Business & Economy

City debates making bids public in Burlington Telecom sale

Jane Knodell
City Councilor Jane Knodell, P-Central District. File photo by Phoebe Sheehan/VTDigger

BURLINGTON — City officials are debating whether to make public a group of finalists being selected from the eight organizations that bid to buy or partner with the city to operate Burlington Telecom.

A 2014 settlement with Citibank, then the municipal fiber network’s main creditor, requires Burlington Telecom be sold, though the city can retain partial ownership.

If the telecom is sold by January, the city will retain a larger portion of the sale proceeds. A City Council-approved sale process anticipates a buyer being selected by the end of August in order to meet that deadline.

Finalists are expected to make presentations to the City Council in executive session July 31. City Council President Jane Knodell, P-Central District, said officials have not decided whether to name those finalists, or provide the public more information about their bids, before accepting a bid.

Knodell said the city must strike a balance between keeping the public informed and engaged and securing the most favorable outcome for residents in the sale process.

The most favorable outcome isn’t necessarily the highest sale price, she said. Knodell would rather find a buyer or partner that will continue to grow Burlington Telecom, ensuring it continues to be an economic driver and preserving competition among internet service providers in the region, she said.

Mayor Miro Weinberger confirmed that officials have not reached a decision, but indicated his preference would be to identify the finalists and release their bids after a winner is selected.

Weinberger said there was already extensive public involvement with residents developing criteria for the sale, such as maintaining a local presence. Prematurely disclosing the final bids could weaken the city’s bargaining position, the mayor said.

“Each bidder is working hard to convince the city they can meet those criteria, and they don’t fully know how they stack up against and what the others are offering,” Weinberger said. “That dynamic creates a strong negotiating position for the city.”

Miro Weinberger
Burlington Mayor Miro Weinberger. File photo by Morgan True/VTDigger

Weinberger said he is committed to releasing information about the finalists, but his preference would be to do so after a winner is selected.

One bidder has already publicly identified itself. That’s Keep BT Local, which is proposing a co-operative member ownership model.

Alan Mattson, the co-op’s chairman, said going public may disadvantage his group’s bid, allowing competitors to fine tune their proposals based on the information.

However, Mattson said he doesn’t believe Keep BT Local would make substantive changes to its proposal if the finalists and aspects of their bids are made public.

The upside to engaging the public is that it would create greater support for whomever is eventually selected, Mattson said, while helping city officials make a selection that’s truly in the public interest.

Mattson pointed to the process by which City Market was selected to build a grocery store at its downtown location as an example. Public input swayed that process by showing that residents preferred the co-op to a Shaw’s.

“We should all put our cards on the table, and let those cards play,” Mattson said.

Knodell said she agreed that whomever is selected to run Burlington Telecom will benefit from residents knowing who they are and having confidence in them.

“That argues against a 100 percent closed process,” she said.

Further complicating matters is a potential conflict of interest in the sale for the private firm Dorman & Fawcett, which has managed Burlington Telecom since 2009. The firm helped resolve the telecom’s legal troubles and is widely credited with helping the sputtering business turn a financial corner.

However, because Dorman & Fawcett will receive 10 percent of the eventual sale, its interests could diverge with the city’s when it comes to balancing the right partner against the highest payout.

City officials are nonetheless consulting Dorman & Fawcett as they winnow bids and work toward selecting a winner.

“We represent the city. Our allegiance is to the city, and I’m sure (the Burlington Telecom Advisory Board) and others in the city administration will confirm that,” said Terry Dorman, the firm’s founder.

Both Knodell and Weinberger said they do not believe Dorman & Fawcett is approaching the sale with its own agenda, and Weinberger said that without the firm “the prospects for Burlington Telecom would be much dimmer.”

The city is aware of the firm’s potential conflict, but officials didn’t want to “throw out” the expertise Dorman & Fawcett has developed from years of managing Burlington Telecom, the mayor said.

“We are very aware of that potential conflict and working to make sure it doesn’t become an actual conflict,” he said.

Dorman and other members of the firm involved with Burlington Telecom are disclosing all conversations they have with parties involved in the sale process, and all decision-making authority rests with city officials, Weinberger said.

Still, the firm may be exerting influence over how the process is being conducted, not just whom the city ultimately selects.

“Mr. Dorman of course is used to a completely private kind of sale, and here we have a public that feels strongly vested in this decision and rightly so,” Knodell said. “We need to take that into consideration while also acknowledging that disclosure in some cases could be adverse to the public’s interest.”

Dorman declined to comment on the sale process and whether he believes the city should identify finalists before selecting a winner.

Another barrier to making the finalists public are nondisclosure agreements signed by the city and bidders. The agreements are meant to prevent the release of nonpublic information that could undermine Burlington Telecom or companies vying to run it.

City officials say they are still on track to meet the January deadline for making the sale, which will allow Burlington to retain its largest possible share of the sale proceeds. Any deal must be submitted to the state Public Utility Commission, formerly the Public Service Board, for its approval by that time.

City officials are hoping to go before the commission in October, leaving a tight window for further engaging the public in the city’s decision-making process.

Correction: An earlier version of this misstated a timing element for the sale of Burlington Telecom.
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