Exclusive: No raises for seven years - That’s just one way FairPoint plans to pay for northern New England's Verizon buyout

Published in the Portland Phoenix

If regulators allow FairPoint Communications to buy Verizon’s telephone lines and systems in Maine, New Hampshire, and Vermont, its 3000-plus employees can look forward to seven years without a raise.

Further, FairPoint customers will benefit from no additional spending on telephone or Internet operations for the next seven years. FairPoint has pledged to buy and install new telephone and Internet equipment in all three states, but as of now, the company has no idea how much it will have to spend just to get the existing Verizon equipment working properly — something that must be done before the first upgrade project can even begin. And the company plans to spend the same amount running its systems in the year 2015 as it will in 2008.

Shareholders will be worse off than customers — apparently even more so than they’re expecting. According to filings with the Public Utilities Commission, FairPoint is predicting shareholder equity will decline by $1.1 billion (a figure 25 percent higher than the $900 million drop the company has publicly projected elsewhere).

The company as a whole will also be in bad shape. One possible scenario FairPoint has presented to Maine regulators would leave FairPoint with “essentially no cash left after payment of expenses, interest, taxes and dividends” — leaving it nothing to pay off the $1.5 billion in debt the company will incur in the $2.7 billion Verizon deal, much less the $625 million it currently owes its creditors. (And if that scenario doesn’t happen and there is cash left over, FairPoint has refused to promise regulators it would use the cash to pay off debt.)

If the proposed Verizon-FairPoint telephone merger is approved, the quality — and even the existence — of land-line telephone service throughout northern New England, will depend on FairPoint’s ability to make good on several key financial assumptions. But analyses in PUC filings call those assumptions “inappropriate” and assert they “do not reflect reality.”

The publicly traded North Carolina-based telecommunications company, which runs small local phone companies in 18 states (including Maine), has gone to great lengths to assure the public, politicians, regulatory officials, and industry analysts that the deal’s finances will work out. Its chief operating officer, Peter Dixon, told Mainers back in June that the money coming into FairPoint from former Verizon customers’ monthly service fees will be more than enough to pay for FairPoint’s increased expenses, including repaying outstanding loans. But the company’s internal financial projections, summarized in PUC records, say money will be so tight that success depends on, among other specious ideas, the price of gasoline remaining constant for the next seven years. (Another of those specious ideas is that the unions, whose contracts expire in late 2008, will accept zero-percent raises for the next seven years.)

That’s all beyond the fact that FairPoint almost certainly knows (and Verizon definitely does) that the sale price itself is far too high — nearly two-thirds higher than the amount at which Verizon values the assets that are being sold.

FairPoint executives’ financial plans for life after the merger include the assertion that the company will pay down $318 million in debt over the next seven years, though they don’t say how, and have not promised — or disclosed to regulators any possible plans — to do so. Even worse, the company is basing its financial predictions on interest rates being lower than they are today. Even if they are, PUC filings say FairPoint will have to refinance as much as $1.5 billion in debt to extend its repayment period, in order to continue to afford debt payments.

The FairPoint/Verizon deal has come under withering fire in all three states, with Maine’s Office of the Public Advocate recommending 24 conditions be imposed if our Public Utilities Commission approves the sale — including dropping the price by $600 million. Vermont’s Department of Public Service has recommended that state’s Public Service Board impose as many as 56 conditions before the sale is approved, such as requiring state approval before FairPoint can transfer any Vermont revenue to company operations outside the state. The New Hampshire Office of Consumer Advocate has not specifically recommended conditions, but has testified before its state’s Public Utilities Commission that there are major problems with the proposed deal.

FairPoint has countered those criticisms, claiming it will be a financially viable company, and pledging to expand high-speed Internet access in all three states (see“Internet Disconnect,” by Jeff Inglis, August 24).

But its own plans, as described in PUC filings, indicate that its finances will, in fact, be tremendously shaky, and that any expansion of service will have to cost the company nothing beyond the initial investment to install equipment. Another big problem, the documents at the PUC say, is that the broadband service FairPoint is promising as a great boon — to regulators, shareholders, and the public — actually “loses more and more money as time goes on.”

Kennebunk library cancels, reinstates art show

Published in the Portland Phoenix

An art show that has been in the works for more than two years was abruptly canceled last week by the Kennebunk Free Library — before the art even was on the walls — and then, almost as abruptly, un-canceled in time to be installed for its opening reception on Tuesday.

The exhibit, “Portraits in a Time of War” by Kennebunk artist Gerald “Bud” Swenson, is a series of stylized faces made from cloth pieces cut out of American flags. According to Swenson, the library agreed to display his work two years ago. Two months ago, he reports, he showed library trustees some of the portraits and “told them it might be controversial” because of his use of flag fabric.

“They approved the show. They sent out a press release, and then the day before the show they called and said it was canceled,” he says, adding that he was told the library had received a single complaint, about his cutting up American flags.

That was on Halloween; he was scheduled to hang the art November 1, and open the show to the public November 2. (The artist’s reception was to be on Election Day.) Swenson did not hang the art as scheduled, but did pass the word about the cancellation among the state’s arts community. That resulted in the library receiving several letters and phone calls in support of Swenson’s art. And on November 2, the library trustees met and decided the show would indeed go on; Swenson hung the work Monday, and the reception was happening as scheduled at press time.

Library director Janet Cate says the show’s month-long run will now be augmented by two yet-to-be-scheduled public forums, where anyone can come and discuss the works, the means by which they were created, or anything else relating to the show.

“I’m very pleased,” says Swenson. “Censorship is stopped cold.”

“Portraits in a Time of War” | works by Gerald “Bud” Swenson | through Nov 29 | at the Kennebunk Free Library, 112 Main St, Kennebunk | 207.985.2173

On the Web
Gerald “Bud” Swenson: www.geraldbudswenson.com

It’s one in the morning — how sweet!

Published in the Portland Phoenix

Officials in New Zealand’s capital, Wellington, are considering a new way to reduce violence and other problems at bar-closing time: handing out chocolate. (Seriously! They say it lessens the likelihood of fights. Maybe it’s because eating chocolate triggers the production of endorphins, the brain chemical some call “natural opiates” that make people feel happy and relaxed. Or maybe it’s just hard to punch someone while holding a piece of candy in your hand.)

The NZ idea is based on success with a similar initiative in the English seacoast tourist town of Bournemouth, where businesses and city officials have devised ways to make nightlife both safer and more fun. It comes in the wake of an announcement by a group of local bar owners that “the behavior of a small minority of drunken youths threatened the future” of the downtown “party zone,” according to the Wellington Dominion-Post newspaper.

As Portland continues to grapple with managing the Old Port’s nightlife (see “Growing Pains,” January 27, 2006, and “The Freakin’ Weekend,” February 17, 2006, both by Sara Donnelly), we might consider making like the Kiwis and stealing a couple ideas from Bournemouth (pop. 160,000).

We’ve heard of a couple of their concepts before, specifically getting better support for an all-ages venue and having a night bus to get people home safely — and quickly (see “Ideas From Away,” by Jeff Inglis, January 5). And we actually have in place another one — HomeRunners, which drives you and your car home if you’ve been drinking. (Bournemouth’s service uses compact scooters that fit in the trunk, rather than a second car, like HomeRunners does.)

But there are some new ideas that could work, too, and are worth at least talking about here in Portland:

Number one, of course, would be the chocolate giveaway (though with Fuller’s Gourmet Chocolates gone from Wharf Street, the epicenter will by default have to be Old Port Candy on Fore Street instead). Also:

Having social-service agencies send counselors to bars, to offer support to people in need.

Getting the City Council to grant some (or any) late-night licenses (possibly without alcohol, but letting people hang out and maybe eat something), to both spread the mass release of revelers across several hours, and to let people wind down the night in a more relaxed way.

Asking bars to voluntarily agree to a minimum drink price (so no participating bar will offer specials cheaper than that amount), to reduce binge drinking of cheap booze.

But let’s just start with the chocolate. In England at least, the cops like it, the bars like it, the local government likes it, and we can only assume the staggering drunks getting the handouts like it. We know we would.

Gambling on voters: Downeast Mainers pin their hopes on the turn of the ballots

Published in the Portland Phoenix

Question 1
Do you want to expand gambling in Maine by letting the Passamaquoddy Tribe build and operate a slot-machine parlor, high-stakes beano games, and a harness-racing track in Washington County?
A gambling operation in Calais, right on the Canadian border waaaay Down East, would be farther from Southern Maine than Foxwoods or Mohegan Sun. The Passamaquoddy Tribe wants to build a harness-racing track (which is not a big money-maker) and then use that track as a site for a massive-revenue-generating gambling hall with up to 1500 slot machines.

Supporters — such as the officials and community members in the TV ads pleading with Mainers to salve their poverty-induced misery with cold, hard cash — say it will be a source of economic development in a depressed area of Maine, and that it will provide more money for the state to spend. Opponents say it will prey on residents of an already poor part of the state, and that gambling isn’t a good method of economic development.

But the real dispute is not about this racino. It’s about whether this racino “opens the door” to more gambling in Maine. It may seem like a funny question, given how much gambling there is already.

We have two multi-state lottery games (Megabucks and Powerball), scratch tickets too numerous to count, bingo halls packing in the players, Penobscot Nation-run high-stakes beano games with prizes as high as $25,000, and nonprofit agencies regularly running benefit events consisting almost entirely of casino games. There’s tons of betting on horses — at the two tracks (to which this would add a third) and the four off-track betting parlors (including one owned by the company the state has hired to monitor slots revenue — see “Jackpot,” by Lance Tapley, June 8) — and the annual agricultural fairs. And don’t forget Hollywood Slots in Bangor, which has nearly 500 slots already, and next year will open a parlor with up to 1500 machines.

Question 2
Do you want to spend $55 million to support business development in Maine, including research and product-development grants, and business-expansion loans? (The grants would attract at least $50 million in federal or private matching funds.)
Nearly all ($50 million) of the money in this bond would go to the Maine Technology Institute, which awards grants in key industries where government officials think Maine has a competitive advantage, like marine-related industry and forestry. Grant recipients must find matching funds from other sources, like the feds or their own pockets. The remaining $5 million would go to smaller loan programs to help businesses expand.

Question 3
Do you want to spend $40 million to renovate and expand buildings at Maine Maritime Academy, at community colleges, and at UMaine campuses, and an additional $3.5 million to support renovations and improvements to schools, museums, historic buildings, and libraries?
Renovations and building expansions at the state’s institutions of higher learning are never-ending, and funding them is downright expensive. They are so costly, in fact, that public universities leave them out of their regular annual budgets, preferring instead to borrow money to pay for the work. This bond also adds $1.5 million into the state’s revolving fund for school renovations and expansions, which already has $6 million available. The extra money means more schools can be fixed up or expanded. And the bond includes $2 million to match funds raised for projects to improve museums, libraries, and other cultural buildings.

Question 4
Do you want to give $20 million to the Land for Maine’s Future land-conservation program, plus an additional $7.5 million to improve state parks, plus $1.5 million to improve irrigation systems, and a further $6.5 million to support river-based economic development programs?
The Land for Maine’s Future program has conserved nearly 445,000 acres of key Maine land (scenic spots, wilderness, shorefront, and easements on working farms and forests), at a total cost of $97 million, or an average of $220 an acre. The new money would continue that effort. And in recent years, state bonds have been issued to promote water-quality projects on farms, to fix up state parks, and for water-related economic-development projects — in this case to revive riverfronts in environmentally sensitive ways.

Question 5
Do you favor extending term limits for legislators from 4 to 6 terms?
Maine lawmakers are prohibited from serving more than four consecutive two-year terms in one house of the Legislature before they have to take a break for at least two years (though the “break” can include serving in the other house). Term limits were imposed in 1996 as part of an effort to get “new blood” into the Legislature, and to expunge inward-looking cronyism from the State House. The previous limit, of four terms, was an attempt to strike a balance between longevity-given experience and fresh ideas; this is a proposed revision to that balance.

Radios, beds, and commissioners
Cumberland County questions explained
Question 1
Should the county spend $1.7 million to upgrade radio and data-transmission systems for police, fire, and rescue personnel to use?
It may seem amazing in the 21st century — and seven years after 9/11 highlighted the problems (and deaths) that can result — that firefighters and police officers from different agencies can’t talk to each other on the radio. Sure enough, that’s still true here. This bond would buy radio and computer systems to prevent that, and would also provide systems that local police departments could use — not just the county sheriffs.

Question 2
Should the county spend $1.1 million to build an expanded medical clinic at the Cumberland County Jail?
Each day, roughly 200 inmates at the Cumberland County Jail need some sort of medical care, whether for an illness or injury, or a chronic condition, or even to deliver a baby. The jail’s 900-square-foot infirmary is too small to handle that amount of traffic — especially when inmates are accompanied by guards, or if someone has to spend the night receiving medical care. If there’s no room, inmates who are sick have to return to their cells, or get treatment at a hospital, which is much more expensive than if something can be handled at the jail. The money would build a 3000-square-foot expansion to the infirmary, allowing nearly every inmate with medical needs to be treated without leaving the jail.

Question 3
Should there be seven directly-elected county commissioners, instead of three?
Cumberland County residents are served by a three-person commission with the power to increase our property taxes. Lots of its spending is for services Portlanders don’t use, like sheriff’s deputies on patrol, who rarely work in towns with their own police departments. (Other county services, like the jail and maintaining property records, Portlanders do use.) With three districts, the same person has to represent the needs of Portland, Falmouth, Cumberland, North Yarmouth, and Long Island. (The other districts stretch from Cape Elizabeth to Standish, and from Brunswick to Bridgton.) This would further subdivide the county, letting each commissioner represent a smaller group of people.

Legislature moves to protect Maine journalists

Published in the Portland Phoenix

In September, Maine Superior Court Justice Arthur Brennan ordered 15 media organizations to surrender videos, photographs, and notes of interviews — including material never published or broadcast — from their coverage of a November 2006 fire in Biddeford.

The organizations, which included community-weekly newspapers, daily papers, and the state’s largest TV stations, were told to turn over the information — whatever still remained — to a private company because the company convinced the judge it feared a future lawsuit in connection with the fire, and needed the information to prepare a defense, in case such a suit was filed.

This case, and others of national prominence in which attorneys — often prosecutors — seek to use information collected by journalists as evidence in court (and demand access to material that had never before been made public) has led to a renewed discussion among policymakers of whether there should be so-called “shield laws” protecting journalists from being forced to disclose confidential sources and information.

“The whole point of these laws is to get accurate, useful information flowing to the public,” says Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press in Washington DC. “They ensure that the public has a better chance of getting truthful, independently reported information, ... maintain the independence of the media, and also make it possible for sources to come forth and inform the public.”

A shield law “would have helped a lot” in the Biddeford case, says Sigmund Schutz, a lawyer with Preti Flaherty in Portland, who coordinated media outlets’ responses. In the end, all but one of the media outlets had nothing to turn over, and the one — the Portland Press Herald — requested that the demand for information be narrowed. After the narrowing, the Press Herald had nothing to turn over, either, Schutz says. But he says no media outlets objected to the ruling on First-Amendment grounds. “Standing on principle without a shield law is expensive,” Schutz says.

A federal shield-law proposal moved to the Senate floor earlier this month, and Maine lawmakers are being asked to take up a similar proposal.

If legislative leaders agree that Portland Democratic representative Jon Hinck’s bill should move forward, it would be debated by lawmakers early next year. If not, the bill would have to wait until January 2009 before even being considered.

In recent years, federal prosecutors, in particular, have gotten more aggressive at using the courts to force journalists to reveal the identities of their confidential sources, often in order to pursue charges against the source for illegally disclosing the information.

The most publicized example was the New York Times’s Judith Miller, who spent 85 days in prison in 2005 for refusing to identify the person who told her that Valerie Plame, the wife of a US ambassador, was a covert CIA agent. That investigation resulted in the conviction of White House aide Scooter Libby for perjury.

Now, Dalglish says, as a result of “the heightened attention to the issue in the federal system,” many of the 17 states without a shield law are considering them, including Maine.

Journalism organizations in the state are looking closely at Hinck’s proposal; the Maine Pro Chapter of the Society of Professional Journalists (of which I am vice-president) was slated to discuss it Wednesday, after the Phoenix’s deadline.

Leaders of the Maine Association of Broadcasters, Maine Daily Newspaper Publishers Association, and Maine Press Association all say they will review the bill in the coming weeks, and expect their organizations to back the bill in general principle, while reserving the possibility that they might want some details changed.

Hinck is open to feedback, but thinks the bill is important. “We need a free press, desperately,” he says. “I have sometimes been an intermediary between whistleblowers” and reporters, and he knows it can be difficult to get good information if a source is worried about being discovered.

Suzanne Goucher, president and CEO of the Maine Association of Broadcasters, says one argument against a shield law proposal is that it “becomes a Christmas tree for everything that [legislators] like and don’t like about the media.” But she notes that such a law could be useful, too, citing the September court ruling. “The very fact that the court would grant a motion like this, when there’s no suit pending,” she says. “You’ve got to be kidding me.”