Cable giant Comcast has offered $17 million for Alameda's beleaguered telecommunications business, and if the City Council approves the deal, the company could take over next Friday.
Alameda Power & Telecom's general manager, Girish Balachandran, announced the deal at a public workshop Wednesday to discuss the future of the telecommunications system. He stressed that the deal won't be final until it is approved by the council, which is slated to discuss it Tuesday.
The Public Utilities Board is also set to discuss the proposed deal on Monday to offer its own recommendation to the council.
Under the deal, the bondholders to whom AP&T was due to pay $33 million in June will receive a guaranteed $15 million payment. The utility may need to pay millions more in additional costs out-of-pocket.
Also outstanding are the costs of fighting two lawsuits over the cable system's bonds, including the city's lawsuit against Nuveen Funds, which holds more than $20 million of the bond notes, and Nuveen's counterclaim; and a suit brought by the contractor first hired to build and operate the system. The contractor, Vectren Communication Systems, holds an additional $6.3 million in bonds.
The utility is also out the nearly $44 million in interfund transfers its electric business advanced to the telecom business during the course of seven years.
In addition, AP&T will be forced to lay off a dozen employees and cut six positions
Several critics of the city's foray into the cable business hailed the deal, saying it will shield the city from additional financial losses and allow the utility to focus on its successful electric service.
"There's no way to turn this into a positive decision, but it was a decision that needed to be made, and I commend you for it," said City Treasurer Kevin Kennedy, a longtime critic of the city's telecom plans.
City Auditor Kevin Kearney called the deal a "miracle." In February, the Public Utilities Board directed AP&T staff to look at three options for the future of its telecommunications line, including refinancing its existing bonds and providing the same services, refinancing and adding a voice service, or selling the system.
Mark Northcross, a consultant hired by the utility to help examine those options, said the cable business doesn't make enough funds to refinance the bonds without putting up money from its electric business or the city's General Fund as a guarantee. And he said adding a voice component could cost the city, which is facing its own budget crisis, an additional $2 million.
"Selling the system now eliminates further financial risk for AP&T and the city," Northcross said.
The utility shopped its telecommunications business to more than five dozen companies, and it received three bids, with Comcast's coming in highest. The utility also solicited and received approval for the sale from 95 percent of its bondholders, including Nuveen.
Balachandran and AP&T spokesman Matt McCabe said they're aiming for a seamless transition for the utility's roughly 9,500 cable and 6,600 Internet customers. Cable customers could see some changes in their channel lineup, and Internet customers would have 12 months to change their e-mail addresses. More information on those changes is due next week.
The city embarked on its cable business a decade ago, after voters gave approval. The city originally planned a $10 million investment in the system and up to $20.5 million in financing. Ultimately, the costs grew to include $44 million transferred from AP&T's electric operation and a total of $39.3 million in bonds.
Balachandran said the city decided to enter the telecom business because Alameda was underserved by its then-provider. But intense competition, expensive changes in technology and escalating programming costs posed insurmountable challenges to the fledgling system.
"The vision of what we had 10 years ago is not what we have today," he said.
Balachandran said Thursday's presentation and a wealth of additional information would be on the utility's website: www.alamedapt.com.