When the state of Connecticut sought a routine refunding of $500 million in bonds a couple of weeks ago, it found that Wall Street's credit crisis had hit home.
Only about $90 million of the state's bonds were bought, raising all sorts of questions about how the state can cope with billions in projects that are planned or underway.
Bristol's comptroller, Glenn Klocko, said that if the state can't sell its bonds and other towns, including AAA-rated Avon, can't find buyers either, then it's time to consider a freeze on all capital projects.
"Those who are looking to bond are going to have serious problems," Klocko said.
Klocko said the credit crisis that has contributed to tumbling stock values and corporate panic is going to have an impact on Bristol, too.
He said, for instance, that if the $130 million school project had to be financed now, "it would be a no go."
Klocko said that Bristol wouldn't be able to bond for its share of the cost and the state would likely pull out of it anyway, since it's on the hook for 74 percent of the tab.
"You can't do it now," Klocko said. "The bets are off. The numbers are very shaky."
Klocko said the financial situation is unprecedented since the Great Depression, with nobody having the cash to buy bonds.
"It's the worst ever. It's extremely tough," Klocko said.
With such uncertain markets, he said he intends to recommend to the City Council and the Board of Finance to hit the brakes on everything they can.
"It's not the time to fool with new projects," Klocko said.
The city has about $25 million in borrowing that it intended to roll into a bond sale next year. For now, it's simply borrowing the cash from its own reserves, including the $5.3 million it used to buy the downtown mall several years ago.
Klocko said that the city can't finance any more projects itself. It would have to sell bonds if anything new arose, even an emergency allocation to fix a bridge or other type of crisis.
"We no longer have the capacity" to handle any more significant spending needs, the comptroller said.
The chaos in the markets may have an immediate impact on the school plan because the city is negotiating the final purchase of the former Crowley dealership on Pine Street and is eyeing an empty lot off Matthews Street. Each would house a 900-student school.
But if officials are not confident that they'll be reimbursed at the promised 74 percent rate by the state, those purchases may not happen, because the city might prefer not to risk getting stuck with land it can't use.
Delaying the purchases might well kill the project since there's a tight timetable already.
"It's not the time to fool with new projects, including schools," Klocko said.
Calls to the state treasurer's office have not been returned yet today, but Reuters quoted an anonymous person in the Connecticut government today who said the state got only about $88 million in retail orders during a presale period and had slashed its sale to $100 million overall.
That means about $400 million in expected transportation infrastructure work around the state won'tt have any financing in place and, presumably, may not happen until bonds can be sold. It's not clear if that would have any impact on Bristol.
Most of the municipalities around the country that have sold bonds in recent weeks have seen the interest rates they pay soar, which can have a drastic effect on the cost of projects.
State Rep. Frank Nicastro, a Bristol Democrat who is also on the City Council, said he warned months ago that the economic crisis would worsen.
He said that the city can have terrific school buildings, but if it's taxes are too high, there won't be any children to attend them.
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