In a unanimous decision, the Vermont Supreme Court has upheld the sale of Burlington Telecom, after opponents of the sale agreement appealed it to the high court in October.
Opponents, represented by attorney Jim Dumont, asked the court to send the decision back to the Vermont Public Utility Commission, with a requirement that taxpayers be reimbursed $16.9 million in funds that had been diverted under then-mayor Bob Kiss.
The city, represented by Paul Phillips of Primmer, Piper, Eggleston and Cramer, argued the case was moot because the sale had already gone through, and the city had received as much of the misused funds as possible under the sale agreement.
Associate Justice Harold Eaton Jr., who authored the affirming opinion, said if the court had granted the appeal to sale opponents, it “would be tantamount to rewriting and effectively unwinding the sale agreement that the PUC determined would promote public good.
“That, in turn, would thwart the purpose and framework of the PUC’s November 2014 order, which approved a comprehensive plan aimed at restoring Burlington Telecom’s financial and regulatory stability in order to attract a qualified purchaser within a certain timeframe,” the ruling said.
In 2009, it was discovered that Kiss had wrongfully diverted $16.9 million in taxpayer funds to BT in an effort to keep the operation afloat. This caused the city’s credit rating to plummet, and Citibank, the main creditor of BT, then sued Burlington two years later, demanding $33.5 million in payment.
The suit was settled in 2014 for $10.5 million and a share in BT’s future value. Part of the settlement paved the way for the city to sell BT to Blue Water Holdings, which then leased the assets back to the city.
With City Council approval in 2017, BT was sold in Feb. 2019 by the city to Schurz Communications and its local affiliate Champlain Broadband. The sale totaled $30.8 million and Burlington saw $6.4 million in proceeds.
In October oral arguments, Dumont said the PUC’s approval of the sale violated the city charter, which reads in part, “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.”
Dumont said a private entity is about to reap the benefits of the missued $16.9 million, and the reaping of those rewards should be conditioned on repaying taxpayers.
Phillips, arguing for the city, said the 2014 PUC order resolved regulatory questions regarding the misuse of taxpayer dollars. The agreement allowed the city to collect as much of the payments as it could, and also allowed for a future investment in Champlain Broadband.
Phillips also said a court decision remanding the matter in the way Dumont proposed would be “legally impossible,” because the BT assets have already been sold to Champlain Broadband and the PUC’s jurisdiction in relation to the city charter does not extend to a private company.
The unanimous decision from the court, announced Friday afternoon, quickly brought praise from city officials.
“The decade-long Burlington Telecom crisis is over, and our solution promotes the public good by preserving high-speed internet choice for Burlingtonians and saving BT users and taxpayers many millions of dollars,” Mayor Miro Weinberger said in an emailed statement. He said he is proud to have fulfilled “my promise to voters to fix BT and restore the City’s financial standing.”
“We’re very happy the court affirmed the Public Utility Commission’s decision because this ends 10 years of litigation and uncertainty regarding BT,” City Attorney Eileen Blackwood told VTDigger.
Blackwood said the next step is for the council to make final decisions as to whether it would like to invest in Champlain Broadband. The council will have to decide how much of the $6.4 million it would like to invest versus returning money to the city’s coffers. The council has a March deadline to make that decision.
Reached Friday by phone, Dumont, the opponents’ attorney, said he was out of his office all day and had not had a chance to read the ruling.
