2-23-14 – The Hook And Who Remains

by Chris Campion

Recently the City of Burlington finally settled with Citibank over the Burlington Telecom fiasco.  This completely and utterly avoidable fiasco, foisted upon taxpayers at the whim and discretion of politicians, has been percolating for years, but at least now, there’s been some partial relief.   The city council approved of the deal reached earlier by Mayor Weinberger’s office, which puts Burlington on the hook for $10.5 million of the $33 million the city was essentially liable for, based on the original lease/purchase agreement with Citibank that provided the startup capital and equipment for Burlington Telecom.  From WPTZ:

Not pictured:  A Frowning Burlingtonian

  • “My top priority since the day I entered office was to get Burlington’s financial house within order,” Weinberger told WPTZ’s David Charns. “My top priority within that was solve the BT issue and do it in a way that protected taxpayers.”

There was little to hope for here, in terms of protecting taxpayers, because it was always likely that the lawsuit would end in a settlement, it was just a question of how much and when.  Weinberger’s office inherited the mess from Bob Kiss, and Jonathan Leopold, who both supported the creation of Burlington Telecom and later funneled $17 million of taxpayer dollars out of the city’s cash pool to prop BT up when it was likely to be closing its doors.

So how will the city pay the settlement?

  • “We anticipate that the settlement payment will largely be paid for by BT revenues and non-city sources,” said Weinberger.

Note that non-city sources will not include a generous donation from former Mayor Bob Kiss.  There is also a bridge loan of $6 million that needs to be assumed by whatever lucky entity decides they want a white elephant in their backyard.

  • The plan over the next few years is to find a permanent partner for BT that will have majority ownership of the utility. The city will continue to make revenue, but according to its agreement with Citibank, will have to share some of its proceeds with Citibank.Loreda Sola of Keep BT Local said his Burlington-based group will “actively pursue becoming the BT partner.” Keep BT Local wants to fund BT as a co-op. Sola said that would “keep control over this resource local and ensure focus will be on reinvesting profits in Burlington.”   Weinberger said he welcomes a proposal by Keep BT Local but added that any eventual BT partner would need to pay back a bridge loan, which is estimated to be more than $6 million. 

Which has been the plan all along, in terms of repayment, with or without a partner – it’s just that now the payoff has been reduced.  That said, the enterprise still does not have the subscriber base that was touted as part of its original business plan that would keep BT afloat.

  • Meanwhile, Weinberger added that BT sales have strengthened in the last few years.  “It is now throwing off a significant amount of revenues in excess of operating expenses,” Weinberger said, in response to a question if BT would be able to make its payments to Citibank. 

Unmentioned here is whether or not BT’s excess revenues – revenues so casually talked and tossed about, you’d think it was $17 million in taxpayer funds he was talking about – includes the reduced payments to Citibank, and, more importantly, the $17 million still owed back to the cash pool.  Well, wait a minute – Weinberger does mention the $17 million, he just doesn’t mentionhow or when that’s going to be repaid.  In fact, he says he hopes to pay back the funds:

  • The mayor also hopes to pay back $16.9 million in taxpayer money used for additional BT debt incurred in 2008 and 2009.  “I am satisfied that this agreement does right by the taxpayers of Burlington,” Weinberger said, though he shied away from putting a specific number out there.

What must be supremely unsatisfying is that no one, not in the current or prior administrations, has been held accountable for their actions in the taking of taxpayer dollars, with no authorization except a post-facto notification to the city council.  The dollars were already gone before anyone had a chance to even ask the question if it was the right thing to do – and as the PSB found, BT was in violation of its Certificate of Public Good, because the dollars were not repaid in the period outlined in the CPG.  It looks like Burlingtonians will simply eat the $17 million.

Don't worry, taxpayers will come along to clean that up.

Despite this better news about the Citibank settlement, there is no settlement yet reached with the taxpayers, and until BT becomes truly self-sustaining – like a real business has to be, every day, or its doors shut with no bailout assistance from a Kiss or Leopold – then the albatross still hangs over the city and its taxpayers.  The load has been lightened, somewhat, but the telecom is still 20% short of its 5,000 subscriber minimum requirement, even if that original 5K number now is still too low to offset the increased liabilities due to the $17 million and the remaining Citibank payments.  After all these years, despite the public avowals of how fantastic BT is for Burlington, it still can’t meet its minimum subscriber target.

In the end, though, the taxpayers are paying for everything – and the people in charge didn’t deign to ask their opinion as to what they think should be done.  Instead, a reckless misappropriation of funds occurred.  Burlingtonians have zero recourse in avoiding the liability in increased taxes to pay for this monster, but maybe this lesson will stick around for a few years, whenever Burlington politicians start making promises about undertaking projects that have no rightful place in the public sector.

Reprinted with author’s permission from dangerwaffles.wordpress.com.

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