The City Council voted 5-1 on Tuesday night to tweak the proposed 2007-08 budget to give iProvo up to $1.2 million in surplus sales-tax revenue.
Mayor Lewis Billings' budget would have given iProvo an interdepartment loan for a third consecutive year to help fund the fiber-optic network.
The change will not take effect until the budget is approved in a June 19 council meeting.
The iProvo project supplies network space for private Internet, television and telephone providers.
Tuesday's move will allow the network to make its annual $3.2 million payment toward a bond debt without slumping further into the red. The iProvo network received a $39.5 million bond at start-up and has since incurred two loans from Provo's energy fund, totaling an additional $3.08 million.
Council Chairman George Stewart said it was important to tap the sales-tax surplus to meet this year's shortfall to avoid adding to iProvo's future debt.
"It would be fiscally irresponsible to burden iProvo with more debt," Stewart said. "If past economic cycles are repeated, the city might not have the favorable economic conditions we have today, which could result in cutting city services to fund iProvo debt."
Projections from 2003 predicted iProvo would break even when it reached 10,000 customers, meaning it would generate enough revenue to pay its yearly bond-debt payment on its own. But the network is approaching 9,830 customers and still is struggling to make its payments, which will increase by $600,000 in three years when it begins to pay back loans from the city's energy fund. Stewart said a third loan would tack on another $230,000 to that rate.
The latest estimates show iProvo would need to reach about 18,000 customers before it breaks even.
Billings had sought to help iProvo make its payment with a third city-loan rather than subsidize the project with sales-tax revenue. He said it was dangerous for the council to pick from the city's general fund because it is unpredictable from year to year.
Billings also chided Stewart, a former mayor, for making the iProvo funding issue too political. He said the council chairman was misconstruing interdepartmental transfers by equating them with bank loans. Billings added that iProvo should pay for itself because city subsidies would undermine the project and welcome lawsuits from private entities.
"I've been told there's a very strong likelihood that we'll see litigation against the city," Billings said. "I would like to set the politics aside and do what's best for the city."
Stewart said legal counsel had said sales-tax revenue could be used to pay back the bond and added the debt simply must be repaid.
"The question is the most fiscally responsible way to fund that debt," he said.
In a public hearing before Tuesday's vote, Provo resident David Griffith said he had encountered technical issues using iProvo and warned customers would turn away from the service if they weren't fixed.
"In the marketplace, it doesn't matter what promises are made. It doesn't matter what the potential is," Griffith said. "If a customer doesn't get what he thinks he paid for, he's going to go somewhere else. That's what we're seeing with iProvo."
