Vermont Business Magazine As Burlington Telecom heads to a new chapter in its brief history as part of new owner Schurz Communications, another chapter appears to be closing. A recent audit conducted on the City of Burlington has found that its improved financial performance, and subsequent bond rating upgrades, has resulted in the city saving $12.6 million. The financial problems suffered by Burlington Telecom and subsequently by the city as it tried to shore up the telecom with an unauthorized $16.9 million loan cratered the city's bond rating and that of city-owned Burlington International Airport. At the City Council meeting on Monday, January 29, 2018, Council accepted and approved the city’s Fiscal Year 2017 (FY17) audit and management letter and Fiscal Health Report issued by the Chief Administrative Officer (CAO). These documents capture major financial progress over the past six years in two primary respects:
First, in January 2018, the City of Burlington received its first audit and management letter with zero findings and no “Material” or “Significant” weaknesses. This represents a dramatic change since the City was downgraded to the edge of junk bond status in 2012, and received a FY12 audit with 27 findings, of which twelve were identified as “Material Weakness,” and one was a “Significant Deficiency.” Material weaknesses are serious concerns for municipalities because they indicate that a “reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.” Such conditions can lead to preventable losses or waste of public funds, abuse, and inaccurate budgeting.
Second, the CAO’s Fiscal Health Report finds that the reforms of the City’s financial operations indicated by the management letter and other substantial improvements to the City’s financial health have led to credit rating upgrades that have saved taxpayers and ratepayers millions of dollars. Of the six ratings steps that Burlington lost between July 2010 and June 2012 in the wake of Burlington Telecom’s financial struggles, four have now been restored in three upgrades over the last three years. These upgrades have resulted in total net present value (NPV) savings of approximately $12.6 million in current dollars (or $18.9 million in gross dollars over the terms of the bonds the City has taken on since the upgrades began*). Of this total, the NPV savings for the Burlington School District since the credit rating upgrades began is $1.7 million. These savings will continue to grow dramatically each year as the City and Schools take on new debt in a period of substantial public investment. These savings keep money in the pockets of Burlingtonians and have helped make it possible for the City to make new investments in our infrastructure, public safety, parks, and social programs with minimal tax increases (the municipal property tax rate is only .2 percent higher in FY18 than it was in FY15).
Mayor Miro Weinberger released the following statement regarding the FY17 management letter and Fiscal Health Report:
“The new management letter and Fiscal Health Report show that the broad financial progress of the last six years is compounding and dramatically benefiting the pocketbooks and quality of life of Burlingtonians. With our financial foundation sound and strengthening, the City is in good position to both continue to invest in core public infrastructure, public safety, and our kids, and to contain municipal property tax increases. I thank our CAO’s Office and Department heads for working for this progress day in and day out, and am grateful for the partnership of the City Council and Burlington voters in this effort.”
Karen Paul, CPA, Ward 6 City Councilor and Board of Finance Member, and sponsor of the Council Resolution adopting the management letter and Fiscal Health Report, stated: “The City’s Fiscal Year 2017 audit and management letter are milestone accomplishments. They are the result of relentless efforts on the part of many to see that fair and transparent financial reporting is the cornerstone principle in our financial processes. Our City’s financial health is strong. It is critical that we continue on this course, which I believe will result in seeing our rating restored to pre-2010 levels in time.”
Source: City of Burlington. 1.30.2018 *This figure represents total savings over the life of the new bonds issued since the City’s financial turnaround began in 2014.