Update on Burlington Telecom Hearings & Next Action Steps
- Watch the Public Hearing from 7/8/14
- Watch the Technical Hearing from 7/22/14
- Read Docket 7044 Documents
- Settlement Deal with CitiBank
- Comparison of Bluewater/ Pecor Deal with Rosemawr
The PSB hearing officer Lars Bang-Jensen, Staff Attorney and Jay Dudley, Utilities Analyst conducted several hours of cross-examination with City witnesses:
In a move toward financial stability, the Blue Ribbon Committee on BT recommended, and the City agreed, to default on the CitiBank loan in order to negotiate another deal and reduce the liability. The City explored a number of options, including revenue bonds (which, apparently, the PSB said they could not do). The City was not successful in finding other lenders or investors because of BT's "distressed asset" status--nor could they find common ground with Citibank to reduce the debt load through negotiation.
Finally, in 2012/13 the City decided to pursue "special interest" financing, i.e. an unconventional lender. The City was able to procure an offer from the Rosemawr Group to help fund a portion of the settlement with Citibank. The Rosemar deal would have provided about $6 million in exchange for BT assets, at a relatively high interest rate (more than 7%), and would have enabled them to direct the sale of BT with a major piece of the proceeds. See comparison of the deals.
The City used the Rosemar offer to show Citibank that they could fund at least $6M of what was ultimately a $10 million settlement. Citibank included the "arms length" sale of BT to a private entity as an additional source of revenue for the final settlement. Citibank will also get 50% of the net proceeds when Burlington finally sells BT in the next 3-5 years. The final deal gets the City out from under the $33M lease and yields approx $10M or 30 cents on the dollar for Citibank. See the: Citibank Settlement (no longer confidential).
The City also used the Rosemar deal to find a more favorable deal with a special purpose entity, which they did, through local Burlington business man Trey Pecor and the Merchants Bank--now known as Bluewater Holdings. The City is in the process of finalizing a "sale-leaseback" with Bluewater, which will pay Citibank $6 million for 7% interest plus a 40% share of the final sale of BT in 3-5 years. The City will continue to operate BT and, ff the City is able to get at least $11 million, it will be able to direct the ultimate sale.
To recap: When the ultimate sale of BT happens in 3-5 years, Bluewater gets 40%, Dorman and Fawcett gets 10% and the City splits the net proceeds with Citibank 50/50 (or less depending on when the sale takes place).
The PSB cross examination centered on:
- City efforts to find alternatives to the Bluewater "sale-leaseback: (including many of questions about viability of revenue bond, which according to the City for purposes of timing and Citibank was not viable);
- Future of the $16.9 million and City's ability to recover through current earnings or future ownership stake.
BAMO questions focused on the non-existent public process to date and public process contemplated for next sale to private entity. The Mayor believes that the CIty process has been meantinful and that future public involvement would center on attendance at City Council and BTAB meetings.
The Burlington Access Management organizations beleive that public involvement is critical for assuring the an ownership structure and City ownership state that will assure continued low rates, and enable the City to realize the economic and community benefits of BT for decades to come.
Both Terry Dorman and Mayor indicated a willingness to establish criteria for the selecting the next owner and open the process to public involvement, but no meaningful details were forthcoming in either written or oral testimony. All City witnesses were firm that they wanted no conditions attached to any future sale, maintaining that it would make resale much harder to attain.
- VT Digger - Burlington Makes Case for Selling Burlington Telecom 7/22/14 - Hilary Niles
- Burlington Free Press - Burlington Telecom's Crossroads 7/22/14 - Joel Banner Baird