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The Pension Predicament 

Fair Game

Published July 14, 2010 at 9:54 a.m.

Fair Game is Seven Days’ weekly political column.

Burlington’s city employees are entering their second fiscal year without contracts, according to labor negotiators.

The contracts of the four unions — representing police officers, firefighters, electric workers and general city employees — expired June 30, 2009.

While negotiations with Burlington Electric Department workers and other city employees are ongoing — in some cases, these groups meet monthly — talks with the police and firefighters have been less constructive.

“Since we started, participation on the administration’s side has been limited,” said Derek Libby, president of the Burlington Firefighters Association. “So, we’ve felt a level of frustration throughout the process.”

“It’s not unusual to have contracts spill over beyond their expiration date, but now we’re entering the second year … and that’s different. It’s the longest I can recall,” said Joe McNeil, the city’s lead negotiator. McNeil has represented the city in labor talks for nearly 30 years.

A key sticking point centers on the $39 million shortfall in the city’s pension fund. Neither side will reveal how they’ve proposed to close the gap, citing the confidentiality rules that govern labor talks.

Libby will say the city rejected offers from the police and firefighter unions in December and promised a counter offer that never arrived.

“We felt like we made a good-faith offer given the economic times,” said Libby.

Two weeks ago the two sides agreed to keep talks moving ahead without calling for an impasse — yet. The unions hope to receive an outline from the city this month, said James Dunn, an attorney who represents the police and fire unions.

On Monday, the city council approved a contract offer for BED workers, which puts off a pension-fund agreement until September 1. If no agreement is reached by then, either party can declare an impasse to initiate mediation.

The pension fund relies on three funding streams: employee contributions, investment gains and taxpayer funds. The fund’s existing obligations amount to about $170 million.

How much is actually in there? Burlington’s pension fund has taken a beating during the recession. According the state treasurer’s office, the city’s pension investments hit a high of $125 million in October 2007. That figure plummeted to $75 million by February 2009. As of May 31, the fund was back up to about $102 million.

City taxpayers have had to step up contributions to the fund to keep it solvent. Their share has increased sixfold since 2003, when they coughed up $1 million. They paid another $6 million in FY 2008 and 2009, and will deposit $6.3 million in FY 2011. That’s in contrast to FY 2005 and 2006, when the city shorted taxpayer obligations by $1.6 million and $1.1 million, respectively.

“The trick here is to find a pension program that is both sustainable and affordable, and it’s been a difficult go in negotiations,” said McNeil.

New Lease on Life?

“Fair Game” has learned that Terry Dorman, the Quechee-based consultant hired to turn around the city’s beleaguered Burlington Telecom, has won a small reprieve from the telecom’s top creditor, CitiCapital.

BT’s next interest payment was scheduled for August 17. But CitiCapital has agreed to give BT a six-week suspension, until September 30, according to a memo obtained by “Fair Game.”

BT missed two interest payments totaling more than $750,000, and another principal and interest payment of $780,000 was due next month. CitiCapital drew down on a $1 million reserve fund to make the March and May payments, and is entitled to the balance of the fund before September 30.

Mayor Bob Kiss sent a July 2 memo to the city council that reads: “This agreement is important. It is an indication that CitiCapital is taking the time to carefully consider this matter.”

In the meantime, BT is struggling to keep its head above water. Its poor financial performance is threatening to sink the city.

Last week Moody’s Investors Service downgraded the city’s credit rating for the third time this year, as a result of Burlington Telecom’s $17 million debt to taxpayers and its general financial instability.

The downgrade affects about $87 million in outstanding city debt, and could cost the city tens of thousands of dollars in added borrowing costs.

BT officials also say that, as a result of the annual college student exodus, customer counts went down in May and June. Chris Burns, BT’s general manager, claims the telecom company continues to add new customers each week and has about 4800 customers at this time. He wouldn’t provide more specific information about customer losses and gains, citing business confidentiality.

The mayor is expected to call a special meeting of the council later this month to update the panel on Dorman’s work and BT’s future.

To BT or not to BT?

Burlington’s Chief Administrative Officer Jonathan Leopold is fighting back against a lawsuit that aims to hold him personally responsible for BT’s $17 million debt to taxpayers.

Leopold’s attorney Robert Gensburg, notable for representing Guantanamo Bay detainees, argues that Leopold made payments on BT’s behalf in his official capacity and therefore is immune from prosecution. Besides, he didn’t act in bad faith, malice or for personal gain, Gensburg argues.

Gensburg makes this existential observation: “The city and BT are one and the same entity. [Leopold] did not authorize taxpayer (i.e., city) funds to be paid to BT, because there is no BT.”

Gensburg asserts the taxpayer plaintiffs — former GOP city councilors Fred Osier and Gene Shaver — are trying to mulct Leopold by holding the CAO personally responsible for the city’s financial mess, calling their charges “scurrilous attacks on this character.”

Mulct? It’s an arcane pejorative that means “to extract money by fine or taxation.”

I’m sure the feeling is mutual.

The Mac Is Back

Storyteller Mac Parker may owe investors more than the $10 million he originally claimed after state regulators accused him of violating securities laws to bankroll his new-age film, Birth of Innocence.

According to court documents, Parker likely raised more than $12.8 million between 1999 and mid-February 2007, according to an email on file with the court. The email was from an individual hired by Parker’s attorneys to organize the storyteller’s haphazard financial records.

The email, sent to Parker’s wife, noted that, through early February 2007, Parker had paid his “silent partner,” Dr. Louis James Soteriou, more than $3.6 million, with $1.2 million identified as film-production expenses.

The email also notes “there are substantially more deposits from mid-February 2007 through 2009.”

Parker stopped raising money in late 2009 after being confronted by state officials. He agreed to turn over detailed financial records but has yet to produce them. Regulators with the Banking, Insurance, Securities and Health Care Administration want the court to fine Parker for the delay.

State regulators have also disclosed in court papers that Parker signed investment agreements with people who merely helped him find investors, and that he also had “undocumented” lending agreements with some investors.

Lights, camera…

Media Notes

Gannett, the corporate parent of the Burlington Free Press, has plans to outsource newspaper design and online comment moderation at its 81 daily newspapers, according to Jim Hopkins at GannettBlog.

The move is another in a long line of cost-cutting measures for Gannett. In the past several years, Gannett has slashed local jobs, eliminated some home-delivery routes, moved the Freeps’ circulation call center to Kentucky and outsourced graphic design to India. This year the company will outsource ad production to the Midwest.

The Freeps is about to lose two very hard workers from its dwindling talent pool: Metro Editor Patrick Garrity and Associate Editor for Digital Operations Becky Holt. Garrity is moving to the Big Apple, sources tell “Fair Game,” while Holt is leaving to work for Burlington’s Committee on Temporary Shelter.

The banner on the cover of the Free Press declares it to be “A Local Custom: Serving Vermont for 184 Years.”

Will that claim be true in year 185?

Campaign Notes

The national women’s group EMILY’s List long ago endorsed Vermont Secretary of State Deb Markowitz in the race for governor. EMILY wrote off Sen. Susan Bartlett — literally. In an online pitch to its members, EMILY’s List explains why Markowitz is the best candidate of the four Democrats and one Republican. What is this — mean girls?

Doug Hoffer, one of two Democrats hoping to unseat Republican Auditor Tom Salmon, was also written off last week: A widely published Associated Press article focused on the auditor’s race but failed to mention Hoffer at all. Only Salmon and Democrat Ed Flanagan, a state senator and former auditor, got any ink in the story.

The AP later issued a correction and published a separate story about the Democratic primary, mentioning both candidates. Not as many papers picked it up as ran the original.

Last week, “Fair Game” noted that Sen. Peter Shumlin’s campaign had changed Andy Bromage’s profile headline from “Peter Principled?” to “Seven Days: Shumlin Principled,” while offering no link to the original article or credit to the illustrator.

The campaign pulled the link, and reposted it later this week with the correct title, a proper link and illustration credit. A campaign intern and campaign manager Alex MacLean took responsibility for the mistakes.

Speaking of mistakes, I erroneously reported that a February WCAX poll conducted by embattled Research 2000 firm put Lt. Gov. Brian Dubie ahead of all Democrats. In fact, the poll showed Secretary of State Deb Markowitz beating Dubie by two points.

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About The Author

Shay Totten

Shay Totten

Shay Totten wrote "Fair Game," a weekly political column, from April 2008-December 2011.


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