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Mayor’s Office

City Delivers on Promise to Resolve Burlington Telecom Crisis

FOR IMMEDIATE RELEASE
March 13, 2019
Contact:  Olivia LaVecchia
(802) 734-0617

 

Citibank fully releases Burlington from $33.5+ million lawsuit; City recovers nearly $7 million of lost taxpayer funds; City ensures high-speed broadband choice for Burlingtonians in perpetuity

 

Burlington, VT – Over today and yesterday, the City of Burlington closed on the transfer of Burlington Telecom to Schurz Communications, marking the final step in the resolution of the City’s years-long financial crisis. The closing follows the City Council’s 2014 unanimous decision to transfer Burlington Telecom to Blue Water LLC as part of the settlement agreement with Citibank; the Vermont Public Utility Commission’s February 19, 2019 order to grant certificates of public good and approve the sale; and Monday’s strong City Council vote to authorize the final transaction between Blue Water LLC and Champlain Broadband, which is the local affiliate of Schurz Communications.

“After years of work, today we have made good on all of the goals that we set out to achieve at the beginning of this process, which include restoring the City of Burlington’s financial health, recovering as much of the lost taxpayer funds as possible, and ensuring that Burlingtonians continue to benefit from high-speed fiber optic internet,” said Mayor Miro Weinberger. “This outcome represents hard-earned progress far better than was thought possible seven years ago. I want to thank all of the employees of Burlington Telecom who have worked hard throughout this process. I also want to thank Schurz Communications for their commitment to Burlington and wish them well in their new community role.”

With this transfer, the City has accomplished the following:

  • Brought full and final resolution to the $33.5+ million Burlington Telecom lawsuit with Citibank, as until today’s closing, Citibank retained the ability to re-open its lawsuit;  Citibank’s full release of the City from further BT liability is attached;
  • Recovered at least $6.97 million of the $17 million improperly spent by the City prior to 2010 (an additional recovery of up to $500,000 in the future is possible); In addition, with today’s resolution, the City retains ownership of the building that houses Burlington Telecom and will begin receiving rental payments of $115,000 a year and tax payments of $18,000 annually;
  • Ensured that the City’s financial recovery and improved credit rating will continue.  To date the financial improvement has resulted in total net savings for Burlingtonians estimated at more than $15 million in current dollars, according to the included 2019 Fiscal Health Report from the City Clerk/Treasurer’s Office;
  • Ensured the continued stable operations of Burlington Telecom, allowing Burlingtonians to continue to benefit from the powerful fiber optic infrastructure installed by BT; and
  • Secured numerous ongoing community benefits, including retaining the power to shape the future of Burlington Telecom through the authority, in perpetuity, to block a future sale to a telecommunications monopoly. A summary of the community benefits ensured by today’s closing is below. 

Transfer includes strong regulatory and contractual protections for public and BT users

Despite being in default on its lease and not owning BT’s assets, in the 2014 Settlement Agreement with Citibank the City secured the ability to direct the sale of BT to a new operator.  This ability allowed the City to lead a public engagement process and competitive sale process that resulted in a final agreement with Schurz Communications that includes many benefits and protections for the public and BT users. These benefits and protections include:

  • Commitment not to increase prices to customers of broadband for 60 months;
  • Commitment to anti-monopoly future sales restriction by granting the City the authority to block a future sale to a telecommunications monopoly;
  • Commitment to the full, rapid build-out of fiber optic infrastructure of Burlington;
  • Commitment to net neutrality and to maintain BT’s historic privacy policy;
  • Right for the City of Burlington to roll over cash proceeds from the sale into a minority ownership interest in the new BT, and to add a local Board representative; and
  • Annual contributions of $300,000 a year for at least 10 years to grow the local tech economy and invest in digital divide initiatives and other community needs.

Background: Resolution of decade-long financial crisis

Today’s closing fully resolves the greatest financial crisis in the City’s history. This crisis has been ongoing since late 2009, when it became publicly known that BT was unable to make payments on the City’s $33.5 million lease with Citibank or return $17 million of City general fund dollars improperly spent on BT by the prior administration.  These events resulted in a federal lawsuit with Citibank, six steps of downgrades in the City’s credit rating from 2010 to 2012 to the edge of junk bond status, and a lack of liquidity that put the City’s continued operations of core municipal functions at risk.

The Weinberger Administration and the City Council took decisive action in the years 2012 – 2015 to stabilize this crisis including:

  • Securing voter approval in November 2012 for the $9 million Fiscal Stability Bond that addressed the City’s liquidity crisis;
  • Securing the February 2014 settlement agreement with Citibank, which began the process of settling the $33.5+ million lawsuit for $10.5 million plus a share of the future value of BT and allowed the City to direct the transfer of BT to the right partner, and was unanimously approved by the City Council; and
  • Securing local bridge financing through Blue Water LLC to implement the settlement agreement.

Please see the full history in the included timeline.

Today’s closing completes this process, and marks the full and final resolution of this years-long financial crisis.

For additional information, please see:

Photo: Mayor Miro Weinberger announcing the closing.

 

 

Press Release Date: 
03/13/2019
City Department: 
Mayor's Office