A lawsuit filed by two former city councilors against the City of Burlington and then Chief Administration Officer Jonathan Leopold over the use of almost $17 million to cover Burlington Telecom expenses has been dismissed.
In a 14-page final judgment order Superior Court Judge Geoffrey Crawford rejected arguments by Fred Osier and Eugene Shaver, both former Republican city councilors, that Leopold was guilty of fraud and personally liable. They also wanted the court to require that BT immediately reimburse the city.
While Crawford said the court does not condone the city’s violation of a Public Service Board condition requiring BT to pay its own way, Leopold “did not spend money without authorization from the City Council.”
In 2005 the PSB issued a certificate of public good (CPG) that prohibited BT from using taxpayer money to pay capital or operating costs in the process of creating a municipal telecommunication system. But the new enterprise was not able to meet its early costs without outside help, and in 2007 the city began withdrawing money from its pooled cash account.
In a deposition Leopold said he was unaware of the CPG restriction, known as Condition 60, until November 2008, and made “a pragmatic decision to borrow money in the short-term until refinancing was in place.” That became impossible in 2008 due to the growing crisis in credit markets.
Crawford noted that the case was one of the first in Vermont “in which taxpayers seek to recover against a Vermont official.” An 1896 state law provides immunity from claims of repayment by local officials, he noted. Crawford also pointed out that city budget resolutions, particularly in 2009 and 2010, called for spending money for BT.
“In approving expenditures in excess of budgeted revenues, the City Council recognized that in some years, the cost of building out BT would exceed any reasonable estimate of revenues,” he wrote.
This was “hardly surprising,” the judge added, and “it makes no sense to pretend that BT revenues would be sufficient to pay for construction in the early years of the enterprise.”
Osier and Shaver also wanted the court to make BT reimburse the pooled cash account for all the money that was borrowed. But Crawford ruled that since the underlying issue is a CPG violation, the Public Service Board is best equipped to administer the cure.
“Taking $17 million out of BT would repay the taxpayers,” Crawford wrote, “but it would undoubtedly also eviscerate BT, resulting in negative consequences for the City (such as a lowered credit rating) and its taxpayers. The better course is to defer to the process presently being overseen by the PSB.”
Crawford dismissed the claim against the city, and also granted Leopold’s motion for a summary judgment on the charges against him, “on the narrow ground that the annual expenditures for BT were all authorized by vote of the City Council.”
The decision also said that the demand by the plaintiffs for a permanent injunction would be “administratively confusing and redundant.”
Use of the city’s cash account “fell far below standards of candor and rectitude which we expect from public officials,” the judge wrote. A promise that the telecom system would not be built with taxpayer money was also violated. But he concluded that the state’s immunity provision applies in this case, there were no allegations of corruption or personal gain concerning Leopold’s action, and the City Council did sign off on annual expenditures for BT.
According to Burlington City Attorney Eileen Blackwood, the ruling sent a strong message to the plaintiffs. But that does not necessarily mean the case is over. “The court left the door open to say things could be refiled,” she said.
