State Tells City: Stop Loaning Cash to Burlington Telecom
The Department of Public Service told the city of Burlington late Friday it wants a firm commitment from the Queen City that it will not loan Burlington Telecom another dime and will repay the $17 million already owed to city's checkbook.
The request came Friday in a filing by the department in the ongoing case before the Public Service Board. In that case, Burlington Telecom is seeking to amend its certificate of public good to operate for two reasons: One, it hasn't completed its build out within the timeframe it promised, and it has borrowed money from the city without repaying it in 60 days.
In fact, Burlington Telecom has borrowed about $17 million since early 2008. Neither the city council nor the city's board of finance explicitly agreed to loan the money. Instead, the decision to loan the money was made by Chief Administrative Officer Jonathan Leopold.
Public Service Commissioner David O'Brien informed Seven Days via email Saturday that the request is necessary given the amount of money involved, and the city's failure to comply with its repayment condition for nearly two years.
"In our view they should not continue to violate the condition of their CPG, i.e. cause more harm, while the matter is investigated," said O'Brien.
"The department recognizes that this action may be difficult to effect," states the letter. "However, BT's violation of its CPG conditions is a serious offense and cannot be allowed to continue as the department investigates, and the board rules upon, BT's amended petition."
The state wants BT to repay the money, with interest, and promise not to borrow money from the city until all the outstanding debt is repaid.
The filing is the latest in an ongoing public feud between O'Brien and city officials regarding Burlington Telecom. Next week, two special meetings will be held in Burlington to talk about the troubles facing Burlington Telecom — one city council meeting and the other a public forum.
City officials say they received the DPS letter after the close of business Friday, and several hours after it was released to the media.
"The tone of urgency of the letter is ironic since the DPS has known about the City’s use of pooled cash since November 2008," said Mayor Bob Kiss. "This is a public relations ploy consistent with Mr. O’Brien’s inaccurate and unwarranted statements about BT’s finances. His remarks undermine public confidence in BT and increasingly appear to be a strategy to close BT down."
Burlington Telecom general manager Chris Burns said O'Brien's statements are "irresponsible. We're in an already competitive market with Comcast and he's only making our job harder."
Kiss noted that the city asked the PSB to review the condition related to the repayment of loaned money in light of the need to refinance BT and to resolve the condition regarding completion of the build out within the city.
Leopold said the city originally focused on the build out condition because in order to finance the next phase of Burlington Telecom's operations, the city needs to know exactly what the PSB defines as "passing by" all homes. The city said its initial CPG is not clear if"passing by" all homes includes laying fiber-optic cable along private rights-of-way inside condo associations.
In filings before the PSB, the city estimates it will cost another $6 million just to pass by all homes (including the entrance to condo associations) and businesses in Burlington.
The city could refinance BT's debt right now, and repay the city, but it could cost $1.1 million in fees and penalties, said Leopold.
The city would, in all likelihood, need to seek additional financing once the PSB issues a ruling on the build out condition. That could end up costing the city more money in fees and penalties, said Leopold.
"By asking us to pay the money back now, it's just a short-term fix without looking at the long-term viability of the business," said Burns.
Kiss said the DPS and the city tried to work through BT's problems for months before petitioning the PSB to settle. He believes O'Brien's actions call into question the department's credibility in the case.
"The events of this past week raise serious concerns about the role of the DPS in this proceeding," said Kiss.
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Here is the complete text of the letter filed Friday by the Department of Public Service:
"The Department has received a copy of BT's Amended Petition and Testimony dated September 30, 2009 and has conducted its initial review of these documents. Understandably, the Department is deeply concerned about BT's violation of Condition 60.
"The Department requests that BT cease its violation of Condition 60 during the course of this proceeding. Specifically, the Department is seeking a firm commitment from BT that it will re-pay all money withdrawn more than 60 days ago from the pooled cash management system back into that same system. The repayment should include all interest charged against BT from the pooled cash account. Furthermore, the Department requests BT's assurance that it will stop taking any money from the pooled cash system until it has paid back the currently overdue sum, and will thereafter fully comply with Condition 60 unless and until the PSB orders otherwise.
"The Department recognizes that this action may be difficult to effect. However, BT's violation of its CPG conditions is a serious offense and cannot be allowed to continue as the Department investigates, and the Board rules upon, BT's Amended Petition."
Photo credit: Jordan Silverman.