Burlington Council Votes Against Reinvesting in Burlington Telecom | Off Message

Burlington Council Votes Against Reinvesting in Burlington Telecom


Brian Pine (P-Ward 3) advocates reinvestment in Burlington Telecom - DEREK BROUWER
  • Derek Brouwer
  • Brian Pine (P-Ward 3) advocates reinvestment in Burlington Telecom
Updated at 11:55 a.m.

Burlington will not reinvest any proceeds from last year's sale of Burlington Telecom back into the company.

City councilors early Wednesday nixed a proposal by Mayor Miro Weinberger to use $2.4 million of the proceeds to purchase a small stake in the new company, a subsidiary of Indiana-based Schurz Communications.

The fateful decision, made after midnight during a marathon meeting, ends a tumultuous two decades of municipally owned broadband. 

"It's a risky investment, and we're not allowed to make risky investments with taxpayer funds," Councilor Joan Shannon (D-South District) said in voting no.

Before the vote, Weinberger noted that his proposal was preliminary and meant to start a conversation among the councilors.

“Given how this debate has played out and given the very strong statements made on both sides … I want to be clear that I also respect and accept the decision if the council decides that we should not invest,” he said.

The final tally was 8 to 3 against reinvestment; Councilor Adam Roof (I-Ward 8) recused himself from the vote. Councilors Brian Pine (P-Ward 3), Sharon Bushor (I-Ward 1), and Council President Kurt Wright (R-Ward 4) voted to reinvest.

The decision whether to reinvest was "momentous," Wright said in remarks just before the vote. "I believe we are about to make a colossal mistake."

Burlington Telecom launched as a municipally owned and operated broadband provider in 2003. By 2009, the city had used nearly $17 million to keep the company afloat — a scandal that took down Mayor Bob Kiss.

The city, under Weinberger, completed a $30.8 million sale of the utility to Schurz in March 2019. The bulk of the proceeds went to repay bank loans and consultants, but Burlington netted about $6.5 million.
As part of the deal, Schurz gave the city one year to decide whether to reinvest in the company. Weinberger recommended reinvesting $2.4 million, which would buy Burlington a 7.5 percent stake in the company and one seat on its governing board.

Proponents of reinvestment hoped that stake would reap annual returns that could, over time, recoup the city funds that were misspent more than a decade ago.

As the proposal's prospects dimmed, a group of current and former councilors staged a press conference last week in an effort to drum up public support. Two of those former councilors, Dave Hartnett and Jane Knodell, also spoke during public comment on Tuesday night.
Hartnett, a Democrat, told councilors that reinvestment offered taxpayers' only hope of being paid back in full. He dismissed skeptics' concerns about financial risk should the investment turn sour.

"You're doubling down with Don Sinex," Harnett said, referring to the maligned CityPlace developer, "and you're worried about risk with Burlington Telecom?"

Others lamented the prospect of walking away from any municipal control over the city telephone and internet provider.

"It will be a sad, sad day in the city of Burlington if tonight you vote to cash out," Knodell, a former Progressive councilor and University of Vermont economics professor, said before the vote.

In supporting the investment option, Pine highlighted Burlington Telecom's financial recovery and projected that a city investment would increase its value over time.

"We deserve to reap those rewards," he said.

But a majority of Democratic and Progressive councilors said the investment's inherent risks were too high, and the proposed ownership stake in the company too low. 

"I don't think we should pretend that that one seat is going to allow us to steer the direction of the company," Councilor Jack Hanson (P-East District) said. "That makes me uncomfortable to put public money into a private company whose decisions are out of our control."

After the vote, the council also agreed to make public a confidential risk assessment prepared by city attorneys and consultants. The documents won't be released publicly until redactions can be made, but those analyses appeared to have been a key factor for some council members.

"We need to have closure about this and move forward," Councilor Ali Dieng (D/P-Ward 7) said.

Correction, February 19, 2020: A previous version of this story misidentified Joan Shannon's district. Further, the story previously contained a miscalculation related to the amount of money the BT sale netted the city.