AFFORDABLE?: Burlington College is in financial trouble after borrowing $10 million to purchase a 33-acre campus on Lake Champlain.

By Bruce Parker | Vermont Watchdog

While borrowing millions to build a campus on Lake Champlain may have sounded like a good idea at the time to leaders at Burlington College, two board members at the agency tasked with approving the tax-exempt loan said no way.

“One board member thought the property could be put to better use than being used as a college campus, and the other board member questioned the college’s viability and whether they would be able to repay the debt,” Robert Giroux, executive director of the Vermont Educational and Health Buildings Financing Agency, told Vermont Watchdog.

The circumstances surrounding the 2010 purchase have come into sharp focus after a recent audit revealed the college is in financial distress, and is failing to make payments on part of a $10 million loan obtained to buy the 33-acre property from the Roman Catholic Diocese of Burlington.

On Nov. 18, 2010, Vermont Educational and Health Buildings Financing Agency, a conduit issuer that signs off on tax-exempt loans for nonprofit organizations, held a board meeting to vote on whether to approve Burlington College’s request for a loan of up to $7 million.

According to minutes from that meeting, former Burlington College President Jane O’Meara Sanders, wife of U.S. Sen. Bernie Sanders, I-Vt., told the board the 33-acre campus would help meet increased student demand and create a true campus experience. According to Sanders, new programs and increased marketing had driven enrollment to maximum capacity at its facility.

I HAD A PLAN: Jane O’Meara Sanders, former president of Burlington College and wife of Sen. Bernie Sanders, said her plan to purchase a new campus for Burlington College had broad support from financial consultants.

And with rising student enrollments and a new full-time fundraiser, the college, Sanders said, would be able to repay $6.7 million to People’s United Bank, the lender. The other $3.5 million loan was to come from the Roman Catholic Diocese of Burlington, the seller of the parcel.

Representatives of consulting firm Public Finance Management, who also attended the meeting, told the board the loans would increase the college’s debt service by five times. Nevertheless, the firm recommended approval, saying the college had the revenue to service the debt.

Four years later, many observers now worry Burlington College may soon go belly up, and a regional accrediting agency has put the institution on probation due to financial concerns.

At the time Sanders made her presentation to the board, the college had only 200 students, no significant endowment, an annual budget of less than $4 million, and a capital campaign described as “in the silent phase.” Revenue was almost entirely based on student tuition.

“It did seem Burlington College didn’t have the wherewithal to put this thing together. I didn’t think it was ready for prime time,” Tom Pelham, one of two agency board members who voted against the loan, told Vermont Watchdog.

Pelham, who served as commissioner of finance and management under former Gov. Howard Dean and tax commissioner for former Gov. Jim Douglas, called the transaction “a thin and unwise development” from numerous perspectives.

“From a diocese point of view, it didn’t seem to work. From a future plaintiffs view, if there were other cases against the church, it didn’t seem to work. (Also), the town seemed to be indifferent to the benefits the property taxpayers could have gotten out of this proposal.”

Pelham said the speed of the sale was suspicious as well.

CLASSROOM WITH A VIEW: Situated on beautiful Lake Champlain, Burlington College’s new 33-acre campus is estimated to be worth between $16.5 million and $20 million.

“The property was on the market for less than a month as I recall — it was on the market for a very short period of time. It was one of the most extraordinary pieces of vacant property in the state,” he said. “… I did think if this wasn’t Jane Sanders, it probably wouldn’t be going as fast as it did.”

Sanders wasn’t the only politically well-connected leader involved in the deal.

According to a 2011 VTDigger article, Jonathan Leopold, treasurer at Burlington College and also the city of Burlington’s chief administrative officer, was another key broker.

Originally appointed Burlington’s city treasurer in the 1980s when Bernie Sanders was mayor, Leopold resigned his post as Burlington’s chief administrative officer in 2011 after secretly diverting $17 million from the city’s general fund to prop up Burlington Telecom.

Charly Dickerson, the other VEHBFA board member who voted against the loan, said he doubted the college could afford the new campus.

“I didn’t think at the time that the college had a strong enough balance sheet to be able to assume such a project. That’s why I voted against it,” Dickerson said.

“The board has two criteria upon which to approve a particular issuance of bonds by statue. One is whether the project is needed, and the other is whether the institution has the ability to repay its debt. I had concern about both of them.”

While Giroux recalls arguments cited against the loan’s approval, he said People’s United Bank gave his agency’s board confidence in the transaction.

“A big boy stepped up to the plate and said we take full responsibility for our piece of the transaction, we think this is a good opportunity for the bank, and we’re willing to lend money to Burlington College. That gave my board certain comfort that there was a very sophisticated partner on the other side of the Burlington College transaction.”

In a phone interview with Vermont Watchdog, Sanders, who resigned in 2011 after butting heads with trustees, said the college was financially sound when it purchased the campus.

“I think it’s simplistic to look at the current problems within Burlington College and pin it on the purchase of the campus,” she said.

When asked if the dissenting votes gave her leadership team pause, she said, “I don’t want to speak for the two VEHBFA board members, but there are a dozen others who voted for it, and believe me, they asked very good questions.”

Sanders added that she welcomed dissent because it “added to the discussion” and made the team consider its decisions from different perspectives.

“What people don’t understand is we had a $1.75 million bond on the old property, which was just one acre, and we would have a $10 million dollar bond — a $6.5 million bond, and the rest due to the Catholic Diocese — on 33 acres, and quite a bit more potential for the college to grow. We had no room to grow on the previous campus.”

The additional debt was not a stretch given the college’s budget and growth targets, Sanders said.

“The 30-year amortization is not that much of a leap. People who are much more experienced than me in this area looked at everything with a fine-tooth comb, whether it was the board of trustees … or PFM (Public Finance Management), and said yep, this is not only very doable but a very good plan for the future of the college.”

Still, Pelham said he wasn’t convinced.

“It seemed to me that this was incredibly thin, and that, in the end, it might be those aligned with the bank in a situation like this that end up controlling a beautiful piece of property for less than one-third of its value.”