Billings, Stewart at odds over paying iProvo's debts

PROVO — Provo Mayor Lewis Billings wields wide-ranging power in Provo's strong-mayor form of government, but City Council Chairman George Stewart and the other six council members control the city's purse strings.

The built-in conflict is bristling this budget season as Stewart challenges Billings in a showdown over paying iProvo's debts.

The city's fiber-optic telecommunications network has 9,723 subscribers to phone, Internet and cable TV services offered over the network by private companies Veracity and MStar.

The city makes more than enough revenue from its leases with those companies to cover the city's operations. But it doesn't generate enough revenue to make payments on the debt the city incurred when it issued $40 million in bonds to construct the network.

"I think this is the most critical financial issue facing Provo this year and in coming years," Stewart said.

Billings is asking for a $1 million line of credit in next year's budget to help iProvo cover its bond payments next year.

The City Council previously approved two earlier requests for lines of credit totaling $3.08 million from the energy department to iProvo.

Stewart is refusing to support the new budget request. Instead, he wants the city to start to pay as it goes, using the general fund.

Billings praised Stewart for the effort he put into running alternative budgetary projections. The men remained cordial Tuesday during a 100-minute public discussion, both ceding some ground but ramping up for a specific iProvo budget presentation next week.

The city owes $3.2 million a year in iProvo bond payments. Paying back the two previous lines of credit will add an additional $624,000 a year in debt payments to seven city budgets beginning in 2009-10.

"My argument is, let's not add to the debt," said Stewart, who said he is committed to iProvo's success.

Originally, the city projected it would break even with 10,000 subcribers. Those projections anticipated more residents signing up for triple-play services — phone, Internet and cable TV — and more business subscribers. Instead, 54 percent of subscribers are apartment complexes, and half of those only take one service.

Now iProvo needs 13,000 or 14,000 subscribers to break even, project manager Kevin Garlick said.

Stewart is wary of Billings' budget proposal because he found it too rosy, projecting 60 new subscribers a week next year. Veracity and MStar met that threshold from July to December last year, but sales slowed the next three months and stalled recently.

From April 26 to Tuesday, a period of almost two weeks, the total of subscribers rose by 18. The slowdown is attributed to seasonal selling by the companies, which are hiring new sales staff for an annual summer push.

Billings and Garlick defended the projection of 60 new subscribers a week next year as an important target for Veracity and MStar. They also said the city is recruiting new companies to compete on the network.

Garlick said Veracity and MStar don't like the decision, but the city hopes to find a company that will specialize in recruiting small-business subscribers.

The City Council asked Billings, and he agreed, to provide an alternative iProvo budget that projects 40 new subscribers per week before the iProvo staff makes its budget presentation to the council next week.

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