Burlington Telecom: From a Cloud of Litigation to a Campaign Storm

At a news conference held January 21 to unveil Burlington Telecom’s new look, Mayor Miro Weinberger drove home his point: Troubles at the telecom shop are over.

“Now that the litigation is done, is over with, is gone, is dismissed,” he began, “we are here to start a new conversation.”

His point: The $33.5 million legal imbroglio with Citibank is resolved, and serious financial problems have been put to rest.

But one thing hasn’t changed. Burlington Telecom remains caught in the political cross fire. The “new conversation” Weinberger wanted to start has turned into something that sounds an awful lot like a campaign debate.

On the morning of the mayor’s triumphant pronouncement, Steve Goodkind, a Progressive running for mayor, slammed Weinberger’s handling of BT during an interview with Vermont Public Radio. Later in the day, in an interview with Seven Days, Goodkind again panned him for “throwing out the baby with the bathwater,” because Weinberger’s settlement entails eventually selling BT.

To Goodkind, a former public works director, BT represents one of his political opponent’s biggest blunders. It’s a primary reason he’s challenging the first-term Democrat, under whom he briefly served.

Greg Guma, a liberal activist and a late addition to the race as an independent, also identified BT as a main concern, saying he wants to prevent its “corporate buyout.”

Weinberger considers the BT legal settlement the crown jewel of his first term — proof that he’s made good on his pledge to clean up the fiscal mess left behind by his Progressive predecessor, Bob Kiss.

Normally prone to technical, detail-laden explanations, the mayor describes the predicament BT was in — and his work to resolve it — in uncharacteristically stark terms. “The bank was saying ‘Rip up the fiber from the ground’ … They were trying to destroy Burlington Telecom,” he said recently. “We have saved Burlington Telecom with the settlement agreement.”

His administration resolved the $33.5 million lawsuit Citibank brought against Burlington for failing to repay money the bank spent on building out the fiber-optic network. The parties finalized a $10.5 million settlement agreement on January 2.

To pay for a large chunk of it, the city is relying on a $6 million bridge loan from ferry magnate Trey Pecor. Under the loan arrangement, Pecor’s newly created company, Blue Water Holdings, owns the BT equipment and leases it back to Burlington. The plan is to sell the telecom after no less than three years, and the sooner it sells after that, the better for Burlington. Its share of the sale proceeds diminishes over time, and after four years, the city loses any say in selecting the buyer.

Weinberger has repeatedly emphasized that the settlement eliminated a huge liability. He’s also predicted that it will “keep tens of millions of dollars in the pockets of Burlingtonians” by eventually prompting an upgrade in the city’s credit rating.

In a typed, three-page document provided to Seven Days, Goodkind wrote that the Blue Water bridge loan contains six drawbacks — he later referred to them as “the mayor’s six deadly sins” — for Burlington. Chief among them: It puts the city “under the gun” to sell BT and will leave it with only a fraction of the proceeds.

Provided with Goodkind’s document, Weinberger staffers penned a response nearly three times as long, disputing practically every point.

During an interview January 25 at his sparsely furnished campaign headquarters on College Street, Weinberger was exasperated. “We have worked on this harder than anything else that we’ve worked on in my first three years. I hope you take that at face value.”

He stands by the result. “It’s an agreement that I think is better than anyone thought we were going to be able to secure,” Weinberger said, pointing out that the bridge loan saves taxpayers from footing the bill, and it gives the city some control over who will ultimately own BT.

The settlement and the bridge loan did win unanimous approval — after rigorous scrutiny — from the Vermont Public Service Board and the Burlington City Council, which includes five Progressives.

“I scratch my head when I see that,” Goodkind said. “I don’t know what to make of that.”

One of the five Progs was Jane Knodell, an economist at the University of Vermont who nominated Goodkind for mayor at the Progressives’ December caucus.

During an interview, Knodell didn’t seem rankled by the candidate’s implication that the council signed off on a raw deal. She said she wished that the administration had presented members with more than two financing proposals, and, in retrospect, “I felt like we should have asked harder questions.”

But she didn’t support Goodkind’s view that the bridge loan is a “terrible” deal for the city. “It’s not perfect, but it’s pretty good,” Knodell said. “This is all water under the bridge. I think the average citizen is very happy to have the Citibank settlement behind them, and I think the real issue is how to create the best possible future.”

Guma, who serves on the Burlington Telecom Cable Advisory Council, echoed her assessment: “One can quibble about whether it was the best deal possible, but that part of it is done.”

Goodkind is calling for an audit of all the money that’s been spent on BT — something, he said, that has never been done. “We’re going to find out what actually happened, not just sweep it under the rug,” he said.

Weinberger contends that BT has already undergone multiple audits and criminal investigations and completing another one “would waste hundreds of thousands of taxpayer dollars” and “distract BT from attempts to grow its customers and taxpayer value.”

Goodkind had been a city employee for three decades — and worked under five mayors — when he retired almost two years ago as director of public works. He compares his last boss to Kiss, accusing Weinberger of continuing to “maintain a veil of secrecy, shielding the public from the details of the operations of BT.” He brought up the minimum sale price for BT — a sealed figure that the city and Pecor have agreed upon. Goodkind thinks the number should be disclosed.

For the mayor, who’s always fashioned himself as the anti-Kiss, it’s an especially galling allegation — one that he rejects as “just completely groundless.”

“Here we are at the campaign, and you’ve got a former leader of the Kiss administration … coming back, trying to rewrite history,” said Weinberger. “He is trying to turn day into night, and I think it’s outrageous.”

As evidence that he’s made good on his pledge of transparency, Weinberger pointed out that the city now posts its daily financial transactions online. He said that BT releases all of its operating data except for “a small amount of proprietary information that would benefit competitors and hurt taxpayers if released.” According to Weinberger, the minimum sale price fits that description.

As for all of the BT-related, closed-door discussions during the last three years, the mayor insisted that they were necessary because they involved a lawsuit and business negotiations.

Several people who’ve kept close tabs on the deal are inclined to agree. “Clearly, discussion of pending legal settlements all comes within the purview of executive session,” Knodell said. “So were there things discussed in executive session that should have been discussed in open session? I would say no.”

“Yes, it would have been nice if those [Burlington Telecom Advisory Board] meetings were not in executive session, but I think the city has come up with the best deal,” said Lauren-Glenn Davitian, executive director of the Center for Media & Democracy and a staunch advocate for preserving local ownership of BT. “Really the question is about BT’s future. That’s what the conversation should be.”

On that, the candidates also disagree.

Weinberger has said the city would likely remain a “partner” with any future owner, and that he’s open to a “creative ownership” model such as a co-op. But he’s also made it clear that “it is quite likely that the city will no longer be the majority owner the way we essentially are now.”

City ownership is exactly what Goodkind wants. He’s proposing that Burlington use public financing to buy BT back from Blue Water, and then operate it as a public utility. He says he’d devote profits from the operation to eventually pay off the $17 million in city funds that were improperly diverted to BT when Kiss was mayor.

“We’ve taken all the pain for it. Why would we unload it now and not get any of the benefit?” he asked.

Davitian supports Goodkind’s approach, while acknowledging that it relies on a big unknown: “Is the public willing to pony up?”

Andy Montroll is a lawyer and chair of Keep BT Local, a group that has been trying to purchase BT and make it a co-op. Before he launched his campaign, Goodkind served on the board. “From my own perspective, if the city can find a way to keep it, that would be fine,” Montroll said. But the group he leads has been “moving on the assumption that the city is going to have to divest itself either all or in part of Burlington Telecom.”

Weinberger has said that keeping BT in the city’s hands “would require an enormous level of change in terms of the charter, state law, the city’s license, and, maybe more importantly, I think there would need to be a dramatic shift in public opinion about what we want for the future of Burlington Telecom.”

Guma also questioned the feasibility of Goodkind’s buyout proposal. But he argued that Weinberger should be doing more to bring together key players, including the city, Pecor and Keep BT Local, to ensure that the telecom doesn’t end up in corporate hands. “There’s really no proactive movement to have any outcome other than privatization.”

In some ways, BT is a proxy for a bigger debate.

Goodkind calls it a “classic example of the philosophy and management style of the city administration” — to which his rebuttal is, “Burlington is not for sale.”

Weinberger suggests that Goodkind’s recommendations are fiscally reckless and “would drag Burlington and BT back to the failed policies of the past.”

Said Davitian, “Burlington Telecom is a kind of a battlefield — no, not a battlefield, an arena — where this debate about community values can be talked about.”

This story was updated at 5:30 p.m. on 1/28/2015 to reflect that Pecor’s company’s name is “Blue Water Holdings.”

Burlington Telecom: From a Cloud of Litigation to a Campaign Storm

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This article appears in Jan 28 – Feb 3, 2015.

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