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March 15, 2010

Blue Ribbon Panel: Too Soon to Review Reboot BT Offer

BlueRibbon A special committee empaneled to help the Burlington City Council evaluate the future of Burlington Telecom voted unanimously Monday morning to hold off on reviewing any single, specific outside offer for help until the city's cash-strapped telecom venture's finances are examined by an outside consultant.

Last week, the Burlington City Council asked the BT Blue Ribbon Committee to evaluate a recent offer dubbed "Reboot BT" crafted by nine businesspeople, three of whom were at the helm of BT when it was created. Along with the committee, a newly-hired financial consultant will be asked to weigh in on the proposal, as well as other short-term offers of help.

That financial consultant, Dorman & Fossett, will be in town this week and has yet to begin its work.

Members of the Blue Ribbon Committee said it would behoove the panel to hear from the consultant first about how to set up a timeline and structure to review proposals rather than take on proposals piecemeal.

"If we were interviewing candidates for a job, we wouldn't interview candidates over weeks and months when the information was no longer fresh as we came across the next proposal," said Pat Robins. "And, we can't be talking to proposers as we're trying to figure out what financing option works best. We respond to every request and be whipsawed."

Robins said the panel should stick to its report's key finding, which is that the city needs to figure out how to restructure BT's finances first, then look for an outside partner.

The seven-member panel unanimously agreed.

Committee members said the Reboot BT proposal also included a complete takeover of BT's management by new people, something most agreed could hurt the chances of BT finding a long-term solution, as potential partners could be turned off by the fact that new people are on board.

"Terry Dorman said that there should be no changes in management at least until he's had a chance to come in and look at the things as they are now," said City Councilor Karen Paul (I-Ward 6), a member of the panel.

Panel member Bill Shuttleworth, the former director of the Vermont Telecommunications Authority, said there is interest in working with BT from the industry folks he's talked to informally. But, they are waiting for clarity from the administration and council.

"From what I hear from people in the industry, they are waiting for the city of Burlington to decide what it is they are looking for and are expecting a formal solicitation," said Shuttleworth. "The only information they have right now is what they are picking up on the grapevine and what they are reading in the Free Press. They've all read the Blue Ribbon Committee's report and nothing in there surprises them."

"What is making them nervous is the political environment surrounding this, and that includes the state of Vermont, as it would appear that the state is not supportive of muni fiber projects," Shuttleworth added.

Mayor Bob Kiss told the group that so far several groups have expressed an interest in working with BT: RebootBT, V-Tel, Sovernet, and FairPoint. Only Reboot BT has submitted a formal letter of interest outlining their proposal. The city is also working to meet a March 26 deadline to submit a proposal to Google.

Kiss said he agreed with the committee's decision to review more than one proposal at a time, and to not accept the Reboot BT proposal as offered.

"We want continuity in the business and any decision about the future of the business would be premature," said Kiss. "Once we're ready to move forward, we would be putting out a public request, and create a uniform process rather than just responding to who gets on the phone first."

The committee also largely agreed that when Reboot BT was first offered, the immediate crisis was a $380,000 payment to CitiCapital. Since missing that payment, the city has been in talks with CitiCapital about how to remedy the missed payment, but the financier has yet to claim that Burlington is in default of its lease. There is a $1 million reserve fund that was set up at the start of the lease to help cover any missed payments.

"The world has changed a fair amount since missing the payment," said City Councilor Joan Shannon (D-Ward 5), who sits on the committee.

Monday's vote comes just days after legislators called several city officials to Montpelier to talk about what role, if any, the legislature could take. Lawmakers also expressed their concern that allowing the city's credit rating to worsen could have a ripple effect on state-funded projects at Burlington International Airport as well as potentially the state's credit rating.

Given Moody's recent credit downgrade and another $380,000 lease payment coming due in May, Blue Ribbon panel members said there remains some urgency to continue moving quickly, but also thoughtfully.

Last Monday, Moody's put the city on a 90-day negative credit watch, which means it could further reduce the city's credit rating after 90 days. "Future rating action will depend on the city's ability to produce a viable plan to place the telecommunications system on a more sustainable path and provide additional detail on the prospects for the system to meet its obligations, including repayment of the interfund loan," Moody's noted in explaining its rating downgrade. "Additionally, given the city's reliance on cash flow borrowing Moody's will continue to monitor the city's cash position, its ability to meet day-to-day operating requirements, and how a potential default of their outstanding lease obligation would impact operations of the enterprise."

The recent credit downgrade by Moody's affects $87 million in outstanding debt, making it more expensive to repay existing debts as well as take out new ones.

Chief Administrative Officer Jonathan Leopold told Seven Days that the downgrade will cost the city roughly $3,700 more for every $1 million in new, general obligation bonds. The city may issue $4 to $8 million in the coming year, so the impact could be $15,000 to $30,000.

The administrations liberal relocation and allocation of funds, simply defeats the administrations claims of election 2009 when claiming to have kept budgets down and tax rates low. We now know how. Slide 17 to 51 million greenbacks without accountability and the numbers looked great.
It is time for the administration to become accountable. The only way that will happen is for the Kiss administration to resign and we start from scratch.
Projects such as Moran and anything else must be put on hold until the departure of this administration. I have no trust in this administration. Do You, and why?

Nobody gets it. The information withheld was that BT was in violation of two conditions of its CPG. Councilors knew about it by May-2009. 3 out of 5 major candidates for mayor last March were members of the board of finance. That means that they all should have known Burlington's financial situation, especially BT, from executive sessions they all attended. One assumes finance board-cum-mayoral candidates all had an incentive to expose Kiss' "claims" that the city was in not good fiscal health. They did not.

Councilors on the board of finance don't necessarily know anything. You think being on the board of finance gives them some kind of crystal ball? They still have to get most of their information from the treasurer, Jonathan Leopold. Don't you remember the board of finance approving a retro-active pension fund to the last treasurer? I don't think they knew what they were even voting on when they did that!

I'm tired of the BT debate. It was pretty much always a choice between something like the Piper Jaffery offer or just having a gararge sale and eating the loss. Sooner or later one or the other will happen. The council has already decided on the latter, I just wonder how long it will take them to realize that. The longer it takes the more expensive it is.

At worst, auditor statements were not divulged to the council by the clerk's office, however the budget information (passed by the council!) is clear as day. It should behoove councilors to fulfill their "fiduciary responsibility" to request -- no, demand! -- and read such documents and budgets. They did not. Kiss won reelection so he's stuck with the BT problem. However, members of the 2007-2009 finance board (Kiss included) either failed in oversight or they knew the details and conspired to not divulge the true financial situation when they faced each other in the 2009 mayoral election. At this point, incompetence on all sides would seem more plausible.

Intellectually honesty requires asking the same strident questions of Montroll and Wright as Kiss et al. Especially because Montroll stands to financially benefit if the so-called "Reboot BT" program succeeds. Wright has already profited in political capital provided by the BT issue.

The council has had 6 months of 8 hour meetings and special committees. It's time to refinance BT, which it can with its own equity, and not privatize ("reboot") it. Then, it's time to find city leaders who are interested in championing a marvelous technological municipal project rather than selling it off or worse using it for political stick ball. It's time to plug the hole in the boat and sail the city on.

ward 2 resident
I want what you are smoking

It's time to refinance BT, which it can with its own equity, and not privatize ("reboot") it. Then, it's time to find city leaders who are interested in championing a marvelous technological municipal project rather than selling it off or worse using it for political stick ball. It's time to plug the hole in the boat and sail the city on.

What equity does BT have? They are utterly and impossibly bankrupt devoid of any hope of refinancing on their own.

Your statements are freaking hilarious if it were not so pathetically stupid and sad.

I take Jonathan Leopold at his word that he was acting incompetently when the used pooled cash to the tune of 17M dollars. Perhaps you may say he was too freakin lazy to call his lawyer Ellis to inform him of the 65 rules he was too lazy to understand.

Leopold either stole the money or misappropriated it Kiss wanted to look like a king so he allowed Leopold to book the liar loan as an asset..their aint no asset in a bankruptcy.

It all stinks to high heaven, and there is no equity in BT it is only viable if the 50 million is cut at least in half.

You have to wonder why Leopold ever came back to a crappy job as CAO of Burlington he is a high roller in the Bahamas where Mrs Bernie Sanders steers business via Burlington college and Bernie steers business via his political position to sir Jonathan.

Has Leopold run short of capital in paradise? Has this just been a ruse come back to the taxpayer to reload?

You have to wonder with his actions and coverup and secret meeting mentality and not being forthright with the PSB.

Do keep up your prog claptrap it is humorous, equity in BT,haha.

I am glad you are doing your part for the environment around here and keeping your bulb dim.

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