Oh, what tangled interwebs we weave.
We hear a lot these days from some politicians – new and old – that when it comes to Burlington Telecom, that we should not “repeat the mistakes of the past.”
For those of who have not followed the BT story closely for the last eight years, here is a quick summary of how BT got into trouble. I break it down into these key five reasons:
- Mismanagement at BT, worsened by a lack of true public oversight;
- An international financial crisis that stalled a necessary refinancing;
- Unauthorized actions by Mayor Bob Kiss and CAO Jonathon Leopold to loan $17 million of taxpayer dollars;
- A City Council that failed to recognize what was going on until long after the fact; and,
- A City Council that played politics rather than refinance BT’s debt, thus compounding BT’s financial troubles.
There’s very few pols then, and now, who will admit or apologize for their roles in BT’s early troubles. The fact remains, however, that despite a faulty start – BT is healthy, growing, and is primed to expand beyond Burlington under a new, community cooperative ownership.
Given BT’s financial strength today – with a $3 million-plus profit expected this year – it is clear that had the Council approved the refi deal in 2009 that BT would not only have survived, along with the city’s credit rating, but would be larger and much stronger than it is today. Instead, it was left to default on its CitiCapital loan, and then turned over to a private holding company, and placed up for sale.
Now, once again thanks to councilors playing politics, Burlington could lose our telecom; the one we voted in 2000 to create, because we saw it as an important public utility.
How did we get here? Let’s rewind to late 2009.
In November 2009 – two months after I first reported that BT had been “loaned” $17 million by Leopold without truly acknowledging it publicly – the City Council was presented with a refinancing offer that would have bundled up BT’s debt, repaid taxpayers, paid off CitiCapital, and then worked with a new financier to bring itself back to break-even and then profitability.
It was a clear political move, and here’s how it went down (as I wrote at the time):
Led by Councilors Joan Shannon and Ed Adrian, the council Democrats, using parliamentary procedures, split the resolution into two parts and then, blocking debate, approved a repayment clause while then rejecting the refinancing proposal. Which meant, that BT would have to repay its bills out of it’s own cash and not borrow more – from anyone.
Councilor Sharon Bushor (I-Ward 1) said the council action could force BT into insolvency. That it can’t borrow money from the cash pool until a refinancing deal is approved leaves BT pretty much hamstrung.
“I hear people saying they are here to protect taxpayers, but you could easily end up leaving people with a huge debt and no Burlington Telecom,” said Bushor.
Leopold, too, said he was “appalled” by the action, calling it a partisan ploy designed to embarrass the administration. “Do you really want to destroy a $50 million investment and the credit rating of the city?” asked Leopold. “Because that’s what this could do.”
From the beginning of the BT scandal it was clear to anyone paying attention that there was a faction on the city council who wanted to use BT as a political bludgeon against Progressives, and to kill BT slowly in the process.
One councilor who was part of that subterfuge – Republican Kurt Wright – went so far to suggest in 2011 when he was running for Mayor that the city should sell Burlington Electric Department in order to repay BT’s debts, and shore up the city’s pension fund.
Despite the political gamesmanship at the time, in early 2010, the Blue Ribbon Committee on Burlington Telecom—formed after the refi deal was nixed as a way to determine whether BT had a viable future—concluded very simply:
“The Committee does not recommend the outright sale of Burlington Telecom to a third party. Both consultants, HBC and Stratum, advised that the sale of Burlington Telecom was not in the best interest of the community or the taxpayers.”
The consultants also made it clear that, while troubled at the time, BT was too valuable an asset to sell at a “fire sale” price—or at all. And, that even at break-even, BT could meet its debt obligations as well as it investment strategy to expand.
The conditions under which BT was created, and its reasons for existing, have not changed. We, the people of Burlington, should be able to control a key utility that will drive our civic life and economy in the 21st Century.
We should not allow the same political gamesmanship that nearly sunk BT in 2009 be what drives a decision on selling BT in 2017.
Especially since our options are so limited and risky.
If you want to know what happens when you sell to an outside venture capital-funded company, lust look at what happened to Magic Hat.
As BT finances were melting down due to the financial crisis of 2008, an eerily similar predicament was playing out across town at Magic Hat. It expanded by buying another brewery and as a result became heavily leveraged by vulture capitalists who then called in their notes. It led to locally owned and controlled Magic Hat being sold to first one huge beer conglomerate until, two years later, it was gobbled up by an even bigger beer conglomerate. While it’s still here in VT, it’s about as far from locally owned as it can get.
That is BT’s future if we sell it to Schurz or Ting/Tucows.
If you don’t think so, I have a bridge for sale.