Council Balks at Burlington Telecom Refinancing
After two hours of feisty, and at times acrimonious and partisan debate, the Burlington City Council early Tuesday morning scuttled a $61.65 million refinancing proposal for Burlington Telecom.
Mayor Bob Kiss came to the council with a resolution offering to repay any money BT borrowed from the cash pool since October 1 within 60 days, while at the same time seeking council approval to work with financier Piper Jaffray to fully develop a refinancing deal to keep BT afloat and help it complete its buildout.
A complete deal, he said, would come back to the council sometime in mid- to late January for final approval.
In October, the council asked the administration to come back to it with refinancing options, and financing strategies, no later than November 16. Kiss, and Chief Administrative Officer Jonathan Leopold, said the proposal with Piper Jaffray was in response to that request.
Of course, no one said the council would approve what the administration proposed. The council also felt as if the administration was unfairly pushing the council to make a rush decision without giving it enough information.
The refi deal, announced Friday by Kiss and Leopold, would repay BT’s outstanding $33.5 million lease deal with CitiCapital as well as the roughly $17 million owed to the city’s so-called "cash pool" or unified checkbook. The deal would require the city to set aside another $8 million in reserve funds, and it left open the option to finance another $10 million down the road.
While BT proponents cheered the deal on Friday, that good feeling didn't last long. A number of BT boosters believe that the council majority is either willingly, or unwittingly, undermining BT's ability to operate in order to score political points against the administration.
Council Democrats, using parliamentary procedures, split the resolution into two parts and then, blocking debate, approved the repayment clause while rejecting the refinancing proposal. The council voted 12-2 on the repayment provision, and 10-4 on the refi rejection.They'll reconsider the refinancing proposal at their December 7 meeting.
On the final vote, all seven Democrats, two Republicans and one Independent, Karen Paul, voted in favor. All three Progressives and Independent Sharon Bushor voted against.
Councilor Sharon Bushor (I-Ward 1) said the delaying a vote on the refinancing option could force BT into insolvency if it can’t borrow money from the cash pool until a new financing deal is approved.
“I hear people saying they are here to protect taxpayers, but you could easily end up leaving people with a huge debt and no Burlington Telecom,” said Bushor. "By doing this, we're leaving the city and BT hanging."
She also complained bitterly about how Democrats blocked debate during the meeting. “I don’t like being boxed in by this council,” said Bushor.
Leopold, too, said he was “appalled” by the action, calling it a partisan ploy designed to embarrass the administration. Even in the council brawls between Democrats and Mayor Bernie Sanders in the 1980s, in the end all sides came together to work on what was best for the city, he added.
Leopold said he sees little of that spirit at work now.
“Do you really want to destroy a $50 million investment and the credit rating of the city?” asked Leopold. “Because that’s what this could do.”
In response, Councilor Nancy Kaplan (D-Ward 4) said she was tired of being “scolded time and time again. I don’t think we deserve it. We’re racking our brains for a problem that we did not create. Treat us with a modicum of respect.”
Councilors Joan Shannon (D-Ward 5) and Ed Adrian (D-Ward 1) argued that council needed more information, such as BT’s projected financials, its business plan, any documents provided to the financier, and any report given to the city by the financier, before deciding whether to move forward.
Councilors questioned the impact of the new deal on the city's taxpayers. Bond counsel Thomas Melloni told councilors the proposed financing structure would not place taxpayers at direct risk.
Mayor Kiss offered to host a series of meetings to answer councilor’s concerns, but asked the council to allow talks with Piper Jaffray to continue. His offer was rejected.
Kiss told the council earlier that he vetoed their October 26 resolution requesting the mayor put Leopold on leave while the BT mess was sorted out. At the time, Kiss said he wouldn't comply with the resolution — which was purely advisory.
It was Kiss' first veto since first being elected in 2006. And, given the way the debate went last night — it may not be his last.
I had my customary front-row seat in Contois Auditorium and provided a Tweet-cast for all those at home who couldn't watch the live Channel 17 feed of the meeting on Burlington Telecom channel 317.
Below are select Tweets from the tail end of the meeting. Click here to scroll and read the full recap.
- #BTV Councilor Kaplan - "We are trying to help you get out of this problem. Give us a modicum of respect."
- #BTV Councilor Joan Shannon - needs more info from Kiss Admin before voting on #BTV Telecom refi. Wld be OK with 2 wk delay
- #BTV Councilor Kaplan "tired of being scolded again & again. I don't think we deserve it. We are trying to fix a problem we did not create."
- #BTV Councilor Nancy Kaplan (D-W4) says councilors need to conduct due diligence on $60M finance. Need more info
- #BTV Councilor Sharon Bushor (I-W1) said motion will leave Burlingtonians with "huge debt and no BT."
- #BTV bond counsel tells council the proposed refi deal would not put taxpayers at direct risk
- #BTV CAO Jonathan Leopold sez Adrian amendment, if approved, would destroy Telecom & city's credit rating
- #BTV councilor Adrian seeks Telecom biz plan, pro forma budgets, consultant's report, docs sent to Piper Jaffray, and PJ's review of BTV Telecom
- #BTV Councilor Ed Adrian (D-W1) introduces amendment seeking more info from Kiss Admin before approving refi deal