Public Service Board Angered by Burlington Telecom Violations
In a tense, nearly two-hour hearing before the full Public Service Board, Burlington Telecom pleaded its case to be allowed to dip into the city's so-called "cash pool," if needed, to make a $390,000 interest payment to CitiLeasing in less than a week's time.
The PSB made no ruling at the hearing, but it was clear that the board is skeptical that BT can support itself now, or in the future, based on its current financial model.
Initially, the hearing was to be scheduled before a hearing officer, but the three members of the board decided to take up the matter themselves.
"We take the matter very seriously," said PSB Chairman James Volz in an opening statement. "We must closely analyze the impact on the city taxpayers, and we have to take into account the past history of behavior. BT will have to demonstrate, at a minimum, that it will be able to repay the money within 60 days."
The Public Service Department, which represents ratepayers before the PSB, opposes BT's request.
"Our position has not changed, and it's not an easy one to come to for us," said Geoff Commons, a PSD attorney. "In a sense, it feels like we're pushing them off the cliff, but in fact they are the ones that have pushed themselves off the cliff. They are like a cartoon character that doesn't start to fall off the cliff until they look down."
"It's time for Burlington Telecom to face the music," said Commons.
The PSB's decision to hear the case personally wasn't the only surprise. PSD Commissioner David O'Brien made a guest appearance at the hearing—a rarity. Usually only staff attorneys and experts attend PSB hearings.
For example, O'Brien did not attend a hearing involving Entergy two weeks ago, when the utility was facing increased scrutiny for its admitted lies to the PSB, the PSD and lawmakers.
If the PSB takes no action before February 17, the city said, it will go ahead and make the interest payment, understanding it could be compounding its Condition 60 violation. If the PSB rejects the city's plea, BT will be forced to make an interest payment with no borrowed cash, only its own internal cash supply.
Most of the information presented — at least in terms of finances — was nothing new. BT owes $17 million to the city's checkbook and is currently struggling to pay its bills. How it will get out of its financial predicament remains to be seen, though tonight's City Council hearing could begin to shape BT's future.
The only new information to emerge from today's hearing was that a key BT witness — Chief Administrative Officer Jonathan Leopold — has not been cooperating with the PSD's discovery requests for information about BT's finances.
"In its filings, the department says that the negotiations with the city have almost come to a complete standstill because of the noncooperation of [Leopold]," noted PSB Chairman James Volz.
Geoff Commons, an attorney for the PSD, who represents ratepayers in cases before the PSB, said the city was given an additional set of questions on January 6, and to date Leopold has been uncooperative, though he is apparently the only city employee who can answer some of the department's inquiries.
Ellis told the PSB that Leopold has been named personally in a separate lawsuit filed by two Burlington citizens. In that suit, Leopold is held personally responsible for repayment of the $17 million owed to the city's cash pool, if the money cannot be repaid by BT.
Because he is named personally, Leopold has to seek private counsel to represent him in the proceedings. He has not yet hired anyone, but Leopold said he is close to finding an attorney.
The city's insurance carrier will pay for Leopold's attorney, said City Attorney Ken Schatz. The city has hired outside counsel to represent it in the citizen lawsuit. That lawyer is Pietro Lynn.
BT believes it can make the February 17 payment largely with internal cash and not rely on borrowed money from the city's checkbook, but there is the chance it will need to borrow an unknown sum of cash. BT's attorney, Bill Ellis, told the PSB that if it does borrow the money, it has sufficient receivables to repay the cash pool within 60 days per a Condition 60 of its certificate of public good.
But its ability to make a similar payment in May is "up in the air," said Ellis.
BT is seeking the board's approval to make the payment, even though it is in violation of Condition 60, because it doesn't want to "appear to be flouting the board's order," said Ellis. Ellis said BT reached its precarious position through no one's fault but its own, and its appearance today was designed to show the PSB that BT wants to proceed with more caution and transparency before the board.
The board, however, didn't seem to buy that argument.
"We've struggled in the last month or so mightily with the question of public trust," said PSB Commissioner John Burke. "It seems like a crisis, especially when we are relying on those we regulate to provide us with information. Self-reporting is critical, and we had a problem here and a big problem, and how do we get by the issue of How do we trust you now?"
That seemed to be the question on all three board members' minds. Ellis said the city didn't want to be seen as "worsening the situation" and hoped it could repair its standing with the board.
"So, the previous were venial sins that could be absolved with holy water and today is more of a confessional?" asked Burke.
Ellis said that, in fact, BT was genuflecting before the board in hopes of showing it is sorry for its past violations and wants to work with the PSB to find a solution that doesn't result in a "fire sale" of BT's assets.
Mayor Bob Kiss, who attended the hearing along with City Council President Bill Keogh and Councilor Ed Adrian (D-Ward 1), said after the hearing that he still believes the best option for BT is to refinance its debt, repay the city's cash pool and be given up to three years to boost its customer base and look for either a private strategic or an equity partner to help sustain its long-term operations.
Tonight, the Burlington City Council will officially hear from the Blue Ribbon Committee on BT's future.