City council rejects Burlington Telecom refinancing

Related Company: Burlington Telecom Department of City of BurlingtonFinishing just minutes before midnight, Burlington city councilors voted on Monday, December 14, to reject a proposal by Mayor Bob Kiss to finance Burlington Telecom. The vote was held following months of discussion among city officials after it was revealed that the company owed millions in debt to the city, a violation of conditions in its state-granted operating license. The council's decision to seek financing proposals from several companies effectively shut down a request by Mayor Kiss and Chief Administration Officer Jonathan Leopold to allow further negotiations with the investment firm Piper Jaffray for a $61.6 million loan. Leopold said that Piper Jaffray would not likely continue with a financial proposal now that the council would be accepting proposals from other companies.
Although Leopold maintained throughout that the Piper Jaffray financial package was of crucial importance, the council chose to support an alternative approach introduced by Ed Adrian (D-Ward 1) instead. The alternative plan was approved by a vote of 8 to 6.
Those who voted against Adrian's measure said that the administration's plan still offered the best shot at fixing the financial problems of Burlington Telecom. The struggling company has an interest payment of $385,000 due in mid-February, and remains in a prolonged violation of Condition 60 of its cable television license from the Vermont Public Service Board. Condition 60 requires Burlington Telecom to pay back any city money within two months, but when the company was unable to repay a $17 million loan, the city government failed to inform the board of the debt.
In a meeting held prior to the vote, Leopold told councilors that he could not guarantee Burlington Telecom's ability to repay any new money from the city within two months – not without additional loan money. He also said that in the absence of new financing, the firm conducting the city's audit might conclude that Burlington Telecom was unable to repay its debt, transforming Burlington's $9 million reserve into an $8 million deficit and damaging the city's credit rating.
The majority of the councilors remained unconvinced. Many were concerned that the administration's insistence on a speedy vote would not allow them enough time to acquire all the available information.
The city of Burlington started loaning money to Burlington Telecom from it's central checking account, a collected of pooled funds, in early 2008. By the end of June, 2009, that amount totaled $17 million. Mayor Kiss learned of that Burlington Telecom would be unable to repay its debt in late 2008, but did not inform the city council or the Public Service Board until May and September of this year, respectively. According to Kiss, the decision was made because a conflict of interest on the Board of Finance prevented discussions regarding Burlington Telecom from taking place until after the March elections.
The Kiss administration has received heavy criticism from both the Public Service Board and from Burlington residents for their handling of the situation.