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Heartland Institute Scholar: Time To Sell Burlington Telecom

October 17, 2017

The Coalition for the New Economy has discussed the failure of Burlington, Vt.’s municipal broadband network, Burlington Telecom (BT), several times over the past few years. In 2013, we noted the system “borrowed” (perhaps illegally) $17 million from city taxpayers. We’ve reported that, at one point, the system was carrying at least $50 million in debt. And, in 2014, we explained that the city’s mayor was ready to get out of the broadband business. 

Now, at the blog RedState, the Heartland Institute’s Lindsey Stroud argues that, given BT’s negative history, that’s just what the city must do.

Stroud notes that when city leaders approved the creation of BT in 1997, they estimated the system would cost $21 million. A few years later, “BT secured $22.5 million from Koch Financial to construct the network.” It then took four more years, until 2005, before the system was ready to offer service to Burlington residents. Two years later, however, the city needed more money so, as Stroud explains, “it replaced its initial financing from Koch” with “millions more from CitiFinancial, bringing the total to $33.5 million.”

From there, Stroud explains, “BT’s balance sheet only got messier …” That’s when the system “borrowed” $17 million from city funds, an action that violated the terms of its Certificate for Public Good. Later, Stroud explains, “A blue-ribbon commission … found BT had mismanaged finances and carried a debt load that was ‘too great to be covered by’” BT’s revenues. Additionally, Stroud notes, the network “generated a negative cash flow of $10.6 million” between 2010 and 2014.

In all, according to Stroud, BT has cost Burlington taxpayers about $26 million.

Under a court settlement, the city is required “to sell BT to a private company.”

Burlington currently has three bidders, but “only two would offer the funds up front that cover the lost tax dollars.” A third bid, made by a co-op of Burlington citizens, “would likely not be able to provide to the city the money that has been lost” and might not even be able to “maintain the funding needed to keep BT afloat in the future.”

Stroud argues the city should take one of the first two offers. She concludes, “Burlington lawmakers should end the city’s involvement in this municipal project and choose a bid that would recover the costs previously imposed on taxpayers.”

It’s hard to disagree with that.