If you had to boil down the Vermonters First message to one sentence, it could be: Democrats are recklessly spending taxpayer money. Sentence two? The state needs more “balance,” i.e., Republicans in office.
Those two messages from the state’s highest spending super PAC have thrummed like a drumbeat in nearly $1 million worth of mailings, robo calls, TV ads and radio spots this election cycle. Never mind that the state’s Democrats have taken moderate stances on fiscal issues, including taxes and the state budget.
The latest target? Burlington leaders’ attempt to address a debt that threatens the city’s credit rating. Democrats, in particular, are taking heat for trying to resolve a financial problem not of their own making.
The new mayor of Burlington, Miro Weinberger, and the City Council are asking voters to approve “Question 1,” or the so-called “fiscal stability” bond. The bond would pay off $9 million the city owes for an unauthorized loan the city made to the troubled Burlington Telecom in 2008 when Progressive Bob Kiss was mayor. The fiscal stability bond proposal is supported by a cross-section of Democrats, Progressives and Republicans on the City Council. Only one member out of the 14-member council, a Republican from Ward 7, dissented.
If voters approve the bond, property taxes will increase to 2.32 cents per $100 of assessed property value, or $58 on a $250,000 home.
If the bond isn’t approved, Weinberger warns the city’s credit rating will likely be downgraded to junk bond status, and it will be very expensive for the city to borrow money.
Vermonters First sent a postcard to residents of the city this weekend urging Burlingtonians to vote against “Question 1.”
The postcard urges residents to “say no to new debt,” and declares in a list of “facts” that the city’s borrowing costs will double and that the bond doesn’t address “underlying threats to our fiscal stability” (Burlington Telecom debt and the “underfunded” city pension). Vermonters First also asserts that there is “no guarantee” that the bond will improve the city’s credit rating.
The postcard winds up with: “How does this add up? The city can come up with a better solution.” (No solution is offered on the postcard.)
Paul Decelles, the lone city councilor from Ward 7 who opposed the new bond, told Paul Heintz of Seven Days that he worked with Tayt Brooks, the Vermonters First treasurer, on the mailing. Decelles could not be reached at press time.
Weinberger and his supporters, including John Ewing, a former banker and the chair of the Partnership for Burlington’s Future, held an “emergency” press conference Saturday evening to draw media attention to their cause. They say Vermonters First’s postcard is misleading, and in an effort to motivate residents to support Question 1, they have launched their own postcard, robo call campaign, and are holding a rally at Nectar’s on Sunday night.
Why is the mayor campaigning so heavily for this issue? Weinberger says the city has been using risky short-term loans to pay the interest on what he describes as the equivalent of “credit card debt.” The fiscal stability bond he says will refinance the debt and help the city avert a further downgrading of its credit rating to junk bond status.
“I welcome debate, discussion and differing opinions,” Weinberger said in an interview. “What I object to with this flyer that hit the whole city is that it is inaccurate and misleading. It is inaccurate to say that the fiscal stability bond represents new debt. The city already incurred a debt and it’s been paying for that on a credit card year to year and it’s a problem.”
The $9 million debt is what’s left of the $17 million Burlington Telecom “borrowed” from the city’s cash pool in 2007 and 2008, during Progressive Bob Kiss’ tenure as mayor.
The city has used an $8 million surplus over several years to pay down almost half of the debt. Even so, the bond rating agency Moody’s downgraded the city’s credit rating from AAA to Baa3 with a negative outlook last March.
For three years, Burlington has been borrowing money on a short-term basis to pay interest on the debt. The city is currently paying $500,000 a year in interest on temporary “tax anticipation notes,” at a current rate of about 2.5 percent; no payments are currently being made on the debt principle, according to Weinberger. The interest rate is adjustable, meaning it can go up or down with the market.
More troubling, the mayor said, is that there is no guarantee the city will continue to have access to short-term borrowing.
“One reason to do this now and not to wait is to lock in at a low-interest, long-term rate,” Weinberger said. “It [the variable rate] could jump at any time or not be renewed.”
The “fiscal stability” bond would be fixed at 5 percent and paid off over 15 years.
The $9 million debt is one of four “material weaknesses” cited by the city’s auditor. The fiscal stability bond will not address the material shortfall in the city’s pension fund, growing municipal costs or the Burlington Airport’s “separate short-term borrowing challenge,” according to a frequently asked questions section on the Partnership for Burlington’s Future Facebook page.
Weinberger says Burlington Telecom will still be required to pay back the $17 million it owes the city.
“Any funds recovered from BT will be put in a debt service reserve fund that will be used to reduce the property taxpayer’s bond payments,” according to the Partnership.
The fiscal stability bond will have no impact on the ongoing $33 million federal lawsuit with CitiCapital over Burlington Telecom, Weinberger says.
Chris Campion, a writer for the now-defunct conservative blog Vermont Tiger, suggests the city should encourage Burlington College to develop housing units on 33 acres along Lake Champlain that would generate significant property tax revenue in future.
The Vermonters First postcard follows.
Editor’s note: This story was updated at 5:15 p.m.