David Provost, the Burlington Telecom Advisory Board chair, offered strong signals Monday during a public update on the sale that the co-op may not make it to the final round of the selection process.
“BTAB unanimously expressed serious concerns about the sustainability of KBTL’s financing plan and lack of operating experience,” Provost told the audience at a Burlington City Council meeting in Contois Auditorium, after the council spent more than an hour discussing the deal in executive session. There are three finalists that have viable bids, according to Provost.
Two bids from “well-capitalized, established businesses” are cash offers within “a few million dollars of each other.” In both cases, the two bidders have no financing contingencies and would not take on long-term debt.
“An investor with local connections” is the third bidder, Provost said. That offer has “a lower valuation, and includes other benefits for the community and local tech economy.”
There were originally eight proposals submitted for consideration by BTAB. Neither the names of the finalists nor their bids have been disclosed by the city.
Alan Matson, the Keep BT Local board chair, defended the viability of the co-op’s bid. “From what I heard, I feel like an underdog,” he said during public comment at Monday’s meeting.
He pointed to the ownership model and the co-op’s board as strengths, and touted its commitment to transparency. Keep BT Local is the only bidder to publicly announce its intentions.
“I think that that is just another point where the framing could use a bit of changing,” he said. “We look forward to working with the community to help them understand what our offer provides.”
Matson also criticized the city’s opaque process. “One of the concerns we have is that we just don’t really know what other offers are provided to the city right now. That’s something that as both citizens, and as applicants in this process, would be good for us to know,” he said.
Supporters of the co-op echoed Matson’s concerns with the selection process. “Secrecy sucks,” quipped Burlington resident Alex Chaffee. Others asked for increased citizen input. “I feel it’s somewhat disrespectful to me and all the citizens of Burlington to not be able to do some research about these companies,” said Solveig Overby, who said she’s a co-op member.
The city has fallen behind the schedule it marked out earlier this year. In the initial timeline presented by the BTAB, the finalists would present to the city council in July, with a final decision made by July 31. Burlington officials must finalize the sale by the end of the year to maximize the city’s share of the profits.
Provost also noted that there will be some mandates for the buyer, including “a restriction on resale, representations limiting customer price increases to content costs, requirements to maintain BT’s commitment to net neutrality, and an enduring ability for Burlington to use the fiber to support smart city initiatives.”
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Hmmm, let’s do the math. As a taxpayer who is still disgusted over being lied to and screwed financially by the prior city’s administration over BT and the farcical pretense of possibly charging city administrators with malfeasance, I could care less about keeping BT local. Sell to the highest bidder. I actually do not think the city has any business being in the cable or municipal airport business, You need only look at the past and current balance sheets to see why.
I can remember the days before BT and they sucked. Adelphia, Comcast, Verizon, etc. Inferior speeds, higher prices, and shitty customer service. If we sell it to another private company, it’s only a matter of time before BT is sold – again – to one of these faceless conglomerates and we’re back where we started!
We can do better, and we did.
BT is currently profitable and on track to net $3 million this year, which is more than enough to pay down the long-term debt and to maintain, improve, and expand its operations. All 7000 current subscribers will automatically become co-op member-owners, giving BT an immediate, additional source of equity.
The long-term payback of the KBTL bid carries a current value of least $5 million more than its bid price. Only the co-op can keep rates low and provide patronage refunds to subscriber members.
And coops run big telecom networks – bigger than BT. There are 260 telecom cooperatives in 31 states that, combined, generate $3.9B in revenue, $1.3B in value-added income to their members and communities, employ 23,000 people, and have returned tens of millions of dollars (over decades) to their member-owners in the form of patronage refunds, or shares of the profits.
Transforming Burlington Telecom into a local cooperative will ensure that taxpayers and subscribers reap the long-term benefits of a currently thriving telecom. Our community envisioned, built, and paid for BT and we should keep the ownershipand the profits.
Citizens and customers never win when we corporatize our media and infrastructure. The Co-op model is well established, keeps the “profits” in the community, and prioritizes customers not shareholders. Keep BT Local is the only bid that is transparent. Why haven’t the other bidders made their offers public?
With regard to the previous commenter, the city will only get 25 cents on the dollar of any bid, so selling to the highest bidder isn’t as lucrative as it sounds. Any extra money now will be more than offset by the lost money for years to come that Keep BT Local would return to members.
Penny wise, pound foolish.
I think “Saysme” should be just as concerned about the secrecy with which the City has been vetting, talking to and negotiating with the eight, now four, bidders. Seor Saysme: wouldn’t you be more comfortable knowing what the triple bottom line and total cost of ownership would be from all the bidders, rather than just blindly going with the highest bidder? Don’t you think there may be some downsides to that?
By the way, none of the bidders is giving the City anywhere near a majority ownership in BT — that was legally taken off the table as a possibility by the Public Utility Commission as a condition of the sale.
The City absolutely has an obligation to its taxpayers — who got absolutely hosed because of the prior administration’s malfeasance in running BT — to get the best deal that it can. This sale is a necessary part of the settlement that thankfully got the city out of the nightmare that Kiss, et al., handed to the taxpayers. That does not absolutely, positively mean that the city must take the highest bidder, but price is an extremely important factor, if not the ultimate one. In order for the bids to be as competitive and complete as possible, the bidders must not know what the other bidders are offering. In addition, no company can be expected to lay bare in public its financial condition. Stop complaining about “secrecy.” The Council is doing its job.
As a taxpayer, I want the Council to put an absolute premium on how much money it can get for BT.
Whether a tiny city like Burlington ever should have started down the road of building a city-owned telecommunications company, especially during the Great Recession, is another subject entirely.
And yet, here’s the catch: we have to take David Provost’s word for it since we know nothing of the other bids that he referenced. Where does the money come from? What obligations do these anonymous “well-capitalized, established businesses” have to shareholders or investors to turn a fat profit from BT (= higher rates, lousy service)? Does the anonymous “investor with local connections” have the same kind of accountability to subscribers that a utility coop would? The Keep BT Local group has been transparent from the start yet they have respected the constraints of the non-disclosure agreements. Why won’t BTAB and City Council let us know what is going on behind the curtain?
Again, I’ll say to the anonymous ‘saysme’ and ‘knowyourassumptions’ commenters that just because a bid is higher, that doesn’t mean the City will benefit, financially and otherwise, better than, or even as well as, a lower bidder whose business plan over time keeps more money in the City and the pockets of BT’s subscribers. An up-front lump-sum payment to the City that in this case may be around $4.5 million higher than the Co-op’s, might well be met, and even exceeded, by the Co-op model in less than 10 years.
But how do we know this for sure, unless the other three bidders voluntarily come out of the shadows? It’s especially frustrating that the two bidders that David Provost described as “established business that have telecom experience” feel they have to hide their identities.
The Co-op’s bid is $12 million. At least one of the higher bidders is offering $30 million. Obviously, the higher bidders see BT as a valuable and profitable investment, otherwise why would they bid so high? But where will their profits go that they’d rake in from our successful, profitable, world-class telecom system? Not back to BT’s subscriber-owners and the City the way a Co-op would, that’s for sure!
Perhaps “saysme” and “knowyourassumptions” enjoy being anonymous and see nothing wrong with anonymity; however, in a free and open democratic society that Burlington has always prided itself as being, the Co-op is living that ethic in this process, and it promises to continue to do so after it acquires our world-class telecom system. The Co-op will give back earnings to its citizen-subscribers, and not milk our cash cow to feed shareholders, investors and personal bank accounts.
Let’s take the long view, and not be blinded by shiny short-term, up-front lump sum dollar offers.
knowyourassumptions writes, “As a taxpayer, I want the Council to put an absolute premium on how much money it can get for BT.”
Fair enough. But as a taxpayer, I want to put a premium on how much *value* we can get for BT, not just maximize the top-line price of a deal.
And remember, the terms of the deal say that the City will get a diminishing amount of the total sale. I don’t know the exact figures (*), but let’s say they accept a $30M deal and the city gets to pocket $5M of that, for a one-time boost of ~3% of a single year’s budget. We’ve already spent over $16M on BT (I’ve also heard $50M ?) so that means we are selling it at a steep loss.
And remember, it’s profitable now; all future profits will go to its new owners. The co-op would return profits to its members (who are by definition citizens of Burlington) over time, just like City Market. We citizens would stand a much better chance of getting our money’s worth with the co-op option.
(*) the dollar amounts in question are very confusing, what with debt vs investment vs capital expenditures vs bailout vs interest all being tossed around, and I’d love to see a clear accounting on what the city has actually spent over the past 20 years since the initial resolution, as well as how much it would actually receive from various deals
I guess some people don’t understand the concept of trade secrets and confidential business information. I guess some people don’t understand that the City benefits in its decision-making capacity by having full financial information from the bidders, information that it would never receive if the bidders had to make it public. Some bidders probably wouldn’t participate if they had to disclose of all of their confidential business information to the public. I guess some people don’t believe that the decision of what’s in the City’s best interest on BTV should NOT be influenced by the pressure politics of the KBTL group. And I guess some people have quickly forgotten how public ownership nearly destroyed BT.
US Senator, presidential candidate, and perennial agitator Bernie Sanders sure understands financial privacy, however.
https://www.forbes.com/sites/taxanalysts/2…
http://www.nydailynews.com/news/politics/b…
https://www.quora.com/Why-wont-Bernie-Sand…
http://www.washingtontimes.com/news/2016/a…
http://www.factcheck.org/2016/04/sanders-e…
We don’t want to know their confidential business info. We just want to know their names.
“We just want to know their names.”
All you want is the names? That’s all you want? Really? Not according to the below comments of Andrew Simon and Greg Epler Wood. Please at least get your stories straight.
And how does just knowing their names help you, or anyone, decide what is the right bid to accept?