Bridgeport, Conn., officials and the state financial review board have approved a balanced budget for fiscal 1994, two years after the city applied for municipal bankruptcy protection.

The $339 million budget, which received final approval late last week, includes $1 million for a rainy-day reserve fund and money for the hiring of 80 new police officers, city officials confirmed.

Bridgeport officials also submitted a proposed budget to the state-appointed financial review board last month, but the board rejected it because of unanswered questions and assumptions about state aid.

Since then, said Linda Savitsky, executive director of the review board, the city has been forthcoming with information. She also said state aid came in higher than expected.

"Initially, the city said they expected $10 million from the state that they would use for the hiring of new police," she said. "We thought that was a bit optimistic."

Savitsky said her fears were allayed when the state announced that $10.5 million would be available. The higher state aid is attributable to higher-than-expected revenues from the Foxwoods Casino on the Mashantucket-Pequot Indian reservation, according to Savitsky.

The $1 million reserve fund will be financed with revenues from the anticipated sale of the Bridgeport Zoo, according to Nestor Nkow. the city's senior project manager for budget and financial information.

The state oversight panel, known as the Bridgeport Financial Review Board, was established ln 1988, when the city's employment and industrial base began to shrink. The board has the power to accept or reject any financial decisions made by the city.

Savitsky said that for the first time since its creation, the review board and the city council agreed on the budget before the beginning of the fiscal year which begins on July 1.

"We have seen a tremendous improvement in the cooperation between the financial board and the city," said Douglas Cutler, the undersecretary of the Connecticut Office of Policy and Management. "The mayor was faced with an $18.6 million budget deficit when he took office and now we really feel we are on the right track."

Mayor Joseph P. Ganim was unavailable yesterday, but his press spokeswoman, Jo Fox, said the mood in the city is positive.

The new budget has "no bells, no whistles, and no new taxes," she said.

The optimism about the city's present situation is a far cry from where officials were only two years ago.

For years, Bridgeport was plagued by a declining industrial base, increasing poverty and unemployment, and a low tax collection rate.

The city was at its lowest point in June 1991, when former Mayor Mary C. Moran filed for Chapter 9 municipal bankruptcy protection.

The petition was denied by the U.S. Bankruptcy Court, when it ruled that the city had not met the law's required definition of insolvency.

Ganim defeated Moran in the November 1991 election. Upon being sworn in the following January, he immediately rescinded the city's appeal of the bankruptcy.

After Moran filed for bankruptcy, the rating agencies reacted swiftly. Standard & Poor's Corp. downgraded the city to CCC from BBB and Moody's Investors Service cut its assessment to B from Ba.

Both agencies said once the specter of bankruptcy was removed, the city could begin to rebuild the confidence of the municipal marketplace.

Officials at Moody's and Standard & Poor's reported that the city had begun to turn the corner as early as last August.

Standard & Poor's upgraded the city to BB in response to Ganim's efforts to improve the city's finances and one week later, Moody's boosted the credit to Ba.

Although neither Savitsky nor Cutler said they have spoken with rating officials, recently both said they expect the city to be able to sell bonds on its own strength within the next couple of years.

"I think it will take a while for the stigma of the bankruptcy to totally fade." Cutler said. "As is the case with the future of the financial review board, we'll have to wait and see."

The city has authorization to sell $11.4 million of bonds that would be used for mostly school improvements. Those bonds would be secured by a special, temporary state backing.

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