“This deal is illegal,” said Dean Corren, a former candidate for lieutenant governor and one of the six citizens fighting the sale before state regulators.
The misappropriation of funds resulted in a scandal and caused the city’s credit rating to tank. Amid the political fallout, former mayor Bob Kiss didn’t seek reelection, and Miro Weinberger captured the mayor’s office.
Weinberger’s administration orchestrated a multiphase sale of the city-owned utility that would settle its debts and, according to city officials, minimize financial risks to taxpayers. First, Burlington Telecom was bought by Blue Water, a holding company owned by Lake Champlain ferry mogul Trey Pecor. While the city still manages the company, the sale agreement required officials to find a permanent owner to take over the enterprise.
Now that sale is in its final stage, with Schurz Communications and ZRF Partners planning to buy BT from Blue Water. Officials and critics are eagerly awaiting a ruling from the Vermont Public Utility Commission, which has the power to approve or reject the deal.
The citizens group is made up of members of Keep Burlington Telecom Local, which attempted to buy the firm. They say Weinberger and other city officials have turned their backs on the taxpayers whose money was lost.
“That deal basically sells the successful utility at a fire sale price and gets the city only $5 million out of the $16.9 million, at least, that’s owed to residents,” Corren said. “And then, in their most recent filing, [the city] basically said, ‘Well, the taxpayers had no right to that money anyway.’”
Weinberger has consistently said his administration was working to recover as much of the money as possible. He’s also been careful not to promise a specific amount.
In a 2015 press release announcing the completion of a settlement deal with BT creditor Citibank, Weinberger said the deal “creates a route for partial recovery over time of the $17 million of taxpayer money spent on BT prior to 2010.”
Now, lawyers for the city argue that a 2014 regulatory decision abandoned the premise that taxpayers will get all their money back. The city claimed in a November 2 filing with the Public Utility Commission that there is no requirement that officials recover the full $16.9 million.
“In fact, the Commission already approved the sale of Burlington Telecom’s assets to Blue Water in 2014, without … imposing the requirements that the Six Taxpayers now insist upon,” the filing said.
City attorney Eileen Blackwood emphasized in an interview that Burlington Telecom is no longer a taxpayer-owned utility.
“The assets of Burlington Telecom were sold to Blue Water in 2014, and the Public Utility Commission approved that,” she said. “What we have is the ability to operate Burlington Telecom … and the ability to get some proceeds as a result of it. In other words, the deal is kind of already done. What we’re going through right now is the last piece of the deal.”
Corren and the other Burlingtonians say the deal violates Burlington’s city charter, which has the same legal force as a state law.
The charter says regulators considering any municipal utility case “shall ensure that any and all losses from these businesses, and, in the event these businesses are abandoned or curtailed, any and all costs associated with investment in cable television, fiber optic, and telecommunications network and telecommunications business-related facilities, are borne by the investors in such business, and in no event are borne by the City’s taxpayers, the State of Vermont, or are recovered in rates from electric ratepayers.”
Blackwood said opponents’ call on regulators to stop the deal would actually harm their cause, because the city’s agreement with Blue Water will strip public officials of decision-making power if BT isn’t sold soon.
She added that even though taxpayers might not get a $16.9 million return from the utility’s sale, they’re already saving money because of the improved credit ratings that come with putting the episode to rest.
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“The misappropriation of funds in resulted in a scandal….”
The misappropriation charge proved false repeatedly over time. A state and federal investigation both found no malice or “misappropriation”. A civil lawsuit brought against Jonathan Leopold met the same fate. This from Judge Helen Toor in 2014: “”There was no self-dealing, no effort by Leopold to line his own pockets or those of his friends, no inappropriate motive.”
The language in the CPG (Certificate of Public Good) made clear (Condition 60):
“BT may participate in the City’s pooled cash management system provided, however, that BT shall reimburse the City within two months of the City’s expenditure for any expenses incurred or payments made by the City in support of services that BT provides to non-City entities.”
The problem was a failure to pay back the borrowed funds within two months. When did those funds come due? 2008. The Great Recession froze borrowing capacity worldwide.
Could the BT situation have been handled better? Sure. Many – some still in office today – share responsibility. Was there a scandal? Depends on the capital letter beside the name on the ballot. Or a reporter who repeats their message.
With no input from taxpayers, city officials diverted tax dollars to BT. Seventeen million of them. It was fraud.
Eric J: Care to provide evidence to support your claim? I did.
RE: taxpayers, 2/3rds of voters supported the city building out a municipal telecom department (I think around 2000). By 2003, 38 disparate city departments were connected to a fiber network, unheard of back then.
The only reason City voters approved the measure by a 2/3rds majority back then was they were promised and assured that BT would be a completely stand-alone entity and NO taxpayer funds would ever be used to keep it afloat. That promise was even written into the City Charter and the CPG of BT by the Public Service Board but the taxpayers were still screwed by the politicians.
The voters were LIED to and disenfranchised at the polls by the powers that be. It was a fraud
I find this whole notion that BT’s problems were not known to be disingenuous. BT’s financial performance (and problems) were part of the City’s financial statements during that time as are all the Burlington departments. It’s very clear from the statements BT was losing money during its initial phases. For the City Councilors (and taxpayers) to say they were unaware of BT’s problems all these years shows they either don’t read the City’s financial statements or are incompetent. Secondly, after observing Weinberger and the City Council’s actions during the sale of BT, it was very clear they just wanted to put the problem behind them and move on with all their 11th hour hallway dealing. Pecor will make money, BT’s management team will make money and Schurz has all the upside in the deal….the taxpayers not so much. It seems this small group of people are working in the best interests of the citizens and I applaud them.
Good luck!
As with every business, there comes a time when you have to cut your losses. To do nothing will only make Telecom a dinosaur. To keep up with the ever changing times it requires a lot of money for changes. Something that needs a private investor not tax payers continuing to put more and more money into it. Citibank is also taking a loss on the deal. the $17 mil is gone and will not be recovered but millions more is needed for upgrades and expansion. As a taxpayer I don’t want to dump any more money into it. Cut the cord and move on.