PROVO — Provo's mayor and City Council hope to appease Qwest Communications tonight by altering a loan that will help make the first bond payment for iProvo.

Over Qwest's objections, the City Council voted two weeks ago to loan $980,000 from Provo's energy reserve fund to iProvo, the city's $39.5 million fiber-optic telecommunications project.

Payments and interest on the loan between city departments were deferred until 2009, but the council will consider amending the terms of the loan so that it begins bearing interest this year.

Qwest officials complained two weeks ago that the loan is an illegal cross-subsidization of a government project that competes with the private sector. A spokesman said the telecommunications company, which competes with iProvo for customers, is waiting to see the details of Provo's new plan.

"They have told us that their proposal will be revised, but we haven't seen it yet," Qwest's Vince Hancock said. "We still believe this violates requirements of state and federal law that Provo cannot favor iProvo over other providers."

An attorney representing Qwest before the City Council two weeks ago specifically questioned the legality of using a loan to pay off the iProvo revenue bonds.

"A revenue bond is secured and paid for by revenues paid for the service the city is providing or from sales tax revenues," Gregory Monson said. "Not from a loan."

Provo city attorney Robert West defended the loan's legality. Mayor Lewis Billings said Monday the city has obtained an outside legal opinion that will be presented tonight to the council.

Billings said the proposed interest rate would be revealed at tonight's meeting, which won't start until 9 p.m.

City Council chairman George Stewart said iProvo revenues outstripped operating expenses in February, a first for the project. The income isn't enough to cover the bond payments, the first of which is about $3.2 million and due in August.

City officials have said the iProvo staff is expected to request another $2 million in loans over the next year to help with bond payments.

More than 60 new subscribers are signing up for iProvo services each week.

"We're within the construction schedule, within budget and have more than 5,000 subscribers and looking to hit 6,000," Billings said. "We feel like there's significant good momentum, and we hope no one would overlook that."

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