BURLINGTON — The mayor and the City Council said Tuesday they’ve agreed to see if a potential conflict of interest with a dropped Burlington Telecom bidder can be resolved.
Last week the city publicly unveiled three bidders still in the running for the purchase of the fiber optic network.
Mayor Miro Weinberger and the city attorney said a fourth bid had withdrawn and they did not cite a reason because of a non-disclosure agreement.
City communications show that the fourth bid came from a private equity investor with “valuable local relationships and extensive telecom experience.” Because the buyer’s proposal was not presented to the public, little is known about the offer.
Several city councilors said they were surprised and disappointed they weren’t consulted about the fourth bid. They characterized the mayor’s handling of the situation as a breach of trust.
“After extended consultation with the city’s attorneys and council discussion, there was a strong council consensus that the city should explore whether the possible conflict of interest with the fourth bid could be resolved,” according to a joint statement issued by the mayor’s office.
“If so, the fourth bidder will be encouraged to promptly submit a final (letter of intent),” the statement concludes.
The mayor and city attorney have still not said publicly why the bid was withdrawn, but an email from the mayor to city councilors, obtained by Seven Days, provides some insight.
The mayor wrote in the letter “that, in the wake of the legal, regulatory and conflict of interest concerns that have arisen, Terry has requested that [the bidder] withdraw its proposal. I support Terry’s decision and expect there will be further conversation about it in our session this evening.”
Weinberger was referring to Terry Dorman, of the firm Dorman & Fawcett, which the city hired a few years ago to manage Burlington Telecom. Dorman’s firm will keep 10 percent of the proceeds from the sale of Burlington Telecom. The mayor says the city has carefully managed that potential conflict of interest as it looks for a buyer.
City councilors would not say whether Dorman has connections to any of the bidders.
Meanwhile, Burlington business groups held a news conference Tuesday urging the city to accept one of two bids from established telecommunications firms.
Tom Torti, executive director of the Lake Champlain Regional Chamber of Commerce, said TING/Tucows and Schurz Communications would both offer fiscal stability for Burlington Telecom.
Both bids come with firm commitments to build out Burlington Telecom’s regional footprint, Torti said.
TING/Tucows is offering $27.5 million, while Schurz Communications is offering $30.8 million.
Torti said the city can’t afford to entertain the “aspirational” offer from Keep Burlington Telecom Local. The local group is proposing a co-operative ownership model that would convert BT subscribers into member owners.
The co-operative has offered the city $12 million — less than half of what the telecommunications companies have bid.
Torti said Keep Burlington Telecom Local relies on a $10 million loan with a 14 percent interest rate, which would leave the company “too highly leveraged.”
“It has nothing to do with the model,” Torti said. “It has everything to do with the finances.”
Alan Matson, chair of the KBTL board, said he was frustrated with the lack of support from the business community. Matson said debt financing for the co-op shouldn’t be viewed in relationship to the total sale price, but rather to the company’s cash flow, which is sufficient to support repayment of the loan.
Andy Montroll, another KBTL board member, said there is far more value in retaining “100 percent” local decision making through member ownership.
If Burlington Telecom is sold to one of the larger telecom companies, decisions will be left to out-of-state executives, Montroll said.
On Oct. 2, the City Council will winnow the remaining bids to two finalists. A buyer will be selected later next month.
Members of the public can weigh in by emailing BTfeedback@burlingtonvt.gov
For more information on the sale process and details of the three public bids, click here.
