Burlington, Vt., Mayor Swings for an A Credit Rating
In his spare time, Burlington, Vt., Mayor Miro Weinberger plays in an adult baseball league. In his day job, Weinberger is taking a swing at bringing Vermont's largest city out of a balance sheet slump that hammered its credit rating.
Weinberger's efforts are starting to pay off; Moody's Investors Service upgraded Burlington's general obligation bond rating to Baa2 from Baa3 on March 3, assigning a positive outlook, citing balanced financial operations the last two years that are projected to continue going forward.
The upgrade, which occurred on the same day Weinberger was elected to a second three-year term, impacts $99 million in rated-long term debt.
The Democrat took over Burlington City Hall in April 2012 in the midst of a series of Moody's downgrades that began in July 2010, stemming largely from a $33.5 million lawsuit the city faced with Citibank regarding municipally-owned broadband provider Burlington Telecom.
The lawsuit came out of a dispute over money the city borrowed as it the city built a high speed internet, television and telephone network for city and commercial users that failed to pan out financially.
Burlington, which has a population of 42,284, is celebrating its 150th anniversary in 2015 and got a major boost to start the year when a federal district judge dismissed Citibank's lawsuit on Jan. 2, which helped ratify a $10.5 million settlement reached with the banking giant in February 2014 that Moody's considers favorable to the city. Weinberger, who was formerly a member of Burlington's airport commission, referred to the lawsuit as a "long and unfortunate chapter" in the city's history and described the settlement as a psychological boost in addition to aiding the city's financial position.
"It was absolutely critical," said Weinberger of being able to move past the Burlington Telecom issue. "It allowed us to change our sights to other issues."
The Vermont Public Service Board, which ruled in 2010 that Burlington violated its charter by subsidizing BT with taxpayer funds, unanimously approved the city's settlement conditions last November. To pay for the settlement, Burlington city officials lined up $6 million in bridge financing from Blue Water Holdings through the sale of BT assets with other funding deriving from the sale of city-owned property, cable company revenues and insurance. The bridge financing was led by local investor Ray Pecor III and financed by a loan from Merchants Bank.
"It ended a cloud of uncertainty," said Vermont State Treasurer Beth Pearce of the settlement's approval. "It raised confidence in the direction the city was headed."
Weinberger, 45, plays catcher on a Burlington Cardinals over-35 baseball team that won the Vermont Senior League title in 2014. (Former Boston Red Sox pitcher Bill Lee, then 68, pitched a one-hit shutout in the championship game.)
As mayor, Weinberger began tackling financial tests right from the get-go by pitching to voters a $9 million fiscal stability bond that was approved in November 2012, allowing the city to reduce its reliance on short-term financing.
Two-thirds approval was needed to pass the measure and this was easily achieved with 72% yes votes enabling the city to issue deficit refinancing bonds in April 2013.
"It was a pretty drastic situation that called for an immediate action," said Weinberger of the decision to put the fiscal stability bond proposal before voters. "I'm proud that the voters of Burlington understood the importance of this issue."
The fiscal stability bond helped Burlington shore up its cash flow and operations resulting in operating surpluses the next two years. Expenditures in 2015 increased by 2.6% from the prior year and the budget was balanced by a 4.6% tax levy increase.
"It allowed them to stabilize their cash position," said Nick Lehman, lead Burlington analyst at Moody's, which revised Burlington's outlook to stable from negative in April 2014. "They were able to issue and receive bond purchases basically as liquidity."
Pearce, who was first appointed treasurer by Vermont Gov. Peter Shumlin in January 2010, said her office has offered support toward Burlington's financial improvements efforts, but credits Weinberger for being proactive addressing the challenges head on. The Democratic treasurer oversees a state that is rated Aaa by Moody's and Fitch Ratings and AA-plus by Standard & Poor's.
"The mayor has taken the lead on this," said Pearce, who was elected to her first full term as treasurer in November 2012. "He has taken some great steps to move the city in the right direction financially."
While Burlington has improved its financial position, Moody's noted that reserves and liquidity remain low. The city's general fund net cash position at the end of the 2014 fiscal year was $2.6 million, or 4.7% of revenues.
Weinberger said the city has worked hard toward improving financial management protocols noted in recent audits such as producing monthly budget reports. The 2014 fiscal year audit emphasized nine areas of improvement compared to 27 in 2011 and Weinberger emphasized that these enhanced practices will help the city stay on fiscal track. The 2014 audit also praised Burlington for having its first positive general fund balance since 2009.
"It was the cleanest audit the city has had in years," said Weinberger. "It gave us a clear to-do list."
Weinberger credits the city's chief administrative officer, Bob Rusten, whom he appointed in May 2013, for playing a key role in building the city's financial momentum after he led other turnaround efforts in South Burlington and Wilmington, Vt. The fiscal 2016 Burlington budget is slated to be finalized in June and Weinberger said it will deal with spending increases stemming from collective bargaining and retirement contributions. The Burlington mayor is also planning to present a 10-year capital plan to the city council.
With some financial challenges in the rear view mirror, Weinberger views Burlington's future as strong thanks to a growing technology sector along with a thriving medical center and universities.
Weinberger is also excited about a planned redevelopment of the Burlington Town Center downtown mall, which would generate around $6 million in new tax revenue per year. The Yale graduate and former baseball standout at Woodstock High School would eventually like to see Burlington be back in the A category from Moody's, but recognizes achieving this will not happen by swinging for the fences.
"An A rating is where Burlington should ultimately get to, but it will take some time," he said. "We need to stay disciplined as a city."