Business & Economy

Citing risks, mayor looks to nix co-op bid for Burlington Telecom

Miro Weinberger
Burlington Mayor Miro Weinberger. File photo by Alexandre Silberman/VTDigger

BURLINGTON — Mayor Miro Weinberger said Tuesday that he does not believe a local co-op’s bid to purchase Burlington Telecom is viable, and he’s urging the City Council to drop it from the finalists.

The council on Monday is expected to winnow the three remaining bids for the fiber internet, cable and phone company down to two.

A 2014 settlement with Citibank, the network’s main creditor, requires the city to sell Burlington Telecom. A separate agreement with a holding company that bought Burlington Telecom’s assets, and is leasing them back to the city, allows Burlington to direct the sale. For the city to keep the largest possible share of the proceeds, it must select a buyer by the end of the year.

The co-op, Keep Burlington Telecom Local, is offering $12 million; the fiber company Ting is offering $27.5 million; and broadcaster Schurz Communications is offering $30.8 million.

The co-op’s offer has received enthusiastic public support, and its backers have urged city officials to look past the dollar amounts offered and consider the benefits of local member ownership.

The mayor is now saying, though, that the co-op’s bid doesn’t meet the city’s criteria and that there is a “near certainty” the city would be sued if it accepts the low offer.

Weinberger praised Keep BT Local and its leaders at a Tuesday news conference, saying their involvement — dating back to before the sale process began, when the group was just advocating local control — improved community engagement and forced other companies to make offers that reflect the city’s values.

“In part because of the KBTL-inspired community engagement, both the Schurz Communication and Ting proposals are very strong, and ultimately accepting either will result in big wins for Burlington Telecom customers, taxpayers and the city itself,” Weinberger said.

Despite those kind words, the mayor also had this to say: “Fundamentally at this point, the KBTL proposal is not viable.”

There are financial concerns, with Keep BT Local relying on a $10 million loan. Other potential issues are regulatory, relating to whether the city can retain a stake in the purchasing entity, which the co-op offer requires. Questions also exist as to whether the KBTL board can put together an experienced and competent management team, something the mayor said is already included in the other offers.

David Provost
David Provost, chair of the Burlington Telecom Advisory Board, listens to public comment on criteria for selling the utility. File photo by Morgan True/VTDigger

David Provost, who has spent the last eight years as the volunteer chair of the Burlington Telecom Advisory Board, went further. Provost said the KBTL bid was “the weakest” of the eight received and was forwarded to the City Council only because “we thought it was important to keep a local option available.”

However, Weinberger said legal concerns that have emerged are the primary reason he felt it was necessary to come forward and make his position on the co-op known.

“We are now advised by our attorneys that what was characterized as a risk of legal action by Citibank at the last City Council meeting has now become the near certainty of legal action, and real legal exposure to the city, should we attempt to move forward with a bid that’s less than 50 percent of the two other bids,” Weinberger said.

Those concerns have come into sharper focus in email exchanges and conversations between Burlington’s and Citibank’s lawyers, Weinberger said.

Though the co-op bid meets a minimum threshold dollar figure included in the agreement with the holding company, that doesn’t mean the city can accept a low offer without consequence, Weinberger said.

“Citibank is saying the gap between the proposals is too great and does not satisfy a commercial reasonableness test that all contracts (to buy Burlington Telecom) must abide by,” Weinberger said.

He said selling to Ting or Schurz could also head off potential lawsuits from taxpayers who are out $17 million after the previous administration improperly plowed money into a then-struggling Burlington Telecom.

Weinberger said selling to Ting or Schurz would allow the city to recoup roughly $6 million of that money while ensuring Burlington Telecom continues to offer fast, affordable internet service.

Alan Matson, chair of the Keep Burlington Telecom Local co-op board, said the idea that Citibank can take this type of action to influence the sale at the last minute is further evidence of the need for local control, so Burlington Telecom will not continue to be at the mercy of outside entities.

Without weighing in directly on the competing bids from Ting and Schurz, Matson said, “There will be pressures on any company that has multiple locations and multiple lines of business that may or may not favor Burlington at some point or another.”

Matson said he appreciates the city keeping his group abreast of developments throughout the sale process, noting that it got “at least a couple hours” notice before the mayor’s announcement Tuesday.

He said he also appreciates the mayor’s praise but added that it’s left him feeling “a little bit like taking your cousin to prom. You’re there, but it’s not — you’re still not quite where you want to be.”

While it certainly doesn’t help the co-op’s cause to have the mayor oppose its bid, “The death blow will be a full City Council vote,” Matson said.

The financial concerns about the co-op bid are overblown and don’t take into account the long-term financial benefits to the city and other member owners that would accrue through patronage refunds, Matson said.

As for the lack of an experienced management team, Matson said it’s hard to hire someone for a job that the employer is not yet in a position to offer. Many of the candidates the co-op is considering currently have jobs.

“I will say this: I couldn’t be more confident in our management plan,” Matson said.

As for the regulatory concerns, Matson said the state Public Utility Commission would need to issue a certificate of public good to the eventual buyer. Matson said the commission looks for ways to support competitive providers such as Burlington Telecom and that there is a path for the co-op to get its approval.

Matson said he is still working to win councilors’ support ahead of next week’s vote but doesn’t have a count for how he expects that to play out. If Democrats line up behind Weinberger — a fellow party member — that leaves enough votes unaccounted for to swing the process in either direction, he said.

Even if KBTL doesn’t make it to the next round or isn’t selected to purchase Burlington Telecom, he will continue to advocate for local interests in its operation, Matson said.

As for what that might look like, Matson said it’s too early to say. He still hopes the co-op will get to buy the telecom.

Correction: An earlier version of this story conflated the Citibank settlement with a separate agreement with a holding company.

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