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May 17, 2010

Burlington Telecom Won't Make Lease Payment

Bt_logo Burlington Telecom, the beleaguered municipal utility that owes taxpayers $16.9 million, will not make a scheduled lease payment due today to CitiCapital.

As noted in "Fair Game" two weeks ago, Burlington Telecom and city officials have been in talks with Citi, hoping to avoid defaulting on the $33.5 million lease. Burlington officials are encouraging Citi to draw down money from a reserve fund set up when the lease was first penned back in 2008. The reserve fund — which once held $1 million — is to be used by Citi to cover missed payments.

"BT will not be making the payment. Citi will have to decide if they wish to use the escrow," said Chris Burns, BT's general manager. Citi indicated in February it would rather dip into the fund than force an outright default. A default could mean that Citi would seize control of BT and sell off the assets to settle past debts — or find someone else to run the system to ensure it makes its money back on the lease.

If Citi chooses to draw from the fund, the $1 million reserve will have about $210,000 left — not nearly enough to cover a nearly $700,000 payment due to Citi in August.

Burlington Telecom has been forced to pay for any of its ongoing expenses from its own operating revenues, rather than leaning on the city's taxpayers, after a Superior Court judge and the Vermont Public Service Board ruled against them earlier this year.

BT and the city remain in active talks with CitiCapital, said Mayor Bob Kiss. Leading those talks is outside financial consultant Terry Dorman, who was hired by the city council earlier this year to help restructure BT's finances and determine how soon it can repay $16.9 million owed to city taxpayers.

Kiss said he expects some initial recommendations from Dorman within the next two weeks.

"I still believe that Burlington Telecom has this capacity to be bigger than just Burlington," said Kiss. "We need time and money to get us there and that's not unreasonable."

Separately, a "forensic audit" being undertaken by the Vermont Department of Public Service will not be complete until the end of June, said Burns. The department is reviewing BT's finances as part of the ongoing PSB investigation into BT's violations of its certificate of public good.

Burlington, shut this joke of a company down asap. You are costing us all lots of money.

Kiss as quoted" we need time and money to get us there and that's not unreasonable".
What is unreasonable is the fact that he and the CAO were not trusting of the very citizens that approved BT to begin with, and did not bring it to the citizens to try to work out financing.
I feel Burlington citizens have a great loyalty to the projects they approve, such as BT, and would have shown support for alternative financing and the like, but no the Mayor and CAO took matters into their own hands and now the demise of BT is on the horizon, costing us more in the long run.
This is a serious matter and the Mayor and CAO have proven they have no trust in us, and I certainly have no trust in them.
The time have come for both of their resignations and I request it.

How much is the current payment due, and how much is currently in the reserve?

@Haik: Yes. Payment due is $380,000. What remains in the fund is $1 million minus the $386,000 payment made in February. Sorry, had that info in the articles I linked to in the blog post, but forgot to bring it forward to the article. My apologies.

"Kiss said he expects some initial recommendations from Dorman within the next two weeks."

Uh, it's a little late for "initial recommendations," pal.

The pattern continues.
Anything the Mayor says gets gets picked apart and pounded on.
Because he showed no faith in us and now we shall show no faith in him.
Resignation imminent I hope.

We've got to save BT from Leopold/Kiss. We are maybe six months from seeing BT actually disappear. The bank owns the network now and could actively foreclose anytime, although I doubt they want to. More likely, some "white knight" will come in and buy BT pennies on the dollar, then sell off BT because they see it as competition... BT's likely buyer/destroyer? Comcast, Fairpoint or SoverNet (whoever owns them now).

I'm enraged at Leopold/Kiss for making this happen... and just as upset with our lame City Council... I depend on BT for my business and it's gonna collapse and get picked apart... and then I'm back to f-ing Comcast.

CITY COUNCIL... please ACT now. Bring the Gang of Nine or whatever they're called to the table and start negotiating. Boot Leopold/Kiss out of town. MAKE IT HAPPEN. Your timidity and petty bickering while Burlington's future goes up in flames will haunt the rest of your political careers.

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