BURLINGTON — The city attorney aired legal and regulatory concerns with a local co-op’s bid to purchase the Burlington Telecom fiber optic network.
Despite those obstacles, residents overwhelmingly supported the Keep BT Local offer during Monday’s City Council meeting.
Keep BT Local supporters say that without the community oversight of a local cooperative, Burlington Telecom could be resold to a telecommunications giant or managed in a way that puts profits ahead of quality service and the public interest.
Burlington is considering three offers for Burlington Telecom. In addition to the $12 million Keep BT Local bid, there is a $27.5 million offer from Ting/Tucows, and a $30.8 million offer from Schurz Communications. For more information on all the bids, click here.
The city plans to select a buyer before the end of the year in order to maximize its share of the proceeds, as stipulated in a settlement with Citibank, which loaned money to the fiber network and sued when the city didn’t repay the money.
The 2014 settlement with Citibank relied on bridge financing for Burlington Telecom from a firm called Bluewater Holdings, LLC. Bluewater and Citibank will both get a share of the sale proceeds.
If Burlington were to accept the $12 million offer from Keep BT Local, it could also face lawsuits from Citibank or city taxpayers, who are out $17 million, following an improper 2009 cash infusion to the network from city coffers, according to City Attorney Eileen Blackwood.
“There is risk there that needs to be considered,” Blackwood said.
There are also questions as to whether Keep BT Local would be able to get regulatory approval from the Public Utility Commission, which must issue a certificate of public good to the eventual buyer. The PUC must consider the purchasing company’s financial stability, management and technical expertise.
The co-op purchase price relies on the city retaining a $1.5 million stake in Burlington Telecom.
Burlington’s charter allows the city to enter a joint-venture to operate a telecommunications company, but the Public Utility Commission must determine that in such an arrangement, the risk is borne by other investors, not city taxpayers, the state or ratepayers.
Making that determination is complicated because the $17 million the city improperly plowed into Burlington Telecom nearly a decade ago was a combination of taxpayer dollars and money loaned by Citibank, Blackwood said. In the intervening years, ratepayer money was invested in Burlington Telecom as well.
Were the city to invest in the new owner of Burlington Telecom, it would be difficult for regulators to parse whether Burlington’s investment would place taxpayer or ratepayer money at risk of future losses, Blackwood said.
Both Ting/Tucows and Schurz would allow Burlington to purchase a stake in the new Burlington Telecom, but their offers don’t rely on the city retaining partial ownership.
The settlement allows Bluewater to reject a buyer if it determines that a first-time operator does not have a “reasonable likelihood” of getting PUC approval, said Ralphine O’Rourke, an attorney with Primmer, Piper, Eggleston & Cramer whom the city has hired to help navigate the sale process.
Blackwood said officials have not asked Bluewater whether it would make that finding for Keep BT Local, because they want to leave room to negotiate with the company should the city decide it wants to sell to the co-op.
The regulatory uncertainty is a cloud over the sale process, because Burlington plans to pick a buyer by year’s end to maximize its return on the sale, while the PUC could take more than a year to issue a certificate of public good, Blackwood has said.
The City Council is expected to winnow the remaining three bids down to two at a meeting on Oct. 16. The public can continue to weigh in on the sale process by emailing comments to BTfeedback@burlingtonvt.gov.
