BURLINGTON — Burlington officials are starting to consider whether the city should use proceeds from the sale of Burlington Telecom to invest in the company that has arisen from the sale.
Sale opponents, however, have not given up hope — despite the Public Utility Commission’s final approval of the sale last spring. The Vermont Supreme Court is set to hear arguments on their appeal later this month.
The city is arguing that opponents’ arguments against the sale are moot as the $30.8 million sale to Schurz Communications has already taken place.
The council’s November 2017 decision to sell BT to Schurz came after the city agreed to sell BT to settle a lawsuit with Citibank, which sued the city after BT defaulted on a loan. The city’s credit rating tanked after then-mayor Bob Kiss diverted $16.9 million in taxpayer funds to keep BT afloat.
Under the sale agreement, the city has one year to decide whether to invest in Champlain Broadband. Schurz Communications established Champlain Broadband as its local affiliate to manage BT after the sale.
The city recovered about $7 million of the misspent $17 million in the sale to Schurz. The city has until March 2020 deadline to make a decision.
Mayor Miro Weinberger said via email that he is considering a $2.4 million investment in the company that would give the city a 7.5% interest in the company.
“This level of investment would secure a seat on the board of Champlain Broadband, giving the City a voice at the table to ensure that all the many public benefits we secured in the transfer agreement are honored and enforced in the years to come,” he said.
Weinberger said he was concerned that investing more than $2.4 million would be speculative and compete with other goals and needs for funding. He said that due diligence is underway and he would work through the decision with the council after more public input.
Council considers investment possibilities
The city council passed a resolution on a 9-3 vote aimed to kick-start consideration of the Champlain Broadband proposal. Councilors Franklin Paulino, D-North District, Joan Shannon, D-South District, and Ali Dieng, P/D Ward 7, voted no.
The resolution authorizes the city to identify “revenues, costs and capital investment in an updated 10-year financial pro forma.” The city plans to look at the competitive landscape, consider the risks, and look at the potential returns at several different levels of investment.
Council President Kurt Wright, R-Ward 4, said the resolution will enable the city to gather more information for a decision in a few months.
“I don’t know where I would come down at the end of this, I could go either way,” he said. “But I think we would be negligent to not find out all the information we could get.”
If the city could earn returns that pay back the misspent $16.9 million, voters might be supportive of re-investing, Wright said.
“If we found out that this company was really going to take off, and that we were able to make significant money or dividends, I think the voters would want to know that and know there was a possibility they could actually get more of their money back than the [$6 million or $7 million] we are talking about now,” Wright said.
Paulino said he strongly opposed re-investing funds in BT.
“Why would we spend a significant [amount of] taxpayer dollars, at this point $6.5 million dollars, in this company… when we have other more safe investments, opportunities in capital improvements, that could be done,” he said.
Dieng said he was also against re-investing in BT and thought the city should consider other investment possibilities.
“We need to move forward, there are other opportunities for that money to bring investment, to bring our $17 million back, but not through the same company,” Dieng said.
Councilor Sharon Bushor, I-Ward 1, said she thought the city should be aware of its options before making a decision.
“Maybe we could generate a lot more money for the city than just the few million dollars that we are going to have as a result of this sale,” Bushor said. “I myself am not a risk taker, but I certainly want to understand the relative risks of investment before I decide to turn my back.”
Supreme Court arguments
Meanwhile, as the council focuses on whether or not to invest, the Vermont Supreme Court will be hearing an argument from opponents of the sale next Tuesday.
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 intervenors said the deal was in violation of the city charter, which states that “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 city countered that the sale would recoup the highest amount of taxpayer funds possible at the time, and the PUC ruled in favor of the city.
The regulatory panel also determined while it had the authority to impose penalties or revoke a certificate of public good, it did not have the jurisdiction to block a sale in order to enforce conditions of certificates of public good.
In court documents filed with the high court, the citizen intervenors argue that the PUC does, in fact, have the authority to block a sale by applying the Burlington city charter. They say the PUC was wrong in ruling against their argument that approval of the sale was against the city charter.
The city is arguing that the appeal is moot because the PUC’s final order approving the sale was not stayed and the sale has been finalized.Â
Clarification: The relationship between Schurz Communication, Champlain Broadband and Burlington Telecom was explained in an edit at 10:58 Oct. 15.