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Groton -With millions in annual losses leading to a downgraded bond rating and a massive capital investment needed, the impending sale of the city's cable and Internet business at a bargain price is an effort to "stop the bleeding," City Mayor Marian Galbraith said Monday night.
Galbraith addressed a crowd of nearly 100 people at the city municipal building Monday to explain why the sale of Thames Valley Communications for $150,000 to a private investment management firm is in the best interests of the city.
"I'm not trying to sell you that $150,000 is good money," Galbraith said. "It's not like we rejected a more lucrative offer. There is no better offer. I wish there was."
Launched in 2004 as a subsidiary of Groton Public Utilities, TVC has never made money. The company has been losing more than $2.5 million a year - a total of $10.66 million in loses from operating expenses between 2009 and 2012.
The annual expenses disappear with the sale, while Groton Utilities must still contend with the $28 million in debt used to start and expand the company into homes in Groton, Ledyard, Stonington, Voluntown and North Stonington.
The $150,000 offer for the company from CTP Investors LLC was the only offer for the company and the only option outside of liquidation, Galbraith said. Liquidation would have meant the end of the service and its employees, she said.
The sale, she said, will help to retain TVC's 23 employees and offer the best chance of success for the company to succeed. The new owners plan to continue service and invest in the company to keep it competitive and offer more services, she said.
City resident Jay Dempsey said he supported the sale of the company but questioned why residents were kept in the dark for so long.
"I don't think anybody had any idea we were losing $3 million a year," Dempsey said. "It is unfortunate that we are left with $28 million in debt for 14 years, but we will not be funding operating losses of another $2.5 million every year. I wish the new company owners well, and the remaining employees."
Groton Utilities Director Paul Yatcko said in 2009 the effort to double the TVC customer base ran headlong into a bad economy and a price war between competing cable companies Comcast and AT&T.
Galbraith said the attempt to sell the company started in 2011 when it became apparent too much was being lost and the cost of upgrading technology was out of reach. Groton had already decided in 2009 to stop borrowing money to fund the losses, which were then on absorbed by Groton Utilities.
The yearly cost of the debt for the next 14 years is approximately $2.5 million, according to Galbraith.
The new company will operate at the municipal building and start paying $34,000 in yearly rent starting in three years. The city has offered the first year rent free and the second year at half the cost.
City Finance Director Michael Hillsberg said the operating losses first became apparent to bond rating agencies because of new reporting requirements in 2008. Earlier this year, Moody's dropped the city bond rating from Aa2 to Aa3 with a "negative outlook," reflecting "the city's ongoing exposure to the risk of the Thames Valley Communication Inc."
Galbraith, in response to questions from the public, said there was no cover up of the losses.
"Did we shout it from the mountaintops, 'no,'" she said. "That would have undermined consumer confidence."
The City Council will vote on the sale Dec. 17.