Opponents of the sale of Burlington Telecom appeared in Vermont Supreme Court Tuesday to appeal the decision that allowed Burlington to sell the utility to Schurz Communications.
Sale opponents requested the court remand the decision back to the Public Utility Commission with the requirement taxpayers receive a full reimbursement for the $16.9 million that was diverted from taxpayer funds by then-Mayor Bob Kiss.
The city is arguing that the deal with Schurz returned the most possible funds to the city’s taxpayers, and that the case is moot because the sale has already gone through.
The PUC approved the $30.8 million sale of BT from Burlington and holding company Blue Water Holdings to Schurz Communications in February, and the transaction was finalized in March. The city received $6.97 million in proceeds from the sale.
A citizen group, which the PUC allowed to intervene in the case, argued that the sale should not have been approved because the city was recouping less than the $16.9 million in taxpayer funds that were diverted.
The court heard oral arguments Tuesday from James Dumont, who represents the citizen group, and Paul Phillips of the firm Primmer, Piper, Eggleston and Cramer, representing the city.
Dumont argued that the PUC’s approval of the BT sale was in violation of part of the city charter that states “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 private entity is about to reap the benefit of the $17 million,” Dumont said. “That reaping of the benefit has to be conditioned on repaying the taxpayers, this is the only time that can be repaid.”
Three justices — Harold Eaton, Beth Robinson and John Dooley — asked Dumont questions about the effect a remand would have on the sale and the city’s taxpayers as a whole.
“In what universe would taxpayers be better off if we scuttle this deal?” Robinson asked.
Dumont said that the manner is front of the court was not whether a remand to the PUC would affect the deal.
“The issue before you right now is not whether you will scuttle the deal, it’s whether the money that is owed to my clients will be eventually repaid,” Dumont said.
Phillips argued that the PUC’s 2014 order approving the sale of BT from Burlington to Blue Water resolved the regulatory questions around the misspent $16.9 million.
The deal with Schurz allowed the city to recover the highest possible amount of funds for the city’s taxpayers, Phillips argued. The sale agreement also allows the city to invest in Champlain Broadband, the local affiliate Schurz established to manage BT.
“That was integral to the PUCs understanding that there will be a continuing ability to recover additional funds,” Phillips said.
The city also believes that the issue is moot because the sale has already gone through. Champlain Broadband now owns BT, and the PUC would not be able to use the city charter to take enforcement action against Champlain Broadband, Phillips said.
Phillips said a court decision remanding the matter in the way Dumont proposed would be “legally impossible” as the BT assets have been sold to Champlain and the PUC’s jurisdiction in relation to the city charter does not extend to a private company.
“The PUC would be confronted with a condition it would not be able to enforce,” Phillips said.
Phillips argued that the court should focus on language in the city charter that mandates the PUC to use its regulatory power to allow the city to fulfill all of its obligations.
“They had an obligation to satisfy the Blue Water sale agreement, they had an obligation to finalize the Citibank settlement, and ultimately they have an obligation to their taxpayers to do what they can to make the situation whole,” Phillips said. “And that’s what the city has done.”
The city agreed to sell BT as part of a settlement agreement to a $33 million lawsuit filed by Citibank, which had lent money to BT.
Dumont said the 2014 PUC ruling did not resolve the regulatory issues in the case and said the PUC’s jurisdiction in the matter has not changed.
The Supreme Court will consider the appeal and arguments and issue a decision at a later date.
Dumont said during the hearing that Burlington’s taxpayers were getting the raw end of the deal the PUC approved.
“Taxpayers are owed the money, they aren’t getting paid back,” Dumont said.
Phillips said he was heartened that the justices’ questions were rightly focused on the effects their decision would have on the city and its taxpayers.
“This deal represents the best deal that’s going to happen,” Phillips said. “Even though everybody acknowledges the full amount of the city’s prior investments are not going to be recovered, this deal puts in place the best outcome that’s possible at this point.”
