Vermont city’s public telecommunications venture runs into $17 million snag

Vermont city’s foray into telecom hits $17M snag

BURLINGTON, Vt. — A public option for phone, cable and Internet seemed like a good idea when this Vermont college town launched Burlington Telecom four years ago.

Now top city officials are under fire to explain a $17 million debt and whether taxpayer dollars are subsidizing an enterprise usually left to the private sector.

Burlington has touted its telecom system as one of fewer than three dozen “fiber-to-the-home” cable systems in the country, with gigantic capacity and superior speeds for Internet transmission. One of the hottest debates in its brief history came last year when Burlington Telecom decided to continue carrying the English-language version of the Qatar-based network Al-Jazeera.

The new telecom tussle has unfolded in recent weeks after city officials revealed that Burlington Telecom had borrowed $17 million from the city’s “pooled cash” in the past two years but had not paid it back within the 60 days required under its state license.

The administration of Mayor Bob Kiss has come under attack by critics who say the mayor’s office failed to keep the City Council adequately informed of Burlington Telecom’s troubles and kept the public in the dark.

City Councilor Ed Adrian charged Thursday that Jonathan Leopold, the city’s chief administrative officer, had “intentionally deceived” the council and had failed to tell state regulators about the debt cap violation. Adrian has called for an investigation and for Leopold to be placed on unpaid leave.

The developments have reinvigorated the debate over whether a city should be involved in phone, cable and Internet services and whether the city enterprise is on a level playing field with Comcast cable company and FairPoint Communications.

The mayor and Leopold say Burlington Telecom is still on track for success as long as the Vermont Public Service Board will loosen the limit on how long BT can borrow city funds and if the enterprise is allowed more time to meet its goals.

Kiss said having more time to expand will determine how much financing the venture will seek when it goes to the private financial markets to raise money to complete the project and pay down the $17 million debt to the city.

“The question is how much more do we need before we get to cash-flow positive,” the mayor said.

Getting the debt paid off could address what Commissioner David O’Brien of the state Department of Public Service said was his biggest concern — that Burlington Telecom had put the city’s taxpayers at risk. If BT fails, taxpayers could be left to pay millions of dollars, he said.

Leopold and the mayor said BT’s current debt is $48 million to $50 million.

Municipal phone systems are relatively rare around the country, but some have been successful. The town of Hawarden in northwestern Iowa began working on a municipal service in the mid-1990s but ran into legal challenges from private carriers. The town prevailed in 1999 before the Iowa Supreme Court.

“The legal battles are behind us, and we really haven’t had any issues for quite some time,” said Hawarden City Administrator Gary Tucker. “It’s a very successful community venture.”