"We are trying to find the least painful solution," Councilwoman Sherrie Hall Everett said.
Veracity Networks drew its June payment from its security deposit, dropping that account to $1.7 million. That triggered the process for the city to declare Veracity in default and possibly take back the network the city sold three years ago.
So far, the city has received two offers for the network, one from Veracity and the other from Sandy-based OHIvey. The city has rejected OHIvey's offer and is working with Veracity.
Mayor John Curtis proposed the utility fee as a way to cover the gap between Veracity's iProvo revenue and the bond payment. In an earlier interview, Veracity CEO Drew Peterson said the $278,000 monthly payment gobbled up the network's profits.
It's the same gap that bedeviled Provo when it ran the network. During that time, the city subsidized the network to the tune of $2 million annually.
Curtis said the utility bill fee is the only and the most transparent way for the city to meet its obligation, barring a company coming in to buy the network with enough cash to retire the bond.
"No one has come up with anything better," Curtis said in a recent meeting.
But Councilman Sterling Beck is hoping someone will make a better suggestion, especially when the council has a public hearing Tuesday night on the proposal.
One plan calls for assessing a $7.65 monthly fee to every ratepayer in the city. Beck said that would create an undue burden on low-income residents, as they would be paying the same amount as the city's largest ratepayer Brigham Young University.
But Curtis said basing the fee on a percentage of the electric bill could potentially lead to the city collecting more money than needed, as well as socking BYU and other high-end ratepayers a large bill.
Beck said he would support something that was more equitable, and stressed accountability. His suggestion: Have a yearly public hearing to review the rate, and the city's progress toward retiring the debt.
"It is extremely helpful to be held accountable," Beck said.
Additionally, he said, the city should show that residents are getting some value out of the network, such as improved Internet speed.
Everett agreed, saying she didn't want residents to pay for a system that was not working at its full potential.
M. Royce Van Tassell, vice president of the Utah Taxpayers Association, said the association isn't enamored with any of the proposals, but commended the city for being open about its situation, in contrast to UTOPIA, which he said is considering borrowing more money to cover its debts.
Van Tassell described the iProvo rate proposal as the "least bad way" to pay off the city's debt.
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The Provo council will discuss the proposed iProvo rate increase in a study meeting 2:30 p.m. Tuesday in Room 310 of the Provo City Center, 351 W. Center St. Public comment will be accepted that night at a public hearing during the regular council meeting starting 7 p.m. in the Municipal Council Chambers. The regular meeting is also broadcast on Provo's Channel 17 and streamed live at bit.ly/aYISYy.