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DPS: Burlington Broke Law

Burlington, Vermont - October 16, 2009

Burlington officials and the state Department of Public Service are sparring over financial issues at Burlington Telecom. At the center of the controversy is $17 million Burlington Telecom borrowed from taxpayers.

The city says it needed to borrow the money in order to continue its expansion of service in the city and that it was public knowledge it needed the money, but the Public Service Department says what the city did is illegal.

Burlington City officials strongly defended their decision, Friday, to borrow they money from city funds to cover a deficit at Burlington Telecom.

"I think what we've been explaining is the use of pooled cash is a usual and customary function of city government in order to establish and maintain cash flow," said Mayor Bob Kiss, P-Burlington.

Kiss and city Chief Administrative Officer Jonathan Leopold admitted they should have told regulators at the Public Service Board that the company borrowed the money sooner but say what they did was legal. The Department of Public service, however, says the city broke the law when Burlington Telecom did not repay that money within 60 days. Commissioner Dave O'Brien says the city also violated a promise it made when it started the telecommunications company that taxpayer money would not be used.

"The key factor that allowed me to be comfortable was that the risk of this project was going to be kept from taxpayers and the lenders were the ones that were going to carry the risk," O'Brien said Friday.

Leopold said there is always an implied risk when investing tens of millions of dollars.

"First of all the promise that you could guarantee the city would not be at risk I think was overly optimistic" he said.

Leopold and Kiss said part of the problem is DPS put a deadline on when Burlington Telecom needed to offer service to 100 percent of the city. They said the city can not meet that deadline without borrowing money because BT does not generate enough revenue to cover the cost.

"It hasn't been a secret. People may not have been paying close attention, but it's always been clear since December we needed to do another financing," said Leopold.

The city has asked the Public Service Board for an extension of the deadline to complete its build out and an extension of the deadline to repay the money. The city won't be getting support from the Department of Public Service with its request.

Next week the Burlington city council is holding two special meetings about this issue. On Tuesday Kiss and Leopold will answer questions and on Thursday the public will have a chance to comment. Both of those meetings are at 7 p.m. in Contois Auditorium at City Hall.

Bianca Slota - WCAX News