Vermont City’s Muni Wi-Fi $50 Million in Debt

Published December 2, 2009

The mayor of Burlington, Vermont is being asked by the city council and residents why his administration tried to hide the fact its Burlington Telecom project is approximately $50 million in the red.

Burlington Telecom, a city-run service providing fiber-to-the-home for residents, launched with great fanfare four years ago. Until recent months, the service’s biggest controversy was over its decision to carry the English-language version of al Jazeera–a Qatar-based television network often accused of airing anti-American propaganda.

That fracas is now the least of Burlington Telecom’s problems. In late October city officials revealed the service had borrowed $17 million from the city’s rainy-day fund in 2008 and 2009 and failed to pay any of it back within 60 days, as required by law.

Hiding the Debt

On top of that, City Councilor Ed Adrian accused Mayor Bob Kiss and the city’s chief administration officer, Jonathan Leopold, of having “intentionally deceived” the council about the scope of Burlington Telecom’s debt.

Once confronted, Leopold and the mayor admitted Burlington Telecom’s debt was approximately $50 million–more than the city’s entire 2009 general fund budget of $47.5 million.

If the $50 million debt figure is accurate, the city’s approximately 16,000 households are on the hook for about $3,000 each to bail out the project.

Not ‘the Wise Course’

Hance Haney, director and senior fellow of the Technology & Democracy Project at the Discovery Institute in Washington, DC, says it was unwise for Burlington to get into the broadband business in the first place.

“Wireless broadband technology is a fast-moving arena,” Haney said. “Even industry experts frequently can’t predict where it will go, and every so often investments have to be written off.

“The wise course for public officials is to protect the taxpayer and let private investors incur the loss when a project fails,” Haney added.

‘Risky Business’

Carl Gipson, director for small business, technology, and telecommunications at the Washington Policy Center in Seattle, said Burlington Telecom’s failure was inevitable because “cities operate outside of normal market incentives.”

“So what if there are cost overruns and unsatisfied customers? The cost is passed on to the taxpayer under the guise of improving technology for the city,” Gipson said. “It underscores the point that [telecommunications] is a risky business and it should be left to the private providers to undertake such risk.

“Taxpayers cannot just switch their municipal government the way they can switch telco or ISP providers,” Gipson added.

James G. Lakely ([email protected]) is managing editor of InfoTech & Telecom News and co-director of The Heartland Institute’s Center on the Digital Economy.