The co-op’s offer is “not even remotely commercially reasonable and not qualified,” Kevin Fitzgerald wrote in an email Sunday night to city attorney Eileen Blackwood. A city council decision in favor of the KBTL bid would be “vigorously opposed by Citibank on several fronts including but not limited to immediate litigation.”
Blue Water Holdings, which has loaned the city money and will benefit from the sale, also emailed the council, noting that they, too, have serious concerns about the co-op bid.
Michael Furlong, an attorney for Blue Water, expressed “serious concerns” about KBTL’s ability to obtain a certificate of public good, a necessary step of approval granted by Vermont’s Public Utility Commission.
“KBTL is a first-time operator of a telecom system, lacks management experience, and its proposed debt financing reflects junk bond credit or worse,” Furlong wrote in an email. “The City’s comparison of bidders found KBTL does not meet four of the 13 criteria considered, and the City’s outside financial and technical consultants found KBTL’s bid proposal inferior to other remaining bidders.”
Blue Water, which is led by Trey Pecor, cannot direct the sale of BT. But the management and sales agreement does note that Blue Water must approve the buyer if it is a first-time operator.
The dual warnings came just hours before the council meets at 7 p.m. on Monday night to chose between two finalist bidders for BT. They’ll decide between KBTL’s $12 million offer and Canadian company Ting, which put forward a $30.5 million offer. The new emails left councilors scrambling to interpret the threats and consider how other councilors would respond.
“I take that very seriously,” said Chip Mason (D-Ward 5), noting that the litigation costs to the city could be significant. If litigation lasts into early 2019, he added, the city would lose all say in who buys Burlington Telecom.
But Max Tracy (P-Ward 2), said that the letters wouldn’t dissuade him from casting his vote for the co-op.
“While I take their claims seriously, my reading of the settlement agreement is that we’re not bound to take the highest bid,” he said. “We established public criteria and guiding principles for the sale and we vote for the proposal that best meets those public criteria.”
Tracy said that decades down the road, a “democratically run, member-owned cooperative” would best serve the needs of Burlingtonians — litigation or not.
KBTL, which plans to borrow $10 million of its $12 million bid from the Maine Fiber Company, said in a new written offer to the city last Thursday that it secured its loan at 8 percent interest, significantly lower than the original 14 percent.
But that’s no longer true, KBTL board chair Alan Matson confirmed Sunday afternoon.
“We were unable to reach the agreement we thought we had,” Matson said. The terms of the loan, he said, are the same as they were during the October 16 council vote. Matson confirmed the information with Terry Dorman, head of Burlington Telecom operator Dorman & Fawcett, in a series of emails on Sunday morning.
“This is absurd to me. For a while, there’s a new financing deal with the CEO of Maine Fiber, which turned out to be patently false,” Adam Roof (I-Ward 8) told Seven Days on Sunday night. Roof wasn’t sure who he’d vote for, but “I’m going to make my decision based on what we can put on paper,” he said.
“I have to admit, I am frustrated. This is exactly what I feared,” Mason told Seven Days on Sunday afternoon. “We’re less than 30 hours away from a supposed vote and the terms are just now being determined. That’s not OK.”
The reversal comes after the co-op on Friday hosted a rally in Burlington’s City Hall Park. The co-op’s board vice chair Andy Montroll that day heralded the new terms of the loan as other community members and business leaders also voiced their support for the grassroots bid.
But even then, Matson said, the terms of the contract with Maine Fiber were not in writing.
He skirted the question when asked if KBTL had lied about the offer or had jumped the gun in announcing the change publicly.
“I’ve been called out already by councilors who say it’s a gimmick and it’s a bluff,” Matson said.
Maine Fiber CEO Dwight Allison did not immediately respond to requests for comment.
“In this entire process, we have worked as hard as possible to be straightforward and only present what we truly believe,” Matson said. “We had a verbal agreement, and when it got put down on paper, it wasn’t … effectively different from what we initially had in place.”
That means that less than 12 hours before the council’s final vote Monday night, KBTL’s business proposal contains a major error — purposeful or not.
“There’s no pro forma to back up their last [letter of intent] — people are OK with that?” Councilor Joan Shannon (D-South District) asked rhetorically. She said she’d vote for Ting.
But it doesn’t mean that KBTL’s out of the race.
Council president Jane Knodell (P-Central District) said she’d vote for KBTL and expected a 6-6 tie at Monday’s meeting — meaning a winner may not be chosen then. What happens if that is the case is unclear, according to Knodell. “We have to look at our different options about what our next steps are,” she said.
The co-op’s last minute change didn’t affect her decision, she said, though she added, “They might have gotten a little bit ahead of themselves.”
“I think the city of Burlington needs to get its fair share of [Burlington Telecom’s] future profits,” Knodell said of her vote. “Ting does not provide that.”
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KBTL’s public announcement of the 8% financing deal without first confirming the terms of that deal in a written, enforceable document reflects its inability to conduct business at a professional level and bodes poorly for its potential management of BT.
This is stunning. KBTL didn’t just lie… they withheld the truth from Councilors until the night before the vote! Still, right now, on their Facebook page https://www.facebook.com/KeepBTLocal/ you will find these false claims. They have issued no apology or even public acknowledgement that this occurred. Add to that the certainty that Citi will engage in “immediate litigation”, and this should be the final nail in the coffin. But apparently not. Political opponents of Miro have their heals dug in so deep, they can’t even see above their own mess. Dave Hartnett – please be the voice of reason and save this.
I’d like to join Citibank and sue as well if KBTL wins! It’s not local if I’m a Burlington taxpayer who cannot access BT and won’t be able to access BT within the next 20 years if KBTL wins. Keeping it local is meaningless if Burlington residents continue to be denied access to BT. KBTL clearly states they do not have and will not have the money in the foreseeable future to extend service to all residents.
Please, please, please vote for TING. They have the resources to expand service to all Burlington residents and beyond, so all LOCAL residents can enjoy having high speed fiber. That is keeping it local, not awarding BT to the low bidder who will service only those residents who happen to live on ‘lucky’ streets.
KBTL is now doing to the sanctity of the bidding process what Kiss, Leopold and the Progs did to the sanctity of the original referendum that approved BT as a stand alone entity without ANY tax dollars ever being at risk.
The Taxpayers and voters were disenfranchised once by Burlington’s City Government concerning BT; please don;t do it to us again
In the age of Donald Trump, climate change, the increasingly detrimental failures of neoliberal economics….I CANNOT BELIEVE that people are honestly considering selling off a public asset to a large corporation. This is the EXACT WRONG DIRECTION to be going!
All the so called “liberals” [do people honestly think that Karen Paul is a liberal?] with a D next to their name on the City Council should be so horribly ashamed of what they are doing. Most of them will say that their principles make them want to vote for KBTL, but in this situation they cannot support the co-op. Burlington is not a microcosm – these are the debates that cities are having all around the country and the world: are we moving towards public ownership or continuing on the path toward a Lovecraft-ian hellscape of neoliberalism and privitization. These people are pathetically spineless – it is people like this all around the world that have gotten us into the predicament in the first place.
Why are corporations and large banks able to run roughshod over the will of the people? Because our leaders, that say they have principles – looking at you Joan Shannon – lose them the second a powerful outside entity threatens to flex some muscle. It is disrespectful and refuses to acknowledge the power of our community.
Call me crazy, but I think the people of Burlington and our community CAN make the co-op work – and people who say that it isn’t viable might as well believe that Burlington and our community isn’t viable. I hope our Councillors grow some spines and realize that this decision is once in a lifetime.
KEEP BT LOCAL
I am wondering if Miro had any say with citi bank in the letter that was written. He has been against KBTL all along and it is obvious he wants all the money now and TING has it. Like I have said you have to wonder about the honesty of this politician!!
I appreciate idealism and I especially appreciate hard work and the pursuit of the plan to Keep BT Local. But when it reaches a point like this where tactics of misinformation need to be used to make the case. And where Ideology trumps rational decision making. Then you have a problem. That is the case here. I can only imagine how hard it must be to get this far, to realize you’re not even close. But that’s the story, and here the brave and wise must look with clear eyes at this and know its time to take a bow and exit the stage before the debate itself damages more relationships and bruises more egos.
@Dave why do you assume bad intentions? In a different article you immplied that councilors who couldnt go visit Ting were lazy and not working their butts off, you then mentioned the heated rhetoric in politics (I agree!) and now here you assume that KBTL would purposefully mislead, as opposed to the notion that they were excited about a good deal and made a (albeit quite huge) mistake.
And frankly who can blame them? What do we expect when we have a rushed, meaningless process with forced deadines? How can we expect citizens to make informed decisions if even councilors who work full time jobs too have trouble keeping pace with the mayors office?
Its frustrating time and time again to see folks, on all parts of the political spectrum, but particularly those who opposed KBTL from the start, to wait until the last minute to bring up issues that should have been resolved much much earlier in this process.
Of course mistakes will be made by everyone involved when theres little time to make an informed decision!
But dont pretend there isnt ideology on your side too, Dave – you continue to support an administration that has made it clear that they believe the market and trickle down economics will take care of everyone, while in the past decade childhood poverty, homelessness, economic and racial segregation, and the income gap continues to grow.
Both Pecor and Fitzgerald are representatives of companies that want corporate players which remove monies out of the local economy and into the present marketplace that allows less power for consumers and more for national and international investors. In an era where the concept of public utilities are being threatened you can be assured that the city of Burlington will have little leverage with these corporate players. You can imagine if we lost our public electric utility BED and ended up facing the extreme capitalism most towns and cities face in the present economy. You can be assured when Miro has to file with the Vermont Sec. of State for his campaign donations, that that Pecor and Fitzgerald’s companies will gratefully add to his re-election campaign chest. This is how the Democratic party in Northeastern cities seem to play politics and another reason with the Party continue to evaporate from the National scene.
“The letter is just the latest setback for KBTL. The co-op inaccurately portrayed the terms of their loan in a final proposal the group submitted to the city last week.” – Needs to be Game Over for co-op.
The combination of weak management, little access to capital and a bid $18M shy of a worthy competitor should be ample evidence Burlington has no business choosing the Co-op. Hold Ting or the other to accountability and community engagement, the City will have a stronger entity longterm.
The real question is why Councilor Karen Paul at the last minute refused to vote on selecting a buyer for Burlington Telecom.
Paul claimed a conflict but – contrary to council rules – declined to identify her interest.
Why did Paul withdraw? Who threatened her vote? She needs to answer.
I am glad to see that Citi Bank has some sense about them as opposed to the city council who think the KBTL is a good deal. A first year economics or first year business student can see this is a bad deal and a failure waiting to happen. To think you can sell a utility that is $52M in the hole, $35 to Citibank alone, that they will roll for a cheap settlement of $10M. My Comcast is up in Jan and we are waiting to see who this gets sold to. If KBTL wins this then there is no way that I would sign up for them as a provider.