The Vermont Public Utility Commission has approved the sale of Burlington Telecom from the city of Burlington and holding company Blue Water Holdings to Schurz Communications. It will be owned by Schurz’s local affiliate, Champlain Broadband.
The approval came over the objection of a group of residents, who had argued that the PUC should not have approved the sale due to the $16.9 million the city, led by then-mayor Bob Kiss, diverted from city funds to keep BT operating.
The PUC ruled that the residents’ objection was not applicable in the case, and issued the certificate of public good, finalizing the sale.
“The evidence shows that Champlain has the technical expertise, financial resources, and management experience to assume ownership of the Burlington Telecom assets and to operate the telecommunications and cable television systems,” the PUC found.
Mayor Miro Weinberger said in a statement that the decision will allow residents to benefit from the fiber optics installed by BT, avoid returning to a telecom monopoly in the city, resolve the risk of liability while improving the credit rating and recover as much of the $16.9 million spent by the city as possible.
“We welcome the regulatory decision announced today by the PUC, which keeps us on a path to permanently resolving this issue in a way that accomplishes all of these goals, and doing so while protecting this valuable asset and its benefits for Burlingtonians,” he said.
Weinberger said that the decision “confirms the validity” of the course the city took to resolve a lawsuit brought by Citibank.
The city agreed to sell BT as part of the settlement agreement of a $33 million lawsuit with Citibank, which had loaned BT money when it was city-owned.
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The city sold BT in 2014 to Lake Champlain Transportation Co. owner Trey Pecor’s Blue Water Holdings, which has leased the assets back to the city.
The City Council voted in November 2017 to sell BT to Indiana-based Schurz Communications in a contentious vote, choosing Schurz over a local co-op and Toronto-based Ting.
Champlain Broadband, Schurz’s local affiliate, will now own and operate the telecom. Champlain will pay $30.8 million to Blue Water for BT.
The city is set to receive approximately $6.3 million from the sale and has the option to purchase up to one-third of membership interests in Champlain. The PUC ruled that city’s charter does not prohibit the city from investing in Champlain.
The citizen intervenors had pointed to language in the city’s charter which 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.”
The citizen intervenors argued that residents should receive the $16.9 million the city diverted for BT.
The commission had issued an order in 2014 resolving the city’s violations of its certificate of public good relating to the $16.9 million of city funds. The commission ruled that since it had resolved the violations in 2014, it did not have the enforcement authority to require the city reimburse taxpayers.
The PUC ruled that the charter does not apply in the way the intervenors claimed it did, and concluded that the sale will allow the city to recoup the maximum portion of proceeds possible at this time.
If the PUC denied the sale, the maximum percentage of the sale the city could recoup under its agreement with Blue Water would decrease. This would lead the city to recoup even less than it does now, the PUC ruled.
James Dumont, the lawyer for the citizen intervenors, said that he wanted to read the full decision and consult with his clients before commenting. Solveig Overby, one of the citizen intervenors, also said she wanted a chance to read the decision before weighing in.
In a follow-up interview, Weinberger said the decision was a good for residents of the Queen City.
“We see this as a victory for the taxpayers,” Weinberger said. “Had this agreement been overturned, taxpayers would have very likely had no means of recovering any money.”
In a worst-case scenario, the entire CitiBank lawsuit could have been re-opened, Weinberger said.
He said that the city is looking to close the sale in the next couple of months, which lines up with its agreement with Schurz.
Councilor Dave Hartnett said that he hoped the PUC’s decision would mark the end of the BT sale process. He said he was excited that the PUC also ruled that the city can invest in the company.
“If we think Schurz is going to be successful, and I think they are going to, it would be my hope that we would invest back into Schurz and we would have some type of ownership as well,” he said.
Weinberger said he did not think the city should invest all of the funds it receives from the sale back into BT, but that he was open to investing some of its sale proceeds.
“I am open to the investment of some of those funds as a means of … ensuring meaningful city role in the governance of the new BT and to be part of a transition from full city management to the future where that is no longer possible,” he said.
The city has a year to decide after the closing of the sale whether it wants to invest in BT.
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