Keep BT Local will move on to the final round to buy Burlington Telecom, along with Toronto-based Ting.
Burlington City Council members cast six votes in favor of the co-op and five votes for Ting in a four-hour meeting on Monday night. Republican Kurt Wright (R-Ward 4) offered the sole vote for the third company, Schurz Communications.
About 150 residents crowded into Burlington City Hall Auditorium to voice their support for the co-op’s bid. They stood along the walls and sat on the floor, bearing signs with slogans in favor of Keep BT Local.
“How about we keep our internet & just sell Miro instead?” read one, taking a shot at Mayor Miro Weinberger. Read another, “Hands off our internet.”
“This is probably the biggest issue you’ve ever voted on,” former Progressive state legislator Dean Corren told the council. “Decades from now, it will seem silly that we considered having something other than local control over the telecom.”
Others urged the council to consider the extensive public support for the co-op.
Among the lawn signs placed in yards around the city, “You’ve never seen a sign saying, ‘Give it to Tucows,'” said Charles Simpson, referring to Ting’s parent company. People applauded and laughed.
In the end, the two lowest bids for the telecom took the day — the $12 million offered by Keep BT Local and the $27.5 million offer from Ting. Schurz Communications, which is headquartered in Indiana, had bid $30.8 million.
The vote brings closer to conclusion a years-long process to rebuild Burlington Telecom, which fell into legal and financial trouble after then-mayor Bob Kiss diverted $17 million from city coffers to prop it up.
The question has been whether local ownership or strong financial footing for the Telecom holds more appeal.
On Monday, councilors across the board expressed concerns about the financial viability of Keep BT Local’s bid. The co-op’s $12 million offer would be financed by a loan with a 14 percent interest rate.
“It’s not about fear [of litigation against the city], it’s whether there’s legitimate concerns about whether Keep BT Local can pull it off,” said Kurt Wright as he explained his unwillingness to support the co-op. “I don’t take those considerations lightly.”
Citibank has previously sued the city over Burlington Telecom debt, and will receive sales funds. The bank has indicated that it may sue the city again if it believes it hasn’t received its share of profits, added Chip Mason (D-Ward 5).
Still, half the council decided to give the co-op a chance. In spite of the “major hurdles” the co-op faces, “You’ve worked hard to earn my respect,” said Dave Hartnett (D- North District), who voted for the co-op. “I’m a hometown guy and I’m from Burlington.”
Councilors said that their votes Monday night weren’t necessarily an indication of their final choice. The two finalists will continue to refine their offers before the council selects the winning bid on October 30.
Ting and Keep BT Local’s bids are the last of eight that were submitted last June. Four advanced to be considered by the council, but one bidder dropped out.
Last week, Weinberger announced that he supported Ting, and asked the council to reject the co-op’s bid.
Ultimately, “It’s not about fear of litigation,” Weinberger said Monday. It was about the city making good on commitments to pay back debts, he said.
In the coming two weeks, councilors will continue to weigh their options. Councilor Karen Paul (D-Ward 6) requested an outside analyst to weigh the benefits and risks of the co-op bid that are “out of the realm of conventional economic analysis,” including net societal benefits.
Some members of the public also expressed their doubts. Burlington resident Michael Caulo urged officials to consider the “tremendous professional experience” of the “competitive proposals” of the highest bidders. “I’m not sure we can translate the success of a grocery store to the success of an internet system,” said Caulo, referring to City Market/Onion River Co-op.
At times, council President Jane Knodell (P-Central District) struggled to keep the crowd from clapping or interrupting.
But the public input was what ended up tipping the scales in favor of Keep BT Local, said Max Tracy (P-Ward 2). He read emails submitted by the public. According to Tracy, 186 support the co-op, compared to 20 for Ting and 16 for Schurz.
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Its interesting to see how much this thread favored Ting and Schurz. Yet sad to see Councilors – in particular the one that teaches economics, to be bullied by an increasingly aggressive vocal minority. The intimidation and bully tactics used are not OK. Adam Roof shared this in his email about the vote :
“I have been disappointed in the style of civil discourse surrounding this issue. Over the last week or so Ive taken calls where Ive received outright political threats and harassment. Last week I answered a call from a blocked number informing me that if I did not vote for KBTL I would have a target on my back and that capitalist pigs will be slaughtered.”
Although Adam also shared how much support he gets from good and decent constituents, I think that if we want to have strong and effective leaders, we need to treat them with due respect. Or we’ll end up with more “leaders” that cower to the mob instead of leaders like Adam that vote for what’s really best for the city and its residents.
– Dave Gibson
Liz, why hasnt KBTL looked for lower interest capital and offered a higher offer to the city of Burlington? The offer price is low due to the high interest rate. This has a double negative effect on Burlington tax payers. Less money in our coffers up front and more of our telecom money leaving Burlington to cover the holding costs of high interest rates. I fully support a Co-op model but do not like the figures at all. Something doesnt seem proper here. Is there someone from KBTL that can answer the question of why they havent searched for better financing options?
With a multinational corporation like Ting, when you do get connected to our state of the art fiber optic network your rates will soon look more like this, which is where the industry is going, to tier your telecom rates the way your phone rates work (the more data you use, the more you pay):
https://www.heraldmailmedia.com/news/local…
These comments are full of inaccurate assumptions. This might help clarify: https://vtdigger.org/2017/10/13/brian-pine…. Borrowing $12M at 14% with a 1.5 debt-coverage ratio results in the same payment as the multinational and national corporations cost of funds to carry double the KBTL debt load, and their debt-coverage ratios could be lower – the Council and public have asked but this question has not been adequately answered.
As a taxpayer and current BT customer I was very disheartened that six councilors voted for the Keep BT Local bid last night, thereby eliminating Shurz–a stable, family owned telecom and media conglomerate around since the 1800’s–from the selection process. As a telecom consumer I value the great service and choice created by competition between healthy firms. What makes firms healthy is strong cash flow and robust working capital.
KBTL is by far the weakest bid and should never have been included as a finalist by BTAB’s selection process. The junk credit at 14% interest fueling this highly leveraged proposal is indicative of considerable risk lenders have placed on a KBTL operation. With insufficient working capital available KBTL will start hemorrhaging cash under the crushing weight of their liabilities. Ensuring BT can provide sustainable service for their customers is as important to me as protecting taxpayers from the near-term risks of litigation (brought out by either Blue Water and/or Citi) and fiscal pressures that are likely with a lower bid. In the wake of financial mismanagement of BT under the Kiss admin these risks should not be taken lightly.
I have heard the arguments by KBTL; that is BT’s current EBITDA is sufficient to service $12m in debt at 14% interest. However, the assumptions used in such an optimistic foward-looking analysis make even Elon Musk look bearish!!!
Paco DeFrancis
BTV GOP
“I cant understand why the Co-op would choose to borrow money at a 14% interest rate”
Because they had no choice. They can’t get that $10 million anywhere else at a better rate than 14%.
Which tells you either that the lender has no faith in KBTL, or that the lender is actually HOPING that BT defaults on the loan so that it can foreclose on BT, just like Citibank did 7 years ago.
Which is why no one in god’s name should support this bid.
I cant understand why the Co-op would choose to borrow money at a 14% interest rate, this would amount to over $19 million of interest on a twenty year note to borrow $10 million. And the lender is a cable infrastructure company. What is going on there?
So when the local co-op fails the system will be worthless. The local co-op will borrow money at a crazy interest rate and then will not be able to afford the necessary upgrades and expansion. Just because it gets sold to Ting doesn’t mean it is going anywhere.
Congratulations. Six craven councilors caved to the mob of Burlington comministas in favor of a bid that is a joke. The Internet is not a grocery store, and even City Market would never take out a $10 million loan at 14% interest from an out of state lender.
And isnt one of the Social Justice Warriors pictured in one of the photos in this article someone who should be in jail right now for defacing public property a week or so ago?
I don’t care about local ownership nearly as much as I care that as a Burlington taxpayer I cannot use Burlington Tekecom because they don’t provide service to my neighborhood.
I support Ting because I believe they will be able to extend service to all of Burlington. I’ll be really upset if the council chooses to continue excluding taxpayers like me from this wonderfully valuable resource. Keeping it local is meaningless if I’m forced to choose between Comcast or Fairpoint.