Provo council wants details about iProvo merger

PROVO — The Provo City Council wants to know what the city administration knows about the iProvo merger, even if it means signing letters of confidentiality.

"The administration is privy to information the council is not," council attorney Neil Lindberg said during a work session Tuesday.

The council was discussing a request by Broadweave to restructure its payments to the city to facilitate a merger with Veracity Communications Inc., giving the troubled iProvo telecommunications system more strength.

The City Council will vote on the plan in September.

Broadweave purchased iProvo from the city more than a year ago but could be facing foreclosure by February if nothing is done to stop it.

The merger would require a $1.4 million loan from the city's electric department to fund an 18-month shortfall of $82,000 per month in the new company's payments.

Under the arrangement, the new entity, Veracity Networks Inc., would make reduced payments of about $195,000, down from $277,000. However, the city must continue making its normal $277,000 monthly bond payments.

The two top executives from Broadweave and Veracity, Dave Moon and Drew Peterson, have been tight-lipped about the financial arrangements between the two companies.

Because of a cash-flow shortage, Broadweave has been making the payment for months from a security deposit and letters of credit.

Merging the two companies would give cash-solid Veracity more customers, while giving Broadweave better cash flow, allowing for better growth, company officials say. While iProvo operates just in Provo, Veracity operates throughout the state and into Nevada.

Under the plan, Veracity Networks would pay the city $195,000 for 18 months. The payment would then return to $277,000 a month for two years before rising another $25,000 a month for seven years and then returning to its normal schedule until the note is paid off.

The city would earn 5.17 percent on its loan from the electric department reserve fund, where it is earning less than 1 percent in a state pool now, officials said.

Under the original arrangement, if Broadweave defaults, the city could go after its assets not only in Provo, but also in the Traverse Mountain subdivision in Lehi and a subdivision in St. George. Under the new provisions, Veracity is protected from having to forfeit assets it held prior to the contract.