Kiss Administration Grilled by Council on Telecom Finances
Burlington taxpayers could be on the hook for any unpaid money owed to the city's general fund if Burlington Telecom were to be sold for less than what it owes outside investors.
That admission came from Chief Administrative Officer Jonathan Leopold under tough questioning from Councilor Ed Adrian (D-Ward 1) at last night's special city council meeting called to discuss financial problems at the city's municipally owned telecom company.
In all, Burlington Telecom has borrowed roughly $17 million since early 2008.
To date, Leopold has stressed that city taxpayers would not see their money put at risk due to the loans given to BT. Instead, Leopold said refinancing the debt or a sale of the assets could cover the owed money.
But, when asked by Adrian how the loss would be accounted for if Burlington Telecom were sold for less than what it owes, Leopold said it would be a "negative balance" on the city's general fund.
In recent weeks, city officials admitted to loaning Burlington Telecom (BT) at least $17 million from the city's checkbook in order to keep the utility afloat as it awaited a new round of financing to complete the build out of its fiber-optic network within the Queen City.
Since last fall, the city has been negotiating with the Department of Public Service to find ways in which to better define how that build out occurs in order to plan the next round of funding. To date, BT has spent upwards of $50 million: $33 million came from two separate rounds of financing with outside investors, while the remaining $17 million has come from Burlington's "cash pool" account. Or, in layman's terms — the city's checking account, through which about $300 million flows annually.
At a special city council meeting Tuesday night, councilors spoke angrily at times of the public trust that has been broken by the administration's failure to bring Burlington Telecom's problems to the council sooner.
The Kiss administration learned last November that BT was in violation of a clause in its certificate of public good to repay any borrowed cash within 60 days. They did not disclose that to the council until mid-May.
"Why did you not tell the city council about the violations for more than six months? Why did you not tell the fiduciary board of Burlington Telecom this information?" asked Adrian.
"In hindsight, it was a mistake," said Leopold. He said the city was more focused on determining the full cost of the city build out and negotiating with the Public Service Department.
However, Leopold took issue with media reports, and councilor's accusations, that the information was kept hidden. At many steps in the process, he contended, various city and state officials were informed of the use of the cash pool loans to prop up BT. He also said the loans were accurately noted in the city's annual audit and report to the public.
That answer didn't sit well with many councilors.
"As a lawyer, if I make a mistake there are two things I do immediately: Tell the court and tell my client," Councilor Mary Kehoe (D-Ward 6) told Leopold and Mayor Bob Kiss. "The city of Burlington is this administration's client. I think it was a fundamental mistake to not come forward."
Several city councilors, including Councilor Sharon Bushor (I-Ward 1), said the council cannot absolve itself from responsibility.
"Those of us on the council who were here should own up to the budgets we reviewed," said Bushor. "We tend to simply review budgets and accept them as is. In fact, this council couldn't come to an agreement on hiring a budget specialist to help us."
In fact, Democrats on the council have taken their share of pooled cash and put their own attorney on retainer.
Several councilors, including Adrian and Joan Shannon (D-Ward 5), said the Kiss administration had been too reluctant to share information the council needs to provide proper oversight.
Shannon, in her comments, said the lack of information coming from the administration to the council in regards to Burlington Telecom — and the complexity of that information — speaks to the need for a special oversight commission to keep a closer eye on its finances and operations.
A council resolution that would have created such a commission failed earlier this month by a 7-7 vote.
"The time for patience is over," said Shannon. "I don't have confidence in the same team of people who have been working on this since November of 2007."
Other councilors said the public should be reminded of the value of Burlington Telecom.
"I don't think we've lost the public's trust, but we are at a critical juncture," said Councilor Emma Mulvaney-Stanak (P-Ward 2). "We need to remind people what an asset Burlington Telecom is to the community."
Like many councilors, however, Mulvaney-Stanak said she would support an outside audit of Burlington Telecom's finances and management.
Councilors will host their own public forum Thursday night in Contois Auditorium to hear from the public on this topic. The next regular meeting of the council is Monday, October 26.
Mayor Kiss, who had been scheduled to be out of town, has changed his plans and will remain in Burlington to attend the hearing.
Several councilors hoped to keep the special session going past its 10:30 p.m. ending time, but a motion to continue the meeting — which needed two-thirds majority to win — failed.