[B]URLINGTON — City officials and opponents of the city’s sale of Burlington Telecom are waiting on a final decision from the state’s Public Utility Commission on the sale, which is expected in January or February.
Six residents are intervening in the case and trying to block the sale from the city and Blue Water Holdings to Schurz Communications and its local affiliate, Champlain Broadband.
The citizens group is arguing that the PUC should not allow the sale to go through, pointing to the $16.9 million the city, led by then-mayor Bob Kiss, diverted from city funds to keep BT operating.
The city says that the matter has already been settled in the PUC’s decision to allow the sale of BT’s assets to Blue Water Holdings in 2014, and the resulting increases in Burlington’s credit rating have saved citizens money.
As it waits for the PUC’s decision, the city has started to prepare the documents necessary to ensure the closing of the sale goes smoothly.
The city sold BT in 2014 to Lake Champlain Transportation Co. owner Trey Pecor’s Blue Water Holdings, who has leased the assets back to the city. Burlington officials agreed to sell BT as part of the settlement agreement of a $33 million lawsuit with Citibank, who had loaned BT money when the city owned it.
The City Council voted in November 2017 to sell BT to Schurz Communications in a contentious vote.
The PUC is considering a proposed certificate of public good that would finalize the sale.
In May, the PUC allowed the six residents, Dean Corren, Shay Totten, Steven Goodkind, Solveig Overby, Sandra Baird and Jared Carter, to intervene in the case.
The residents argue that city residents are owed the $16.9 million and should receive it from the “the investor or investors who have owned, own, or will own Burlington Telecom’s assets.”
The intervenors are pointing to language in the city’s charter that states that the PUC should ensure that any and all losses from the business and “any and all costs associated with the investment of cable television, fiber optic, and telecommunications network and telecommunications business-related facilities, are borne by the investors in such a business, and in no event are borne by the City’s taxpayers.”
While the city argued that the PUC had previously resolved the issues surrounding BT’s use of city funds for its operations, the commission ruled that it did not “specifically address whether, how, and when the $16.9 million would be reimbursed to the City and its taxpayers.”
The citizens group held a community gathering Dec. 17 to discuss the case and the next steps. The group is encouraging members of the public to support their efforts by posting public comments for PUC consideration on the PUC website and by helping address legal costs by donating to their lawyer, James Dumont.
Corren said that the BT sale is not a done deal.
“We haven’t forgotten that debt is still owed, and it couldn’t be clearer in state laws,” he said.
Corren said the intervenors were hoping for a better deal, or for the city to keep BT as a public utility. If the PUC decides in their favor, the intervenors believe they would get a chance to represent the citizenry in discussions about what happens next.
City Attorney Eileen Blackwood said the city considers the sale to Schurz a continuation of the already-approved sale to Blue Water, which mandated that it be sold to an arm’s-length purchaser after a public process. This process concluded with the City Council’s choice of Schurz instead of other bidders, including a local co-op.
After resolving the litigation with Citibank, the city was able to get BT operating and turn around the telecom’s financial situation, Blackwood said.
Under the terms of the agreement, half of the proceeds will go to Blue Water and half will go to the city.
Half of the city’s split will go to Citibank as part of the lawsuit settlement, which the city estimates will be around $6 million. The city has not decided what it will do with the remaining funds — approximately $6 million.
The city is considering investing that money into Schurz as one possible option, Blackwood said.
The proceeds to Blue Water will be used in part to pay back a loan from Merchant’s Bank, which funded its operation of BT. It also pays back the money Blue Water spent to improve BT’s operations, which made it more sellable, Blackwood said.
Blackwood said the deal is the best the city can get with the current circumstances.
“This deal gets the city the most it can recover of the amount the taxpayers put in,” she said. “This arrangement, which has taken several years, has already seen the city save millions of dollars on its bond rating.”
Accreditor Moody’s has significantly improved the city’s credit rating, which toppled after the revelation that the city had used taxpayer funds to prop up Burlington Telecom.
“From the city’s perspective, the citizens are getting a return on their $16.9 million,” she said.
The intervenors do not consider the increased credit rating to be relevant to their contention about the taxpayer funds.
Blackwood said that the city expects the sale to be approved by the PUC. But she said that if for some reason the deal is not approved, that would be a negative scenario for all involved because part of the city’s agreement with Citibank required a sale by the end of 2018. If the deal does not go through, Blue Water would get to decide who to sell BT to.
“The big risk is if, in some way, they were to say no sale, the assets primarily belong to Blue Water, and Blue Water can sell to whoever they want,” she said. “The city won’t have the right to continue operating BT and will get a much reduced amount of the proceeds.”
Corren said the PUC’s decision will likely be challenged in court by either the citizen intervenors or the city, depending on the commission’s ruling. He said the intervenors believed their case was “airtight.”
“It’s really a last-ditch effort, but that ditch is still there,” he said.
