Vermont broadband mess haunts NorthlandThe CEO of a nonprofit that aims to build a $70 million high-speed fiberoptic network serving all of Lake County and much of St. Louis County has found himself fielding questions about the struggles of a similar network he helped launch in Burlington, Vt., eight years ago.
By: Peter Passi, Duluth News Tribune
The CEO of a nonprofit that aims to build a $70 million high-speed fiberoptic network serving all of Lake County and much of St. Louis County has found himself fielding questions about the struggles of a similar network he helped launch in Burlington, Vt., eight years ago.
Tim Nulty, CEO of National Public Broadband, contends that when he left his job as head of the Burlington network more than three years ago, “It was golden.”
Although Burlington Telecom was not yet operating in the black at the time, Nulty said it was on track to become profitable and had hit many of the benchmarks that had been set for its growth.
Today tells a different story.
Unable to repay more than $33 million it owes to CitiCapital, Burlington Telecom faces the imminent threat that much of its core infrastructure soon could be repossessed.
And an audit for the Vermont Public Service Board recently cited BT, which serves about 4,700 customers, for improperly spending and failing to repay $17 million it received from the city of Burlington. The audit found violations dating to 2005, including some during Nulty’s tenure as general manager.
“Our concern is this could be Burlington Round Two here, and it’s a bad deal when you have taxpayers who could be on the hook,” said Jonathan Blake, vice president of the Freedom Foundation of Minnesota, a free-market think tank. He compared Nulty to a “Music Man” character, selling communities on an unattainable dream.
Nulty counters that the troubles at BT developed after his departure and had more to do with “misbehavior” at city hall than any flaw in the network’s business plan.
“The (Vermont) state attorney general has launched a criminal investigation, and it’s been joined by the FBI,” Nulty said, adding that there’s been no indication the investigation will focus on himself.
Nevertheless, Nulty acknowledged BT’s woes have had personal repercussions.
“There’s been collateral damage, no doubt,” he said.
The audit found that BT “has incurred losses and has consumed net cash every year of its existence.”
But Nulty said it was unrealistic to expect that the network would have been turning a profit by the time of his departure in 2007. Construction of the fiberoptic network began in 2005, and he said BT’s business plan projected the road to profitability would take about 4½ years. These projections would have pushed the network’s books into the black come 2009 and were consistent with industry norms, Nulty said.
Burlington Mayor Bob Kiss did not return calls from the Duluth News Tribune on Wednesday. Jonathan Leopold, the city’s chief administrative officer who has been critical of Nulty and his management of BT, also did not return calls. But the Vermont alternative newspaper Seven Days quoted Leopold saying that BT was “very bad off financially” when Nulty left and had to be rescued with the $17 million in city money flagged as inappropriate in the recent audit.
“The big question is: Where did the $17 million go?” asked Gary Fields, chief financial officer under Nulty at National Public Broadband. “Without good information, people are making all kinds of claims and pointing fingers.”
The $17 million transfer of city money to BT occurred after Nulty resigned.
Regardless of whether Nulty bears any culpability for BT’s financial troubles, his prior involvement threatens to cast an unflattering light on his latest project here in the Northland. That project is moving forward with the help of $66 million in federal support and $4 million in bonds issued through Lake County.
“It’s terrible timing for this all to come out now,” said Lake County Commissioner Paul Bergman. “We were hoping more things would be explained in the audit.”
Bergman says he remains convinced Nulty is not to blame for what happened to BT, and that he considers Nulty an asset rather than a hindrance for the Lake County initiative.
Still, Bergman observed: “These things can spin out of control.” And if they do, he said he would have no choice but to ask Nulty to step down.
For his part, Nulty said he will respect the wishes of the project’s partners.
“I’m not doing this to get rich. I’m doing it because I believe in it,” he said.
“If they come to me and say: ‘You’re too hot right now, and you’ve become too much of a lightning rod,’ I’ll say: ‘No problem and good luck.’ ”
Meanwhile, Nulty is making a play for BT. He said he has put together a group of investors and is in negotiations with CitiCapital, the lender poised to repossess most of the network’s assets.
With proper management, Nulty said he’s convinced BT can be nursed to health.
“But the biggest single reason I want to get involved again is that this debacle is causing immense damage not just to the project in Lake County but to hundreds of other communities that also want to do this,” he said.