Bridgewater Associates.
But Martin says that location is only part of the key to Stamford’s continuing success. “I’m not going to pretend that being close to New York isn’t important,” Martin said. “But we’re working very hard to make this a place people want to live and businesses want to locate.”
Despite easy access to the city a recent Wall Street Journal article detailed the abandonment of the world’s largest trading floor – a 720,000 square foot trading office that has been vacated by UBS Group AG. Author of the article, Peter Grant, theorized that empty trading floor was symbolic of a shift in the financial sector following the 2008 recession.
A corollary article in Bloomberg noted that office vacancy rates are nearly 30 percent. The actuarial report, however, indicates that part of that high vacancy percentage is actually due to the loss of the UBS Group AG trading floor and employers designing more open office environments “thus reducing their overall size for employee per square foot.”
A growing population, low bonded debt, zero deficits and a willingness to work toward long-term sustainability means Stamford has a strong future. But the future of other major Connecticut cities remains in doubt. “Why does Connecticut with one of the highest incomes in the country have three of the poorest cities in the nation?” Martin asked.
Connecticut’s Broken Cities found that even though Connecticut as a whole may have a higher income, its cities have become areas of concentrated poverty. The population in Bridgeport, New Haven, Hartford and Waterbury have declined but the number of people living in poverty has increased by 72 percent.
The declining population, increased poverty and serious long-term debt means the cities face serious issues even as they cut their workforces and decrease services.
“These four cities are home to roughly 500,000 residents, or 14 percent of the state’s population,” study author, Stephen Eide, wrote. “They educate over 15 percent of its public school children. The fiscal challenges of these localities deserve the attention of state lawmakers. However, what the state should do, or can do, given its own fiscal situation, are complicated questions.”
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