[B]URLINGTON — Nearly two months after unexpectedly closing its doors under what school officials called a “crushing weight” of debt, it appears Burlington College will not be able to pay back all its creditors.
Among those at risk of being unpaid are the Vermont Economic Development Authority, the estate of a former faculty member who donated money for a scholarship fund that came under dispute, and a number of vendors contracted by the school.
Burlington College owes People’s United Bank roughly $3.7 million for a loan and a line of credit, according to several college trustees. Board Chair Yves Bradley said that, even with the sale of the land where the college was located, he does not expect the school’s remaining assets will cover the bank debt.
Most of the college’s debt stemmed from its 2010 purchase of a 33-acre lakefront property on North Avenue for a new campus, a purchase masterminded by former President Jane Sanders, wife of Sen. Bernie Sanders.
The college bought the land for more than $10 million using a bank loan and a loan from the Roman Catholic Diocese of Burlington, the seller. Through sales of part of the land to a private developer, Burlington College was able to reduce what it owed the bank and wipe out its debt with the diocese — though the church lost at least $1 million in settling the loan in 2015.
The church was initially paid, in part, with a $1 million investment in developer Eric Farrell’s company, which plans to build housing on the land. Farrell said in an interview last month that he’s since cashed the diocese out of its ownership stake in the company.
Now, People’s United Bank is expected to take ownership of the final piece of Burlington College property at 351 North Ave., where the school itself was located, and is in negotiations to sell it to Farrell.
Bradley said he expects the property will sell for close to $3 million, though he is not privy to Farrell’s negotiations with the bank. Farrell said $3 million is the right “order of magnitude” but wouldn’t disclose the price until the deal goes through.
The Vermont Economic Development Authority loaned Burlington College $250,000 through a subsidiary nonprofit in 2014 to help it cover operating expenses. That loan was partly paid off and its terms modified in 2015, but VEDA is still owed $145,000, according to its CEO, Jo Bradley. The balance of the loan is due in September.
“It may very well be that we do not get paid back in this case,” Jo Bradley said in an interview Monday. The Bradleys aren’t related.
VEDA staff reviewed detailed financial information and projections from Burlington College before approving the loan, Jo Bradley said, and concluded that, “If this, this and this happen, it looks like (the college) could make it.”
“We went into this with our eyes open” she said. “It’s a risky loan — there was no question when we made it.”
Unlike most other lenders, VEDA has a “dual bottom line,” which means it also considers the economic impact of its lending, not just the prospects for repayment, Jo Bradley said.
Burlington College was an important Queen City institution, with a relatively large staff, and supporting the school with a loan, though risky, met the economic development component of VEDA’s mission, she said.
VEDA loans have a default rate of about 1 percent, according to Jo Bradley.
Jo Bradley said Jane Sanders, who was on the VEDA board when the loan was made in 2014 but was no longer Burlington College president, had no involvement in making the original loan. “Nor was she participatory in any other business that may have come up around the loan,” Jo Bradley added.
The estate of Jason Conway, a longtime faculty member who along with his wife, Marcia Vance, was a founder of Burlington College, holds a $70,000 mortgage on the Burlington College property.
That was granted after the estate’s executor sued Burlington College in February alleging that the estate’s $70,000 gift for an endowed scholarship fund was used for other purposes and in a way that violated an agreement between the college and the estate.
The two sides were said to be close to a settlement when Burlington College closed its doors. Norm Blais, an attorney representing the Conway estate, said he no longer expects that money will be paid, given his client’s position behind People’s United Bank in the line of Burlington College creditors.
“As far as my client is concerned, (Burlington College) basically swindled the estate out of $70,000,” Blais said.
Yves Bradley, the board chair, was not able to provide a full accounting of how much the school owes vendors or in utility and other bills. He also could not say what will happen to faculty and staff retirement accounts or whether former staff would be compensated for unpaid time off or other money they might be owed.
“We have little to no clout. It’s up to the bank and their good graces to whatever they’ll do at this point,” he said.
Michael Seaver, People’s United Bank president for Vermont, said the bank would have no comment because the status of its relationship with Burlington College is confidential.
No staff is working at the college anymore except the president, Carol Moore, who is volunteering her time at this point, Yves Bradley said. Moore could not be reached for this story.
Farrell and the bank have been working to clean up 351 North Ave. after the school’s hasty departure, Yves Bradley said, including throwing out rotting food from refrigerators.
Bradley said he is working with a company to finalize a contract for the removal and storage of the graduation tent on the nearby lawn after reports that homeless people were living inside.
(This story was updated July 12 at 4:30 p.m. to include the response from People’s United Bank.)
Correction: An earlier version of this story stated incorrectly that People’s United Bank had taken possession of 351 North Avenue.
