* Updated below: BED's true debt load, plus Kurt Wright responds to the claim his math is wrong. *
Republican mayoral candidate Kurt Wright promised he would unveil a "bold plan" with "bold solutions" to address the serious fiscal challenges facing the city of Burlington — and on Wednesday, he delivered.
At a city hall press conference, Wright revealed his bold plan to shore up the city's finances: Sell one its most prized assets, the Burlington Electric Department.
Wright claims the sale would bring a one-time windfall to the city of more than $100 million.
Aside from BED, Wright said he'd entertain the notion of selling off Burlington International Airport — or at least having its ownership regionalized, or getting the state to take some ownership — as well as Memorial Auditorium, which he claims loses money annually.
What other city departments and services could Burlington auction off? The bike path? City arts? Church Street? The Waterfront?
(Fire away down in the comments section.)
Wright, who has served on the city council in three different stints over the past 15 years, acknowledged his bold solution to sell BED is, actually, not new.
"People have talked about it in the past, but I don't think the climate was right for this in the past and I think it is now," Wright said. "Would I have proposed this 10 years ago? I wouldn't have and I don't think voters would have reacted to it favorably 10 or 15 years ago."
The difference today is the sheer amount of debt facing the city, thanks to Burlington Telecom, the Burlington airport and a flagging pension fund.
In sum, the debts caused by these three entities easily tops $100 million: BT is in debt more than $50 million ($17 million owed to taxpayers and another $33.5 million to CitiCapital); the pension fund is at least $50 million short; and the airport is nearly $10 million in the hole thanks to a parking garage that was built with no bonding.
Republican Mayor Peter Brownell floated the idea of selling Burlington Electric during his two-year stint in office (1993-1995), but voter and city council disapproval put the kibosh on his plans.
Brownell told Seven Days he talked up the idea during his time as mayor to "anyone who would listen." But not many people listened. Or at least, not many took the idea seriously.
For Brownell, the issue of selling BED was not financially driven but philosophically driven.
"It wasn't necessarily because we needed to make money on it," said Brownell, who was facing structural budget shortfalls of $700,000 to $900,000 during his time in office. "Philosophically, I don't think the city has a reason to own an electric utility or an airport for that matter. The liability to taxpayers is something that would keep me up at night."
Selling off an asset to meet ongoing budget shortfalls is not recommended, Brownell said. However, selling off an asset to pay off one-time liabilities "could make sense."
The question remains, however, whether selling of BED would even achieve the "nine figure" windfall that Wright predicts. BED General Manager Barbara Grimes told Seven Days that, in reality, BED's bonded debt is not the $65 million that Wright claims, but closer to $100 million. Under the best case scenario, BED would net the city roughly $50 million, Grime said. (See update below.)
A $50 million windfall would essentially either cover the pension shortfall or make BT whole. Take your pick.
Wright's proposal raises a host of other questions: Would BED's payments in lieu of taxes and other charges to city coffers be covered by ongoing, annual payments by a new owner? Would the new owners assume all of the pension liabilities owed to BED workers? Would the Vermont Public Service Board allow a windfall profit from a utility sale to be spent paying down non-utility costs?
The other question is: Who would buy it? The only power company buying up other Vermont utilities is Green Mountain Power, er, GazMetro out of Quebec. GMP is currently trying to purchase Central Vermont Public Service.
Three of the four Democratic candidates vying to challenge Wright in the general election completely dismissed Wright's plan outright. Only Miro Weinberger said it's an option to consider, but not one he would undertake lightly.
Here's each Democratic candidate's response, in full:
State Sen. Tim Ashe (D/P-Chittenden): "Usually people throw Hail Marys at the end of the game, not the beginning. This is an astonishing proposal. Burlington became a national leader in energy efficiency and broke it off with Vermont Yankee in favor of renewable power precisely because the people of Burlington own it and it reflects our values. Why would we throw away our say in power policy? Totally half baked, not to mention unfair to BED's employees and leadership. We should be commending them, not throwing them to the mercy of multinational power investors."
City Councilor Bram Kranichfeld (D-Ward 2), who previously served as chairman of the BED Board of Commissioners: "BED is a model for municipally owned utilities and has successfully promoted renewable energy, including creating an award winning energy efficiency program, while keeping our electric rates affordable. Leadership requires a steady hand and this is no time to make ill-informed proposals. While I will consider every option, my plan to put Burlington’s finances back in order will not include a fire sale of its assets. Selling BED is a short-sighted approach that could increase our electric rates in an already challenging economy, halt our progress towards renewable energy, and may not resolve any of our long term financial issues."
Rep. Jason Lorber (D-Burlington): “Kurt Wright is trying to sell out our city and Burlington values. Selling out Burlington Electric to private hands would be committing financial malpractice. Burlington Electric saves residents money, while reducing energy consumption. I believe that energy-independence and efficiency are paramount to sustainability. That's what Burlington Electric does, while saving money. Burlington Values our people, our environment, and workers far above a fast buck.”
Housing developer and Burlington Airport Commissioner Miro Weinberger: "The Burlington Electric Department has been a valuable city asset for over 100 years. Public ownership of our power company has allowed the city to invest in renewable energy sources and energy efficiency initiatives. Unlike Kurt Wright, I do not want to sell Burlington Electric and would not consider doing so without careful analysis of all options. The financial assumptions Wright has based his proposal on are contested by BED and may prove inaccurate. That said, the legacy of the Kiss administration is that we have no choice but to consider highly unpleasant options. It would be irresponsible for any mayoral candidate to take any serious option off the table at this point."
For nearly three decades, the ongoing mantra of Democrats, Progressives and like-minded independents has been that Burlington should be open for business, but not for sale.
Clearly, Wright is challenging that credo.
* update - posted 4 p.m., October 20 *
Turns out that neither BED General Manager Barbara Grimes (who spoke to Seven Days from her car) nor Kurt Wright had BED's debt exactly right.
According to BED's Chief Financial Officer, Daryl Santerre, the total indebtedness of the municipal utility as of October 17 was $84 million. That is almost $20 million higher than claimed by Wright. According to Santerre, the bond breakdown is as follows: $43 million in general obligation bonds and $41 million in revenue bonds.
Wright had claimed BED's debt was $65 million, while Grimes thought it hovered closer to $100 million. With that higher debt, Grimes argued that BED would net the city only about $50 million if sold, not $100 million.
Wright stands by his claim that the market valuation of BED would fetch a net of at least $100 million for the city taxpayers.
"I went back and spoke to the people who were crunching the numbers with me and they didn't flinch," said Wright.
Wright said BED's value in the marketplace is more than just the utility's balance sheet - but includes its assets, its cash flow and its location in the market.
"That said, if Barb Grimes is right and this sale would only net the city $50 to $55 million, then I wouldn't do it."
Also, our initial post neglected to include the statement issued by Burlington Mayor Bob Kiss — remember him?. Turns out the two-term Progressive mayor believes Wright's idea is just plain wrong. Go figure.
"Kurt Wright’s proposal to sell the Burlington Electric Department is short-sighted and irresponsible. BED is a tremendous asset of the city. As a municipally-owned utility, it reflects important values of local rate-payer control and public accountability. BED is widely-acknowledged as one of the nation’s leading utilities with respect to the use of renewable energy sources. Selling an asset like BED for a one-time benefit undercuts Burlington’s future. It’s a short-term gimmick that lacks prudence and vision," said Kiss. "The urgency suggested by this proposal is misplaced. The city is working towards constructive solutions for issues such as Burlington Telecom and the pension fund. Proposing to sell BED under these circumstances is an erratic solution to circumstances that require steadiness and careful consideration."