[F]inancial and legal documents released Wednesday carry opinions that favor two established telecommunications companies over a local group in the sale of Burlington Telecom.
A certified public accountant and the city’s legal counsel both raise concerns about Keep Burlington Telecom Local, a local group that wants to buy the municipally run and controlled internet and TV provider for $12 million and operate it as a member-owned cooperative. The city would retain an ownership interest.
The certified public accountant, Jeffrey Small, said the two private companies were financially stronger than Keep BT Local.
“From purely a financial strength standpoint, the strongest company is Schurz Communications, Inc., with Tucows, Inc. also being a strong company while Keep BT Local has weaknesses with various financial benchmarks,” the accountant wrote to a legal firm helping the city with the sale.
In another document, Small said: “The financial strength and history of both Ting/Tucow and Schurz Communications are strong. These two companies have been around for 24 and 145 years respectively. Keep BT Local is a new company.”
The legal opinion released Wednesday by City Attorney Eileen Blackwood detailed legal hurdles she said Keep BT Local would have to get over that the other two companies would not. She outlined the concerns in the letter at Monday’s City Council meeting.
In the document, Blackwood said the state Public Utility Commission would more likely approve a sale to a company with a “demonstrable track record of success” with greater access to capital than a first-time company because regulators are required to consider “the financial stability and operational experience’’ of the proposed buyer.
The city attorney also said the PUC might not accept a lower sales price and that residents might sue if the greater purchase price is not taken. The city will get some of the proceeds from the sale. Controversy erupted years ago when then-city Treasurer Jonathan Leopold improperly spent municipal funds on investments in the city-owned telecommunications company.
Blackwood said any sale that involved the city holding an ownership interest would be closely scrutinized by the commission to make sure Burlington taxpayers would not face financial exposure if losses occur.
Another attorney, Ralphine O’Rourke, said the PUC would likely scrutinize any proposed sale closely because the city violated its certificate of public good issued by the commission by improperly using taxpayer money to finance the company. O’Rourke works for Primmer, Piper, Eggleston & Cramer, a firm the city hired to help navigate the sale.
Another hurdle Blackwood identified was that the company that provided the loan to pave the way for a settlement with Citibank, which had loaned money to the fiber network, can reject a buyer if it determines a first-time operator does not have a “reasonable likelihood” of getting state approval. She also mentioned that any delay at the PUC level could push approval past key deadlines and reduce the city’s share.
City officials are under pressure to sell Burlington Telecom after a settlement with Citibank, which had been financing the network before the city defaulted. Officials plan to sign a contract with a new buyer by the end of the year to maximize the city’s share of the proceeds.
Supporters of Keep BT Local argue their offer is better even though the price is lower. A private company, they say, could sell the network to a large telecommunications company, and rates can be better controlled if under local co-op management. However, the city, Citibank and the local company that provided the bridge loan, Bluewater Holdings, stand to gain more financially the higher the purchase price.
The City Council is expected to narrow the remaining three bids down to two at a meeting Oct. 16. The public can continue to weigh in on the sale process by emailing comments to BTfeedback@burlingtonvt.gov.
