Quick Guide to Burlington Telecom Controversy
Tonight, the public will finally be asked to sound off on the ongoing controversy regarding Burlington Telecom and its use of $17 million in city funds to keep it afloat.
The City Council called the special meeting, which will begin at 7 p.m. inside City Hall's Contois Auditorium.
Here is a quick recap of the BT controversy, along with links to past articles and blog posts tracking this unfolding story.
Mayor Bob Kiss called a special City Council meeting Tuesday night so he and his administration could respond to growing criticism of Chief Administrative Officer Jonathan Leopold's decision to loan Burlington Telecom $17 million — from what is essentially the city's checkbook — to keep the fledgling utility afloat while the city explored new financing options.
That move violated BT's license to do business, issued by the Public Service Board; BT was supposed to repay the city any borrowed money within 60 days.
Some councilors believe it also violates the spirit, if not the letter, of the city's charter.
Councilors are also upset that Leopold failed to explicitly inform them about his use of taxpayer funds to prop up BT — or of the violation until six months after city officials learned of the problem. Nor did he seek their approval, or the approval of the city's Board of Finance, to loan $17 million to BT.
Only the council or the board of finance can approve additional financing for BT.
Leopold has admitted that he did not seek explicit approval from the Board of Finance or the City Council to use the city's "pooled cash" (i.e. checkbook) for Burlington Telecom, nor did he tell the City Council that BT was in violation of its certificate of public good until six months after city officials learned of the violation.
He bristles at the notion that he has kept this a secret, though admits he could have done a better job at ensuring that councilors, and the board of finance, understood the implications of BT's financial troubles.
The use of "pooled cash" to fund various operations of the city is a routine practice, said Leopold, in anticipation of receiving outside financing. In the case of BT, no such additional outside financing has been secured.
Under questioning Tuesday night, Leopold admitted that if BT were to go belly-up, and a sale of its assets were not enough to cover the money it owes to outside financiers and taxpayers, that any money not repaid to the "cash pool" would become a drain on the city's general fund.
This original 60-day stipulation was put in place to answer competitive concerns raised by Adelphia (later Comcast) and the Public Service Department. Both the state and the multi-billion dollar cable giant were concerned that if BT were allowed to rely on taxpayers for funds it would give them a competitive advantage.
The city's charter also explicitly forbids Burlington from using taxpayer funds or money from Burlington Electric Department ratepayers to fund BT.
The city has also failed to meet its stated timeline to complete the build out of the fiber-optic network within the city. Leopold and Kiss say this is because it's proved more expensive than initially forecast by BT's original General Manager Tim Nulty. City officials say opposition by Adelphia and Comcast caused longer days than anticipated, too.
At Tuesday night's meeting, Kiss suggested several steps the council should approve to shore up confidence in the utility and clear up concerns about its finances.
City councilors gave Kiss and Leopold an earful of harsh criticism, but took no action, at the Tuesday night special session. It's expected that the council will debate a wide-ranging resolution aimed at clearing up the financial controversy and shoring up support for BT.
The council's seven Democrats will caucus Sunday night, in preparation for Monday night's regular meeting, and are seeking input from other councilors as they meet with their own outside counsel, Dan Richardson of the Montpelier-based law firm of Tarrant, Marks and Gillies.
The Democrats pooled about $10,000, their share of $21,000 originally set aside for the whole council to hire a budget analyst, to put an attorney on retainer. The council, as a whole, could not agree on how to hire someone and the administration failed to issue a request for proposals in time for an analyst to be hired before the review of the current budget.
"I realize that some councilors were vehemently opposed to the Dems' use of our council funds in this way and want to proceed differently in the future," noted Democratic Councilor Joan Shannon (D-Ward 5), in an email to her council colleagues. "However, the issue at hand right now is how we can best serve the interests of the Burlington citizens, businesses, and taxpayers, and it is my hope that Mr. Richardson will be of help in this endeavor which I believe is our shared goal."
Leopold has faced increasing criticism from the public and councilors about his role in the funding fiasco, with one councilor — Ward 1 Democrat Ed Adrian — urging Mayor Kiss to put Leopold on unpaid leave until an independent audit is conducted.
Most councilors, though upset with Leopold's actions, have said publicly they want BT to succeed.
Burlington Telecom, a municipally-owned and run cable, phone and internet company, ran into financial troubles in early 2008 when it burned through its $33 million lease-purchase loan from CitiCapital. That loan included the refinancing of the utility's original $22 million loan from Koch Financial.
City officials say people shouldn't lose sight of BT's value to the city and the state. Its fiber-optic network is state-of-the-art and it provides necessary competition in a state where few private companies offer similar services. The state's largest private cable provider is Comcast.
Kiss told councilors Tuesday night that BT has to date saved taxpayers more than a half million dollars by providing lower-cost phone and internet services than previous providers. BT also pays franchise fees and payments in lieu of taxes to the city.
For a complete rundown of Seven Days' coverage of the BT controversy, I've put together this list of blog posts and articles as a resource. I've posted them in reverse chronological order.
Secret Lives, Public Officials ("Fair Game" column, examining the political implications of keeping BT finances secret. Posted Oct. 21)
Kiss Administration Grilled by Council on Telecom Finances (posted Oct. 21)
Councilor Wants City CAO Placed on Leave (posted Oct. 20)
Mayor to Propose Burlington Telecom Fixes (posted Oct. 20)
State Tells City: Stop Loaning Cash to Burlington Telecom (posted Oct. 17)
City to Host Special Meetings on Burlington Telecom (posted Oct. 16)
Telecom Tangle ("Fair Game" column where PSD Commish David O'Brien lashes out at BT. Posted Oct. 14)
Where the Hell's My Money ("Fair Game" column, where CAO Leopold defends use of pooled cash. Posted Oct. 7)
On the Public's Dime ("Fair Game" column originally breaking the $17 million loan from taxpayers to BT. Posted Sept. 30)