PROVO — The million-dollar, no-interest loan Provo gave its own iProvo project will get a makeover meant to stave off a possible legal challenge from Qwest Communications.

The City Council voted Wednesday to switch to an interest-bearing loan, betting that paying $400,000 in interest over the next decade will placate Qwest.

The first loan payment still is deferred until 2009. The City Council intends to pay back the loan and to make the interest payments with revenue from residents who subscribe to iProvo services such as high-speed Internet access, cable TV and Internet telephone service. The $980,000 loan came from the city's energy reserve fund.

The decision to alter the terms of the loan actually came near the end of a council meeting about 1 a.m. Wednesday, and Qwest wasn't ready Wednesday night to assess Provo's new strategy.

"We're still evaluating the situation and the actions of the City Council," Qwest spokesman Vince Hancock said.

Provo Mayor Lewis Billings repeatedly told the council that the city attorney and an outside law firm, Chapman and Cutler, believed the loan was legal. But he urged council members to vote to add the interest payments as a hedge against a legal fight.

"If you were to say 'no, thank you,' we believe the action you took was legal," Billings said. "But we believe this would put you in an even stronger legal position if anyone chose to challenge it."

The mayor's office also issued a press release that included this statement by Billings:

"Structuring the loan with an interest rate and terms that would be available on the open market, given Provo's strong credit, is the fairest and most equitable approach, regardless of the strict reading of state law. We feel it is prudent to proceed in a way that keeps the interests of the taxpayers and ratepayers whole and the playing field level with respect to incumbent providers."

That prudence will cost exactly $426,538, according to figures provided by the city, the difference between the original no-interest loan and the revised loan, which has an interest rate of 5.38 percent.

The City Council voted two weeks ago to make the no-interest loan, but councilman Steve Turley asked city staff to consider making it an interest-bearing loan.

"I'm grateful for a compromise," Turley said after Wednesday's unanimous vote. "I'm happy to be acting on advice of our legal counsel and joining with everyone in wishing iProvo the best."

Two years ago, Provo sold $39.5 million in bonds to construct the fiber-optic telecommunications network. Its first $3.2 million payment is due in August and, while revenues now match operating expenses, the loan is necessary to help make that payment because there isn't enough money to pay off the debt.