City Council to vote on Burlington Telecom owner Monday

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City Council to vote on Burlington Telecom owner Monday

Thu, 11/02/2017 - 8:12am -- tim

by Timothy McQuiston Vermont Business Magazine The Burlington City Council, in a stunning move before an expectant crowd at City Hall the evening of October 30, decided to suspend its meeting and come back next Monday to decide on a new owner of Burlington Telecom. The bidders are Keep Burlington Telecom Local and Ting/Tucows from Toronto. The Council vote was delayed when almost exactly two hours after the meeting began, Councilor Karen Paul recused herself because of a conflict of interest.

A visibly upset fellow Democrat Councilor Dave Hartnett asked that the meeting be suspended given this development. After a prolonged discussion and initial failure of the motion, councilors eventually decided to suspend the meeting. The next meeting, November 6, will be a continuation of the previous one, meaning there will not be further public input.

Paul said: “Over the weekend in continuing the task as we all have done, in performing our own due diligence on this issue, I have discovered and confirmed that I have a professional conflict of interest in the matter before us. I’ve tried to work through this as late as 4 pm this afternoon. Despite this I find I must recuse myself from this matter. After being actively engaged in the Burlington Telecom history for over eight years and investing what is hundreds of hours to be part of the solution from BT’s darkest days, I would much prefer to vote on this issue. This is not the position I would like to be in. In my nine years on the Council, I believe I’ve recused myself three times at Council meetings. I’m not able to speak directly to this conflict, but I would like to state that my conflict has nothing whatsoever to do with the parties interested in purchasing Burlington Telecom. I respect each of you at this table and the understanding many of you have given me. I wish you all the best as you deliberate on this very important decision. Thank you.”

Paul appeared to read from prepared remarks on her laptop. She then packed up and left her place at the Council table.

Hartnett followed by saying that Paul already had cast votes on this, such as on narrowing the field to two finalists.

“I have a huge issue with that in this process,” Hartnett said, “and I’m not so sure legally where we stand with that.”

Paul is a staff accountant with South Burlington CPA firm McSoley McCoy & Company (VBM’s accountant). She did not say if that conflict was related to her job at McSoley.

Councilors, the mayor and city attorney were clearly aware that Paul was going to recuse herself, even if no one in the audience was, but Hartnett was still perturbed by the “eleventh hour” development.

VIDEO embedded from www.cctv.org.

The assumption before the Council meeting was that the vote would be a 6-6 tie, which would trigger further discussion and presumably another vote, or more, until a majority prevailed.

But Paul was expected to vote for Ting and the Council only has 12 members, thus leaving KBTL as the presumptive winner.

But a victory by KBTL almost certainly would have resulted in a veto from the mayor (who at the Council meeting declined to speculate on what he would do until a vote had been taken) or rejection of the decision by Blue Water, which in a complicated deal earlier this year, bought the assets of BT and leased them back to BT in order to stave off a lawsuit by creditor Citibank.  

Citibank  itself has essentially promised to sue the city if KBTL wins the bid. KBTL’s ability to gain a certificate of public good from the Public Utilities Commission is also in question.

KBTL proposes to run the telecom as a cooperative, with the city retaining a minority position. It will buy BT for $12 million. It is borrowing $10 million to do so.

Some Councilors who were expected to vote for KBTL, such as chair Jane Knodell, have expressed concern over the finances and lack of professional experience of KBTL, while appreciating the benefits of maintaining the cable, TV and Internet provider as a locally run entity.

KBTL supporters have urged councilors to choose the local option as a way to literally keep BT local for the benefit of Burlingtonians under the original mandate of having a non-commercial telecom that would serve the public good. 

They mention other endeavors, such as Burlington Electric Department and the Onion River Co-op (City Market), as successful partnerships between the city and important community organizations. City Market established a new downtown location after the last grocery store in the city center closed down.

However, BED and City Market do not have any real competition and who knows what new competition will arrive in the rapidly evolving world of telecommunications. 

KBTL supporters were boisterous at the City Council meeting in which the finalists were chosen October 16.

On October 30, both sides brought strong contingents of supporters. Ting CEO Elliot Noss was also in attendance and spoke. 

Weinberger has supported the commercial bidders because he said they have the financial ability to pay off the debt and have experience in running a telecom. While he cannot vote, he does have veto power. 

Weinberger has cautioned that even at the highest bid, the city would recoup only about $5 million, but emphasized that he felt that the city should not be in the telecom business in any case.

Unlike the monopolies the city has with Burlington Electric Department and the airport, telecom is competitive and raucous, with large corporations like Comcast, satellite operators and other specialized fiber firms like FirstLight all fighting for the same customer.

The Kiss Administration had envisioned a public utility, similar to Burlington Electric or BTV, which would provide a public and commercial benefit to the city and its people.

The financially troubled telecom, which has stabilized over the last couple years, required a $16.9 million bail out by the city under Weinberger’s predecessor Bob Kiss, which damaged the city’s credit rating and led to a complex financial deal with Blue Water to get out from under a potential lawsuit by creditor Citibank. A new owner acceptable to the many different stakeholders has to be in place by January.

The two finalists are Ting/Tucows from Toronto and Keep BT Local. Ting was one of two commercial operators whose $30 million investment would satisfy the city’s and BT’s financial obligations. KBTL would organize as a local co-op with subscribers and with the city retaining a minority ownership position. 

At VBM’s request, the city attorney, Eileen Blackwood, answered the following questions via email:

Q: If the Council vote is a tie how is that resolved? (Does the mayor vote?)

A: “The Mayor cannot vote on a Council matter, as he is not a Councilor. City Council would have to determine the method for resolving a tie in keeping with Robert’s Rules of Order.”

Q: Can the mayor veto a council decision and then what happens?

A: “The Mayor can veto a Council decision. Council could overturn a veto with a two thirds vote, but if the veto was sustained, the item would fail.” (Blackwood during the Council meeting said if the veto were sustained, then the original vote would be as if it never happened)

Q: If a councilor recuses herself can a substitute be brought in and who decides on who that is (this happens on some boards and courts)?

A: “There are no substitutes.”

Q: If a councilor quits how is she replaced (would the mayor choose as the governor would)?

A: “We would have to determine what the Charter dictates with regards to Councilor resignation.”

Q: Does Blue Water have the right to refuse to go along with the Council's decision and under what conditions?

A: “Blue Water does have the right to disapprove of a finalist under certain circumstances, such as if the City were to choose a first-time telecom operator as a buyer.”

Even if Ting ultimately wins the bid and the city gets a few million back from the sale, more than the $16.9 million it lent to BT will be lost, when legal fees and increased bond interest payments are factored in.

It’s generally agreed that Burlington Telecom is operating well now.