State Audit of Burlington Tax Increase Financing Finds ‘Millions of Dollars in Errors’

Burlington has made “millions of dollars of mistakes” in funding its infrastructure and owes the state education fund nearly $200,000, according to a new report released Monday by state auditor Doug Hoffer.

The audit covered urban projects paid for by Tax Increment Financing, or TIF, a tool that allows municipalities to borrow to finance infrastructure projects and pay off the debt using increased property tax revenues after completion of a project.

Hoffer said the audit revealed so many errors that “it is clear a new process is needed to reduce the risk of material 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 fund the Moran Frame, bike path reconstruction, and other projects. The neighborhood also extends to some areas of downtown, including the ongoing CityPlace project. Hoffer noted in his report that Burlington has issued nearly $16 million in bonds for projects in the district.

The audit found that Burlington paid $1 million more in project costs than voters authorized.

The city also “underpaid” the state education fund and owes $197,510, according to the report.

In addition, it found that $173,056 in bikeway rehabilitation costs went to work performed outside the PIF district that was therefore ineligible for that funding.

In a press release, Hoffer called the Burlington TIF audit “one of the most difficult audits my office has ever conducted.” He attributed Burlington’s problems to “poor record keeping, turnover of key personnel, and slow adoption of strategies recommended by the City’s own auditors.”

In his statement, Weinberger said the city will 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 transferred from another waterfront project called Waterfront Access North, or WAN, “in part because the charges were previously improperly applied to the TIF Waterfront District instead of WAN”.

He also said the city intends to address 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 district administration. The Municipality regrets these errors and will act promptly to resolve them completely.

Weinberger, who became mayor in 2012, went on to say it was “unsurprising” that the audit found serious errors in the time period it covered, which he said was 2011.

“At the time, we had fundamental problems in our financial systems, which led to a downgrade to borderline junk bond status and financial disaster in 2012,” Weinberger said, noting that the city has made “great progress” in restoring its his finances and regained a positive credit rating.

The mayor said the city has been working with the auditor’s office for more than a year on the audit.

In his press release on Monday, Hoffer said supporters of TIF programs across the state call it a “simple and effective tool” for funding public improvements.

“This audit paints a very different picture,” Hoffer said. “It’s not a cheap way to pay for infrastructure,” the reviewer continued. “We estimate that Burlington will pay more than $11 million in interest on the $32.6 million it borrowed to pay for the improvements.”

Correction: An earlier version of this story misrepresented how the city plans to address issues with bikeway funding.