A special committee empaneled to help the Burlington City Council evaluate the future of Burlington Telecom voted unanimously Monday morning to hold off on reviewing any single, specific outside offer for help until the city's cash-strapped telecom venture's finances are examined by an outside consultant.
Last week, the Burlington City Council asked the BT Blue Ribbon Committee to evaluate a recent offer dubbed "Reboot BT" crafted by nine businesspeople, three of whom were at the helm of BT when it was created. Along with the committee, a newly-hired financial consultant will be asked to weigh in on the proposal, as well as other short-term offers of help.
That financial consultant, Dorman & Fossett, will be in town this week and has yet to begin its work.
Members of the Blue Ribbon Committee said it would behoove the panel to hear from the consultant first about how to set up a timeline and structure to review proposals rather than take on proposals piecemeal.
"If we were interviewing candidates for a job, we wouldn't interview candidates over weeks and months when the information was no longer fresh as we came across the next proposal," said Pat Robins. "And, we can't be talking to proposers as we're trying to figure out what financing option works best. We respond to every request and be whipsawed."
Robins said the panel should stick to its report's key finding, which is that the city needs to figure out how to restructure BT's finances first, then look for an outside partner.
The seven-member panel unanimously agreed.
Committee members said the Reboot BT proposal also included a complete takeover of BT's management by new people, something most agreed could hurt the chances of BT finding a long-term solution, as potential partners could be turned off by the fact that new people are on board.
"Terry Dorman said that there should be no changes in management at least until he's had a chance to come in and look at the things as they are now," said City Councilor Karen Paul (I-Ward 6), a member of the panel.
Panel member Bill Shuttleworth, the former director of the Vermont Telecommunications Authority, said there is interest in working with BT from the industry folks he's talked to informally. But, they are waiting for clarity from the administration and council.
"From what I hear from people in the industry, they are waiting for the city of Burlington to decide what it is they are looking for and are expecting a formal solicitation," said Shuttleworth. "The only information they have right now is what they are picking up on the grapevine and what they are reading in the Free Press. They've all read the Blue Ribbon Committee's report and nothing in there surprises them."
"What is making them nervous is the political environment surrounding this, and that includes the state of Vermont, as it would appear that the state is not supportive of muni fiber projects," Shuttleworth added.
Mayor Bob Kiss told the group that so far several groups have expressed an interest in working with BT: RebootBT, V-Tel, Sovernet, and FairPoint. Only Reboot BT has submitted a formal letter of interest outlining their proposal. The city is also working to meet a March 26 deadline to submit a proposal to Google.
Kiss said he agreed with the committee's decision to review more than one proposal at a time, and to not accept the Reboot BT proposal as offered.
"We want continuity in the business and any decision about the future of the business would be premature," said Kiss. "Once we're ready to move forward, we would be putting out a public request, and create a uniform process rather than just responding to who gets on the phone first."
The committee also largely agreed that when Reboot BT was first offered, the immediate crisis was a $380,000 payment to CitiCapital. Since missing that payment, the city has been in talks with CitiCapital about how to remedy the missed payment, but the financier has yet to claim that Burlington is in default of its lease. There is a $1 million reserve fund that was set up at the start of the lease to help cover any missed payments.
"The world has changed a fair amount since missing the payment," said City Councilor Joan Shannon (D-Ward 5), who sits on the committee.
Monday's vote comes just days after legislators called several city officials to Montpelier to talk about what role, if any, the legislature could take. Lawmakers also expressed their concern that allowing the city's credit rating to worsen could have a ripple effect on state-funded projects at Burlington International Airport as well as potentially the state's credit rating.
Given Moody's recent credit downgrade and another $380,000 lease payment coming due in May, Blue Ribbon panel members said there remains some urgency to continue moving quickly, but also thoughtfully.
Last Monday, Moody's put the city on a 90-day negative credit watch, which means it could further reduce the city's credit rating after 90 days. "Future rating action will depend on the city's ability to produce a viable plan to place the telecommunications system on a more sustainable path and provide additional detail on the prospects for the system to meet its obligations, including repayment of the interfund loan," Moody's noted in explaining its rating downgrade. "Additionally, given the city's reliance on cash flow borrowing Moody's will continue to monitor the city's cash position, its ability to meet day-to-day operating requirements, and how a potential default of their outstanding lease obligation would impact operations of the enterprise."
The recent credit downgrade by Moody's affects $87 million in outstanding debt, making it more expensive to repay existing debts as well as take out new ones.
Chief Administrative Officer Jonathan Leopold told Seven Days that the downgrade will cost the city roughly $3,700 more for every $1 million in new, general obligation bonds. The city may issue $4 to $8 million in the coming year, so the impact could be $15,000 to $30,000.