BVU investigations

The BVU logo seen in the board room of Bristol agency.

BRISTOL, Va. — A 2009 agreement entitles the city to funds from the proposed sale of BVU’s OptiNet division, but Mayor Archie Hubbard said Monday it isn’t that simple.

Last Friday, BVU Authority officials announced a preliminary agreement to sell the fiber-optic telecommunications division to Sunset Digital Communications of Duffield, Virginia, for $50 million. The proposed sale must receive a series of approvals, starting with City Council.

During that announcement, BVU CEO Don Bowman said the sale price would enable BVU to pay off all its $48 million long-term indebtedness across all four divisions. However, a November 2009 agreement between the city and the former Bristol Virginia Utilities reads otherwise.

Section 5c. reads “In the event that the OptiNet division is sold to a third party, the net proceeds after repayment of OptiNet debt and the equity investment shall be split evenly between the city and the authority.”

“As I told council members, let’s argue about that later. First, we’ve got to sell OptiNet,” Hubbard said. “This agreement will be in place and, if there are excess proceeds, then we will demand our half. I don’t know if there will be any money left or not and that won’t be part of whether we [council] approve the sale or not.”

The 2015 BVU audit reflects about $24.4 million in long-term OptiNet debt, the electric system has $15.9 million in long-term debt and the water and sewer systems had more than $5 million combined.

But Hubbard said the issue is more complex.

“Basically, when they [BVU] started OptiNet in the late 1990s, they borrowed some money from the electric system so that really needs to be repaid, because it got capitalized somewhere along the way. From a philosophical standpoint, I think it’s owed back to the electric system. Then, if there is anything left, we divide it. Right now, we agree we want it sold.”

In the 1990s, BVU constructed a limited fiber-optic network and a data center to link city government. In the early 2000s, they successfully pushed to change state law, launching the OptiNet commercial telecommunications venture in 2003.

City Council is expected to vote again on that 2009 agreement at tonight’s council meeting because the previous vote occurred prior to BVU becoming an authority in July 2010. The authority board also recently reapproved the agreement.

“BVU [authority] never did ratify the contract. Since it was done prior to the [authority] legislation that was passed, it says all debts, contracts of BVU automatically transfer to the new authority,” Hubbard said. “That was one of the contracts that they signed with Bristol, Virginia city. It never was done, but nobody thought it would be an issue. Now that we know it will be an issue we want to get it finalized. They’ve [BVU] been living by the terms of it so it’s not like they didn’t know about it.”

Council won’t be voting on the proposed OptiNet sale at tonight’s meeting.

“We want all the council members to have a chance to look at all the terms of the sale,” Hubbard said. “There wasn’t enough time for everybody to get a copy of it and spend any time with it.”

Hubbard said he was first informed of the unsolicited offer from Sunset last fall, has been updated on its progress and sees no problem with the deal.

The meeting is scheduled to begin at 6 p.m. at City Hall, 300 Lee St.

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