Burlington Telecom, the beleaguered municipal utility that owes taxpayers $16.9 million, will not make a scheduled lease payment due today to CitiCapital.
As noted in "Fair Game" two weeks ago, Burlington Telecom and city officials have been in talks with Citi, hoping to avoid defaulting on the $33.5 million lease. Burlington officials are encouraging Citi to draw down money from a reserve fund set up when the lease was first penned back in 2008. The reserve fund — which once held $1 million — is to be used by Citi to cover missed payments.
"BT will not be making the payment. Citi will have to decide if they wish to use the escrow," said Chris Burns, BT's general manager. Citi indicated in February it would rather dip into the fund than force an outright default. A default could mean that Citi would seize control of BT and sell off the assets to settle past debts — or find someone else to run the system to ensure it makes its money back on the lease.
If Citi chooses to draw from the fund, the $1 million reserve will have about $210,000 left — not nearly enough to cover a nearly $700,000 payment due to Citi in August.
Burlington Telecom has been forced to pay for any of its ongoing expenses from its own operating revenues, rather than leaning on the city's taxpayers, after a Superior Court judge and the Vermont Public Service Board ruled against them earlier this year.
BT and the city remain in active talks with CitiCapital, said Mayor Bob Kiss. Leading those talks is outside financial consultant Terry Dorman, who was hired by the city council earlier this year to help restructure BT's finances and determine how soon it can repay $16.9 million owed to city taxpayers.
Kiss said he expects some initial recommendations from Dorman within the next two weeks.
"I still believe that Burlington Telecom has this capacity to be bigger than just Burlington," said Kiss. "We need time and money to get us there and that's not unreasonable."
Separately, a "forensic audit" being undertaken by the Vermont Department of Public Service will not be complete until the end of June, said Burns. The department is reviewing BT's finances as part of the ongoing PSB investigation into BT's violations of its certificate of public good.