Vermont Public Service Board rules against Burlington Telecom

The Vermont Public Service Board has found that Burlington Telecom is in "wanton" violation of its Certificate of Public Good as related to it borrowing $16.9 million from the City of Burlington and not paying it back, and for its failure to buildout the network by 2008. BT was challenged by the Department of Public Service, which acts on behalf of consumers, and was joined by Comcast. Comcast is BT's principal competitor in the city for high-speed Internet and landline television services. The PSB Order was filed October 8.
BT was found by the PSB to be in violation of four Conditions of its CPG: 2,17,56,60. Condition 2 requires that Burlington Telecom conduct its operations consistent with the CPG. Therefore, if BT is in violation of any condition, it is in violation of Condition 2. Condition 17 refers to its failure to buildout the service to every address by September 2008, which it still has not completed.
Conditions 56 (the city covering losses by BT) and 60 (the city lending BT money) refer to the city's financial role in the private, fiber-optic telecommunications company. The city is forbidden to financially support BT. This condition was implemented so that city taxpayers would not be put at risk. However, it stipulated that the city could loan BT money if it paid the city back within two months. However, BT owes the city $16.9 million and it acknowledges that it is in violation of this condition. The PSB hearing officer and the board took particular issue with that violation.
The board wrote: "While not contesting the Hearing Officer's specific findings with respect to violations of Condition 60 of its CPG, Burlington Telecom objects to the Hearing Officer's characterization of Burlington Telecom's admitted conduct as a "wanton disregard" of this condition of its CPG and the related City Charter provision. Based on the number, magnitude and duration of Burlington Telecom's admitted violations of Condition 60 of its CPG, the words "wanton disregard," as commonly understood, are an appropriate characterization of Burlington Telecom's behavior,
and, therefore, we do not modify the Hearing Officer's characterization. This is not to suggest,
however, that the degree of Burlington Telecom's scienter with respect to these violations has
been factually or legally established."
The Hearing Officer, whose report can be found HERE, is John P Bentley, Esq. He filed his "Proposal for Decision" with the PSB on September 10, 2010.
Burlington Mayor Bob Kiss issued the following statement today regarding the Vermont Public Service Board’s (PSB) decision on Burlington Telecom:
‘The PSB decision yesterday confirms the City’s prior acknowledgment of non-compliance with Burlington Telecom’s Certificate of Public Good (CPG). The proceedings before the Board were initiated by the City, and the City has acknowledged non-compliance with conditions of the CPG related to the buildout and the use of pooled cash.
"Burlington does not intend to appeal the PSB’s decision," he said, "and will continue working through the current legal proceedings to develop a plan to cure the violations. Negotiations will also continue with CitiCapital regarding the lease agreement for Burlington Telecom."
Kiss said, "Burlington Telecom provides an essential service to the residents and businesses of Burlington. A successful BT means a more successful Burlington. As these issues move forward, the City ‘ with the assistance of the firm of Dorman & Fawcett ‘ will continue doing the necessary work to ensure that BT provides high quality services at a good value to the Burlington community.’
Burlington Telecom maintains that it is in sensitive negotiations with its principal creditor, CitiCapital Municipal Finance. The result of those negotiations could result in Burlington Telecom being sold. BT is run as a separate entity within the control of the City of Burlington much the same way that Burlington Electric Department is a separate entity controlled by the city.
BT is under a "period of forbearance" to CitiCapital, which means that the credit company is allowing it to skip payments on its lease-purchase agreement until October 29, 2010.
Meanwhile, the Public Service Board is requiring BT to start filing reports on its financial condition and status of its negotiations with CitiCapital on a regular basis starting on October 31. BT must also have a plan in place by December 31 to complete the buildout of the system.
"9. Burlington Telecom shall file with the Board by December 31, 2010, or such later
date as the Hearing Officer shall determine, specific language for the proposed amendment of
Condition 17 and a more detailed statement as to the specific relief it seeks from the financing
limitations of Condition 60.
"10. Burlington Telecom shall file a report with the Board on October 31, 2010, and
additional reports every two months thereafter during the pendency of this proceeding, detailing
its progress in curing or resolving violations of the CPG, which reports should address with
specificity the status of negotiations with its lender, any developments in finding a private
investor in or buyer for the network, and other efforts to cure or mitigate the violations of the
CPG and the effects thereof."