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October 21, 2009

Kiss Administration Grilled by Council on Telecom Finances

Burlington taxpayers could be on the hook for any unpaid money owed to the city's general fund if Burlington Telecom were to be sold for less than what it owes outside investors.

That admission came from Chief Administrative Officer Jonathan Leopold under tough questioning from Councilor Ed Adrian (D-Ward 1) at last night's special city council meeting called to discuss financial problems at the city's municipally owned telecom company.

In all, Burlington Telecom has borrowed roughly $17 million since early 2008.

To date, Leopold has stressed that city taxpayers would not see their money put at risk due to the loans given to BT. Instead, Leopold said refinancing the debt or a sale of the assets could cover the owed money.

But, when asked by Adrian how the loss would be accounted for if Burlington Telecom were sold for less than what it owes, Leopold said it would be a "negative balance" on the city's general fund.

In recent weeks, city officials admitted to loaning Burlington Telecom (BT) at least $17 million from the city's checkbook in order to keep the utility afloat as it awaited a new round of financing to complete the build out of its fiber-optic network within the Queen City.

Since last fall, the city has been negotiating with the Department of Public Service to find ways in which to better define how that build out occurs in order to plan the next round of funding. To date, BT has spent upwards of $50 million: $33 million came from two separate rounds of financing with outside investors, while the remaining $17 million has come from Burlington's "cash pool" account. Or, in layman's terms — the city's checking account, through which about $300 million flows annually.

At a special city council meeting Tuesday night, councilors spoke angrily at times of the public trust that has been broken by the administration's failure to bring Burlington Telecom's problems to the council sooner.

The Kiss administration learned last November that BT was in violation of a clause in its certificate of public good to repay any borrowed cash within 60 days. They did not disclose that to the council until mid-May.

"Why did you not tell the city council about the violations for more than six months? Why did you not tell the fiduciary board of Burlington Telecom this information?" asked Adrian.

"In hindsight, it was a mistake," said Leopold. He said the city was more focused on determining the full cost of the city build out and negotiating with the Public Service Department.

However, Leopold took issue with media reports, and councilor's accusations, that the information was kept hidden. At many steps in the process, he contended, various city and state officials were informed of the use of the cash pool loans to prop up BT. He also said the loans were accurately noted in the city's annual audit and report to the public.

That answer didn't sit well with many councilors.

"As a lawyer, if I make a mistake there are two things I do immediately: Tell the court and tell my client,"  Councilor Mary Kehoe (D-Ward 6) told Leopold and Mayor Bob Kiss. "The city of Burlington is this administration's client. I think it was a fundamental mistake to not come forward."

Several city councilors, including Councilor Sharon Bushor (I-Ward 1), said the council cannot absolve itself from responsibility.

"Those of us on the council who were here should own up to the budgets we reviewed," said Bushor. "We tend to simply review budgets and accept them as is. In fact, this council couldn't come to an agreement on hiring a budget specialist to help us."

In fact, Democrats on the council have taken their share of pooled cash and put their own attorney on retainer.

Several councilors, including Adrian and Joan Shannon (D-Ward 5), said the Kiss administration had been too reluctant to share information the council needs to provide proper oversight.

Shannon, in her comments, said the lack of information coming from the administration to the council in regards to Burlington Telecom — and the complexity of that information — speaks to the need for a special oversight commission to keep a closer eye on its finances and operations.

A council resolution that would have created such a commission failed earlier this month by a 7-7 vote.

"The time for patience is over," said Shannon. "I don't have confidence in the same team of people who have been working on this since November of 2007."

Other councilors said the public should be reminded of the value of Burlington Telecom.

"I don't think we've lost the public's trust, but we are at a critical juncture," said Councilor Emma Mulvaney-Stanak (P-Ward 2). "We need to remind people what an asset Burlington Telecom is to the community."

Like many councilors, however, Mulvaney-Stanak said she would support an outside audit of Burlington Telecom's finances and management.

Councilors will host their own public forum Thursday night in Contois Auditorium to hear from the public on this topic. The next regular meeting of the council is Monday, October 26.

Mayor Kiss, who had been scheduled to be out of town, has changed his plans and will remain in Burlington to attend the hearing.

Several councilors hoped to keep the special session going past its 10:30 p.m. ending time, but a motion to continue the meeting — which needed two-thirds majority to win — failed.

Laughable "To date, Leopold has stressed that city taxpayers would not see their money put at risk due to the loans given to BT. Instead, Leopold said refinancing the debt or a sale of the assets could cover the owed money."

LEopold has done nothing but put the taxpayers money at risk the money he stole is completelyand wholey at risk.

He has nothing to back up his claim but another lie. Jonathan Leopold cannot snap his gnarled thieving fingers and make finacing for Burlington Telecoms Failures magically appear. His hole is does not contain a magic pot of money or he would not have stolen the money from the taxpayers.

For just a small fine of say 1 million dollars... Well Jonathan how about this you and Kiss pay up the fines go to jail and we the taxpayers whom you have robbed get our money back.

Lets not forget what an asset that we have twenty four hour access to Porn, The Kardashians, twitter and the Biggest loser. Serving less than 20 percent of Burlingtons elite! for the same price or more than the competition!

The Republicans on the council have been among Leopold's biggest enablers. Why did they lock hands with the Progs and block BT from becoming a department? That was a huge mistake.

I'm a little disappointed in my ward seven representation on this.

Burlington Telecom is an incredible asset and the service is outstanding. Funding issues are serious and deserve scrutiny, but in no circumstances can we lose Burlington Telecom's service.

"but in no circumstances can we lose Burlington Telecom's service"

Carrying $60-70m in extremely sketchy debt vs. "having" to subscribe to Comcast for the exact same service - what a dilemma

This is tricky. I appreciate our Progressive administration. I voted for them. Are they the best Progressives we could have running our city? By no means. What I don't want to come of this is Kurt Wright or other moderates/conservatives taking advantage of the politics and taking the Prog admin down.

Yes, the Republicans are going to point to the fact that we have left-wing administrators and that they are too liberal with tax-payer dollars. In my opinion it was the republicans that pushed against proper oversight because they are so against municipally owned companies in the first place.

Lets not bring the Progs down with this revelation. They have the right ideas.

Wasn't this illegal $17 million dollar taxpayer loan already made before the failed vote a month or so ago to make BT a city department? In other words, that proposal wouldn't have prevented this scandal even if it had passed.

Leopold acted illegally and should be investigated and prosecuted. Kiss had to know (even though Leopold runs the place) and is responsible also.

Mark sez, "Are they the best Progressives we could have running our city? By no means."

Mark ... you find the "best" Progressives and you put them up to run against Kiss and these other fools who made this nearly fraudulent loan to BT -- then we'll talk.

Kiss and Leopold have been dishonest. They are not to be trusted.

A dishonest pol is a dishonest pol, regardless of their party affiliation.

Progs are revealing themselves to be no different and no better than the rest of the politicians they like to look down their noses at: when one of THEIRS gets in trouble, they circle the wagons and claim that this is all much ado about nothing.

Wrong! Kiss and Leopold broke the law. They're corrupt. Get rid of 'em.

Transparency is a problem for all politicians, especially when they have a majority. They like to assume that the taxpayers would support them and they act in good faith. Maybe it was the right thing to do at the time. Maybe Kiss and Leopold have sacrificed their careers, or maybe they just suck at accounting. I really don't no and until more info comes out I don't think any of you do either.

Just because BT is a municipally owned utility doesn't make it inherently doomed. The inverse is also true. Public utilities are not always run competently and in the interest of the public. That being said, I think the best course of action is to do a third part audit. Have a post audit hearing and lay blame where it lies. This isn't the end of the world and doesn't discount progressivism with a small p.

**know** brain fart... Don't want the spelling police to come after me.

city charter, Section 438 (c)(1),
directs the Public Service Board to ensure that all of BT's costs be
"borne by the investors ...
and in no event are borne by the
city's taxpayers, the state of Vermont,
or are recovered in rates from electric ratepayers."
24 V.S.A. App. § 3-51. Ordinance enforcement
(a) The violation of an ordinance,
regulation or by-law adopted by the city,
... may be prosecuted as a criminal or civil action
#2: how can it be that the $17 million does
not include taxpayer or electric ratepayers money?
BT's commercial debt now about $33.5 million
was financed by "lease-purchase" agreements
beginning with Koch Financial in 2003, 2004 and 2006 and subsequently in 2007 with Citicapital.
The lease-purchase model is analogous to a mortgage.
The Burlington Telecom system is the collateral for the loan. [$17M is NOT collaterized!]
”...honest services fraud is defined in 18 U.S.C. § 1346:
...includes a scheme or artifice to deprive another
of the intangible right of honest services..”
biden sez:”..a new public corruption statute that will be
used to bring charges against anyone
who attempts to deprive the citizens of the United States
or of any State of the honest services
of a public official,
or against anyone who attempts to corrupt
the election process..”

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