One step closer. The Burlington City Council on Wednesday selected a financier for a $6 million bridge loan to pay off the city's settlement with Citibank in the Burlington Telecom dispute.
Councilors unanimously voted to accept a loan from Burlington businessman Trey Pecor and Merchants Bank over an offer from Rosemawr Management LLC, a firm based in New York City that specializes in municipal financing. With the loan, the city will be able to pay the $10.5 million settlement with Citibank over Burlington Telecom's financial woes. Citibank financed the infrastructure for the city-owned utility. It sued two years ago, demanding that the city pay $33.5 million for the cost of the network.
The Pecor/Merchants Bank loan offered a lower interest rate — seven percent — and would allow the city to recoup more money from an eventual sale of Burlington Telecom than Rosemawr's proposal. Here is how it will work:
Merchants Bank will loan Pecor $6 million at an interest rate of seven percent. The loan will be secured by Pecor and BT's property. Pecor will transfer the $6 million to the city, and will receive no compensation during an expected three to five year financing period. Pecor's family has long been prominent in the Burlington business company and owns Lake Champlain Transportation Co. and the Vermont Lake Monsters, among other interests.
When a longterm buyer for Burlington Telecom is found, Pecor and the city will split the proceeds: Under the terms of the agreement, if BT is sold within 36 months of the agreement, the split will be 50/50. The city's share would gradually decline if a sale takes longer. The city would have had to give a larger cut to Rosemawr.
Burlington will then split its share evenly with Citibank as part of the settlement.
“I’m thrilled to be partnering with the city of Burlington, to be partnering with a mayor and an administration that are making such great progress and moving our city in the right direction,” Pecor said in a statement released through city hall. “I love this city; my family loves this city; our future is here in Burlington. I am very fortunate to play a role in helping Burlington make the most of that future.”
The Vermont Public Service Board must approve the transaction, a process Weinberger said will likely happen in the summer. The city will file with the PSB by the end of the week, the mayor said.