Burlington has made “millions of dollars of mistakes” in its infrastructure financing and owes the state education fund nearly $200,000, according to a new report released Monday by State Auditor Doug Hoffer.
The audit addressed city projects paid for by tax increment financing, or TIF, a tool that allows municipalities to borrow to finance infrastructure projects and pay back the debt using increased property tax revenue following a project’s completion.
Hoffer said the audit revealed so many errors that “it is clear a new process is required to reduce the risk of significant errors in the future.”
In a statement Monday morning, Mayor Miro Weinberger acknowledged “significant errors” and pledged to take “prompt action” to address them. However, he disputed some findings, including that the city owes nearly $200,000 to the state education fund.
Burlington has used its Waterfront TIF District to finance the Moran Frame, bike path reconstruction and other projects. The district also extends to some downtown areas, including the ongoing CityPlace project. Hoffer noted in his report that Burlington issued nearly $16 million in bonds for projects in the district.
The audit found that Burlington paid $1 million more for project costs than voters had authorized.
The city also “underpaid” the state education fund and owes $197,510, according to the report.
Additionally, it found that $173,056 in bike path rehabilitation costs went toward work performed outside the TIF district that was therefore ineligible for such financing.
In a press release, Hoffer called the Burlington TIF audit “one of the most difficult audits my office has ever conducted.” He attributed the problems in Burlington to “poor recordkeeping, key staff turnover, and slow adoption of strategies recommended by the City’s own auditors.”
In his statement, Weinberger said the city would transfer $1.2 million from the city’s general fund to the TIF district fund. The mayor noted that nearly $700,000 of the amount owed to the TIF district will be moved from another waterfront project called Waterfront Access North, or WAN, “in part because expenses were previously improperly applied to the Waterfront TIF District instead of WAN.”
He also said the city plans to address the bike path funding issues and will work with the state to confirm the amount owed to the education fund.
In his statement, Weinberger said the report “documents significant errors in the district’s administration. The City regrets these errors and will take prompt action to resolve them completely.”
Weinberger, who became mayor in 2012, went on to say it was “unsurprising” that the audit found major errors in the time period covered, which he said dates back to 2011.
“We had fundamental issues in our financial systems at that time, which in 2012, resulted in a downgrade to the edge of junk bond status and financial disaster,” Weinberger said, noting that the city has made “great progress” in restoring its finances and won back a positive credit rating.
The mayor said the city has worked with the state auditor’s office for over a year on the audit.
In his press release on Monday, Hoffer said supporters of TIF programs across the state call it a “straightforward and effective tool” to finance public improvements.
“This audit paints a much different picture,” Hoffer said. “It isn’t a cheap way to pay for infrastructure,” the auditor continued. “We estimate Burlington will pay more than $11 million in interest for $32.6 million borrowed to pay for improvements.”
Correction: An earlier version of this story mischaracterized how the city plans to address issues with bike path funding.
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