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City postpones Burlington Telecom Vote

Tuesday, October 31, 2017   (0 Comments)
Posted by: Jeff Couture
Burlington's City Council postponed the final vote for a buyer for Burlington Telecom until next week, a choice that came after Citibank said it will immediately sue if the council picks the local co-op and a Democratic city councilor chose to recuse herself hours before the meeting.

Councilor Dave Hartnett pushed to postpone the vote after two hours of public comment.

Hartnett's motion came after Councilor Karen Paul recused herself, citing a professional conflict of interest. Paul voted for Ting in the preliminary round of voting two weeks ago and has served on the Burlington Telecom Advisory Board.

In her remarks recusing herself, Paul said she has been working on Burlington Telecom for eight years and would have preferred to vote for the final choice.

"This is not the position I would like to be in," she said.

Paul declined to comment further on the nature of her conflict of interest, or how long the conflict existed before coming to light. City Attorney Eileen Blackwood, when asked, said she does not believe that Paul's conflict could have impacted prior votes.

However, Hartnett said he still had concerns, saying that Paul could have influenced other councilors and that he was worried about voting without getting more legal information.

"I don't feel good about that," Hartnett said.

Hartnett, who told the Burlington Free Press earlier Monday afternoon that he planned to vote in favor of selecting the co-op, Keep Burlington Telecom Local, said he would not cast a vote even if the council decided to move forward.

During a recess, Hartnett said he was concerned after learning from Burlington's legal team that there was a possibility that councilors who voted for the co-op could be personally sued by Citibank.

The lawyers tried to reassure councilors that they wouldn't be liable, Hartnett said, but he was still concerned.


Hartnett's motion failed on the first vote. But after councilors had the opportunity to ask Ting CEO Elliot Noss and the co-op's Chairman Alan Matson questions, Councilor Kurt Wright moved to reconsider postponing.

The council voted 8-3 to adjourn the council meeting and postpone the vote on the second try.

Keep Burlington Telecom Local has gathered support from a vocal segment of residents and won the votes of six city councilors in a preliminary vote earlier this month. Ting, a subsidiary of Toronto-based Tucows, won five votes.

In another document posted by the city in advance of Monday evening's planned vote, a representative of Citibank wrote to Burlington's lawyers over the weekend to say choosing the co-op's offer would "be a profound, willful and bad faith breach of Burlington's patent contractual, legal, equitable and fiduciary obligations owed to Citibank, including a breach of the implied covenant of good faith and fair dealing, and will be vigorously opposed by Citibank on several fronts including but not limited to immediate litigation."

The threat of legal action by Citibank, which is due to receive a portion of the sale price because of a 2014 settlement of a lawsuit, has loomed over the city council for the past few weeks.

The city has also received a communication from Michael Furlong, a lawyer representing Blue Water, expressing concerns about the co-op's bid, said Councilor Chip Mason, D-Ward 5.

Furlong wrote that Blue Water, the local group that purchased Burlington Telecom and leased its assets back to the city in 2014, would not insert itself into the city's decision making process, but has serious concerns about whether the co-op can make it through the state's regulatory process.


Blue Water has the right to disapprove of a finalist under certain circumstances, such as the city choosing a first-time telecom operator as a buyer. Mason said he believes Furlong's email confirms that they will use that right.

Councilor Max Tracy, P-Ward 2, who planned to vote for the co-op, said he believes the local choice offers the best long-term benefit for the city. He said his understanding of the settlement does not require the city to pick the highest offer.

"We'd have a very strong case if Citibank brings litigation," he said.

He added that the language about Blue Water's right to refuse a buyer is "vague."

Both buyers submitted updated letters of interest to the city last week. In his letter, Noss of Ting promised $250,000 in community initatives, such as funding for BTV Ignite, a nonprofit that supports the city's tech sector, and advertising money for local startups. Noss also committed the company to building out Burlington Telecom's service and keeping prices level.

Noss has also said Ting will make Burlington a regional hub and the eastern headquarters for a new video service, which he projects will bring jobs and economic growth to the city.

Noss answered questions Monday night in front of the City Council and gave a two minute statement during the public comment session. He said he saw his company's bid as "stewardship" of Burlington Telecom.

During questioning, he said that if Ting were to re-sell the utility, the new owner would have to abide by the full terms of the agreement between his company and the city.

The co-op had also updated its bid in advance of Monday's planned vote. On Friday, Andrew Montroll said at a news conference that the co-op had negotiated with its primary lender, Maine Fiber, to lower the interest rate to 8 percent on a loan that would enable the purchase.

However, the City of Burlington made public emails sent over the weekend between city officials, Burlington Telecom consultant Terry Dorman and the bidding co-op's board members showing that Maine Fiber had not agreed to give the co-op a lower interest rate. Matson, the board's chairman, instructed the council to consider the previous interest rate of 14 percent as the co-op's final offer.

"We were unable to reach an agreement with Maine Fiber on an 8 percent base interest rate that included contingent payments based on the future success of Burlington Telecom," Matson wrote in a Facebook post on Monday afternoon. "While Maine Fiber agreed in concept to this idea and worked hard to support the idea, we were never able reach an agreement on a structure that was materially different (in almost all scenarios) from the 14 percent loan that we have already committed to with them."

City Councilor Adam Roof, I-Ward 8, who went to Toronto last week to research Ting's operation, said he has a "ton of respect" for the co-op and does not want to get into a finger-pointing match. But, he said, lowering the interest rate would have been a "material change."

"Does it impact the assessment? Yes, it does," he said. Roof voted for Ting in the preliminary vote and said he had planned to vote for Ting again on Monday night.


Montroll also said the co-op had put in writing its commitment to investing in the community. He said they had always planned to invest significantly in local initiatives like BTV Ignite.

Mayor Miro Weinberger has strongly supported Ting's bid. In a statement released ahead of Monday's meeting, he said that selecting Ting would "ensure a strong and affordable future for BT," pointing to the possibility of a credit rating increase and the promised economic investment.

He called the co-op bid "well-intentioned but very weak."

"The Council should not let slip away tonight's hard-earned chance to finish the job," Weinberger said.

He urged the council to vote on Monday night, saying that it was "time to see we have the political will" to make a tough decision.

Source: Burlington Free Press


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