Marietta selling city-owned Internet company at $24 million loss

<p>The city of Marietta hoped to get in on the Internet boom when it launched its own company eight years ago.</p><p>Now, the city is selling its FiberNet at a loss of about $24 million.</p><p>The Board of Lights and Water and the City Council were expected to vote Thursday to approve the sale to American Fiber Systems of Rochester, N.Y., for $11.2 million _ a figure that's expected to decrease once adjustments are made before closing the deal, which is scheduled for Aug. 31.</p><p>FiberNet has about 180 customers along 210 miles of fiber-optic cable stretching from Kennesaw to Alpharetta and into Atlanta, which is just south of the Chattahoochee River from Marietta.</p><p>The city has poured about $35 million into building and maintaining the system since 1996.</p><p>Mayor Bill Dunaway, who ran for office three years ago on a platform that included selling FiberNet, said Wednesday it was impossible for the city to meet the equipment upgrades to maintain FiberNet.</p><p>"That's why we should not be in this business _ you have to keep reinvesting," Dunaway said. "It's negative cash flow once you consider reinvestment of capital."</p><p>Marietta was not the only city in the country that sought to strengthen financial positions with forays into telecommunications.</p><p>Acworth, for example, chose to enter the cable television business. The city's CableNET accumulated $12 million in bond debt, said City Manager Brian Bulthuis. Acworth couldn't afford to grow the network outside the city enough to make it viable, he said, and CableNET was sold in January 2003 to a private operator based in Savannah. But Acworth did not lose money in the deal.</p><p>Local officials everywhere are looking for innovative ways to generate revenue without raising taxes, but that sometimes can put taxpayers at risk and skew the role of government, critics of such efforts say. Running outside companies, they say, can divert government workers from their primary function and take business away from the private sector.</p><p>American Fiber Systems has more than 76,000 miles of cable in several cities, including Cleveland, Minneapolis, Nashville, Salt Lake City and Kansas City, Mo., according to the company's Web site.</p><p>Dunaway said the purchase of FiberNet would mark the company's debut in the Atlanta area.</p><p>All 28 FiberNet employees will become American Fiber Systems employees, at pay levels similar to what they're now receiving, according to Kevin Moore, the attorney for the Board of Lights and Water.</p><p>___</p><p>HASH(0x2866868)</p>

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