Taxes to cover iProvo?

City Council leaning toward using surplus for debt payments

PROVO — The majority of the Provo City Council is leaning toward using an expected surplus of sales-tax money collected in the city this year to help make iProvo's debt payments next year.

Council Chairman George Stewart has asked the city's finance department to create a resolution to change the proposed 2007-08 budget to allow the use up to $1.2 million of surplus sales tax for iProvo.

Stewart said he intends to present the resolution at the council's June 5 meeting so the public has time to join the debate. The council must finalize the budget at its June 19 meeting.

Nearly one-third of the city's residences use iProvo phone, Internet or cable services. The 9,750 subscribers generate enough revenue to cover iProvo's operating costs and a majority of the debt created during construction of the network.

The city issued bonds to finance construction of the $39.5 million iProvo fiber-optic telecommunications network. The city now makes $3.2 million in bond payments each year.

Mayor Lewis Billings had proposed that the energy department reserve fund be used to lend iProvo $1 million in the next fiscal year, which begins July 1.

The energy department has already loaned iProvo $3.08 million — $980,000 last year, when the bond contract required the city to set aside money for its first bond payment, and $2.1 million this year.

Stewart has dug in his heels against another loan for two reasons. First, he doesn't want to burden iProvo or the city with further debt that would have to be repaid from 2013 to 2020, when the economy might not be as hot as it is now.

"Let's say we're in a recession," he said. "Why should we burden a future mayor and council with debts that we can pay now when in the future it might require cutting essential city services?"

Second, Stewart said the city is expected to rake in more sales-tax revenue than budgeted, enough to cover the $1.19 million in bond payments iProvo won't be able to make on its own next year, according to the mayor's proposed budget projections.

Stewart and Billings both argued that it is fiscally conservative to do it their way. Stewart told the City Council that paying as they go and avoiding the addition of debt during good times is responsible.

Billings said in an interview that iProvo should pay for itself, even if that means paying it over time.

"No one hates debt and taxes more than I do," he said. "I don't favor debt, but I like things that create costs to pay their own way as often as possible."

The mayor downplayed the difference between using a loan to meet the debt payments or using sales-tax revenue. "It's not the big deal some people make it out to be," Billings said. "It really makes so little bottom-line difference at the end of day, it's not an issue I feel I have to go out and die for."

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