The city of Acworth, Ga., leased its unprofitable municipal broadband system to a private company in 2002, but the community didn’t eliminate that budgetary headache altogether.
The company that’s now operating the 5,700-home system has not been able to make the system profitable, either. Thus, the city council may raise property taxes to help pay debts Acworth incurred from constructing the fiber-to-the-home system.
EXTRA $20 PER YEAR
An increase in the tax rate could add about $20 per year per $100,000 in assessed value per home, according to Allen Davis, president of UTI Holding LLC. That’s the vendor that made a lease-purchase agreement for the system from the city in 2002.
The bundled-services provider has 2,800 installed customers and is competing successfully with other area providers, including Comcast Corp., EchoStar Communications Corp., DirecTV Inc. and BellSouth Corp., Davis said.
The real issue, he added, is an irreversible deficit acquired along with the system.
“The debt and debt service exceeds the profit,” he said.
Davis said the city is evaluating a sale of the system, or the possibility of its expansion past more homes, which would give the operation more monthly revenue.
Acworth officials became interested in municipal broadband in the late 1990s. At the time, MediaOne Group Inc. served the area and had disclosed no plans to upgrade its plant to provide broadband service to the region.
That irked local residents, many of whom worked in the high-technology field in and around Atlanta.
To get high-speed Internet service to residents, city officials approved construction of the fiber-optic system.
Unlike many municipalities, though, this system did not piggyback on existing infrastructure from the city’s power company.
The city financed the 100 miles of plant with $6.8 million in tax-exempt municipal bonds.
Service was launched in 2001, but by the next year officials decided to lease the operation to UTI — not because business was bad, city leaders said at the time, but because the city received so many requests for service outside its borders.
BEYOND CITY LIMITS
A commercial firm would be able to expand beyond city limits and take advantage of consumer demand.
But venture capital dried up and the area’s new operator, Comcast, improved its plant and introduced new products that CableNet couldn’t match.
Davis said bankers are showing renewed interest, especially since CableNet has an opportunity, within the original service area, to offer services to about 800 small- and medium-sized business owners.
City officials are scheduled to vote on a proposed tax increase later this month.