Mayor’s Office

Mayor Miro Weinberger Announces Major Breakthrough in Burlington Telecom Litigation

FOR IMMEDIATE RELEASE

February 3, 2014
Contact:  Mike Kanarick
                802.735.7962

Mayor Miro Weinberger Announces Major Breakthrough in BT Litigation 
$33+ Million Lawsuit to be Settled for $10.5 Million, Plus Share of Future BT Value;
Settlement Expected to be Funded Largely from BT Revenues and Non-City Sources;
City Must Achieve Important Milestones to Complete Agreement

Burlington, VT – Mayor Miro Weinberger today announced that the City of Burlington and Citibank have reached a Mediated Settlement Agreement in the Burlington Telecom lawsuit, which will settle the $33+ million lawsuit for $10.5 million, plus a share of BT’s future value.  The settlement is expected to be funded largely from BT revenues and non-City sources and will avoid removal of BT’s fiber optic system.  Earlier today, federal district court judge The Hon. William K. Sessions, III, granted the parties’ joint request to stay the litigation to allow for implementation of the settlement agreement, following City Council approval and Vermont Public Service Board action.

“I am pleased to announce to the people of Burlington that with this agreement, there is now for the first time a clear path to resolution of our BT challenges,” said Mayor Weinberger.  “The agreement – once completed in the months ahead – will accomplish all the goals the City has pursued over the past two years.”

The Administration’s long-stated BT goals have been to:

  • Protect taxpayers from further BT-related losses;
  • Maintain BT service for its more than 4,000 customers;
  • Preserve BT as a telecommunications competitor to maintain affordable Internet, cable, and telephone services for Burlington residents and businesses;
  • Restore Burlington’s credit rating; and
  • Secure, if possible, the opportunity for recovery of a portion of the $16.9 million spent by the City prior to 2010.

Additionally, in the last year, the Administration added the goal of securing the right partner for BT that is committed to working with the City on its BTV Ignite economic and community development initiative.

This agreement will give the City the opportunity to achieve all these goals through a settlement that includes the following major elements:

  • The $33+ million Citibank lawsuit will be dismissed fully in exchange for $10.5 million of payments to Citibank from the following funding sources:

           o    Approximately $6 million in bridge financing from a special situation lender – the terms of this financing, which will be secured entirely by BT revenues and assets, currently are under negotiation (paragraph 4.1(i) of Settlement Agreement); 
           o   $1.469 million from co-defendant McNeil, Leddy & Sheahan, P.C. law firm and/or its insurance carrier (paragraph 4.2 of Settlement Agreement);
           o   $981,000 from BT revenues that have been paid to Citibank or into a court escrow since early 2012 (paragraphs 4.1(iv), 4.3, and 4.5 of Settlement Agreement);
           o   $250,000 of additional payments from BT revenues that will be made to Citibank between now and the closing of this settlement (paragraph 4.1(vi) of Settlement Agreement);
           o   $500,000 from the City of Burlington’s insurance carrier (paragraph 4.1(v) of Settlement Agreement) – this payment is in addition to the costs of defending the City in the litigation over the past two plus years; and
           o   An anticipated approximately $1.3 million payment from the City of Burlington (paragraph 4.6 of Settlement Agreement). 

                    §  It is anticipated that this payment would be financed in large part by BT revenues. 

                    §  This amount could increase and other City funding sources may be required depending on the amount of bridge financing finally negotiated. 

                    §  The Settlement Agreement contemplates this contribution being prioritized for repayment to the City at the time a permanent financial partner for BT is found.

  • The settlement contemplates that the terms of the bridge financing will give the City an appropriate period of time to find the right partner for BT.  At the time of an eventual transaction, it is anticipated that the City will receive a percentage of any net proceeds, additional funds available after repayment of the lender’s principal and costs and Burlington’s new $1.3 million participation.  These future net proceeds of the City will be split evenly with Citibank and will provide the opportunity for partial repayment of the $16.9 million previously expended.

The City of Burlington and Citibank also agreed to a number of important milestones that the City must meet to complete the Settlement Agreement (paragraph 5 of the Settlement Agreement).  Those milestones include:

·         City Council approval of the settlement no later than February 28, 2014;
·         Continuing monthly payments from BT revenues to Citibank until agreement is completed;
·         Securing a special situation lender to finance up to $6 million of the settlement – this financing will be secured only with BT revenues and assets; and
·         Public Service Board approval, for which the City will file no later than March 15, 2014.

“The City of Burlington owes a great debt to the citizen members of the former Blue Ribbon Committee who recommended in 2010 the wise course of action that led to this moment,” added Mayor Weinberger.  “I also want to thank Terry Dorman of Dorman & Fawcett – this agreement simply would not have been possible without his firm’s skillful work to stabilize BT’s finances and operations and to secure a bridge lender.  It would not be possible to make today’s announcement without the willingness of Citibank to pursue in the coming months the path forward laid out in the agreement.”

Mayor Weinberger was joined at today’s announcement by both citizen and City Council members of the Burlington Telecom Advisory Board (BTAB), created from what was formerly known as the BT Blue Ribbon Committee (BRC).

City Council President and BTAB member Joan Shannon stated:  “Today, the big, dark cloud that has hung over the City of Burlington for four years is breaking up, and the sun is beginning to shine through again.  I cannot thank our negotiating team enough for their hard work to get us to this point.  I also want to thank the Citibank participants for their commitment to the negotiating process and for entering into this agreement with the Burlington team.”

City Councilor Karen Paul, also a BTAB member, stated:  “This settlement represents an outstanding outcome – the best possible outcome – for taxpayers and for Burlingtonians who believe that BT is an important economic and community development asset for the City.  Given the huge risks the City faced in the lawsuit, I could not be more pleased with the terms of this settlement.  I am grateful to Mayor Weinberger for his ability to direct a complicated and very trying negotiation and garner this result for our City.”

City Councilor Vince Brennan, also a BTAB member, stated:  “This news will create an opportunity for BT to move forward and seek the true potential it has to offer for the residents of Burlington.  Even as we talk about a dark cloud being lifted, the residents and subscribers’ of BT never gave up.”

David Provost, former member of the BRC, current member of the BTAB, and Senior Vice President of Finance and Administration at Champlain College, added:  “This settlement represents the fulfillment of the goals for BT that the Blue Ribbon Committee laid out in 2010.  Stabilization of the operations of BT is in place, and today the future payment obligations have been restructured to position BT to meet the future needs of residences and companies throughout the City of Burlington.” 

The settlement was reached following two days of mediated negotiations that took place in Burlington at the law offices of Downs Rachlin Martin (DRM) on January 21 and 22, 2014 and was executed on January 30.  Mayor Weinberger led a City negotiating team that included:  BTAB member Pat Robins, Executive Chairman at SymQuest Group. Inc.; Terry Dorman, Principal at Dorman & Fawcett; City Attorney Eileen Blackwood; attorney Marc Heath of DRM; and attorney Thomas Melloni of Burak, Anderson & Melloni.  Attorney Richard Cassidy of South Burlington served as the federal court-appointed mediator during both the January 2013 and 2014 negotiations.

After the agreement was conceptually reached but before it was finalized, the Mayor briefed the Board of Finance and other City Councilors on the agreement in a Board of Finance executive session on January 27.  The Mayor expects to request City Council approval of the agreement in open session no later than February 28 and, if approved by the Council, the City will file its PSB petition no later than March 15.

*Please see attached Mediated Settlement Agreement.

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Press Release Date: 
02/03/2014
City Department: 
Mayor's Office