PROVO — The City Council approved the sale of $39.5 in bonds to finance its iProvo fiber optic system Thursday night.
The city secured a 5.19 percent interest rate for the bonds, which is less than the 6.25 percent rate envisioned during planning talks. The bonds will be repaid over a 22-year period. The repayment will include $28.6 million in interest.
"It gives us a little wiggle room in our model," said John Borget, the city's finance director.
Officials said the city's AA+ rating from Standard & Poor's was instrumental in attracting the low interest rate. The bond rating is the second highest possible, just under AAA. Debt ratings analyze the borrower's ability to repay the investors who purchase the bonds.
The Standard & Poor's rating reflects the city's willingness to secure the loan with its sales tax income. If the city is unable to make bond payments using revenue from the iProvo service providers, sales tax revenue will be used instead. During 2003, the city generated $12.3 million in sales tax revenue, which is 3 1/2 times the yearly bond payment amount.