The Longmont City Council on Tuesday told Longmont Power & Communications that it could make an inter-departmental $7 million loan to cover NextLight construction costs.

NextLight, Longmont’s municipal high-speed internet provider, works on fiber-optic cable that LPC is gradually installing throughout the city.

The NextLight build-out project is funded by a $40.3 million bond the city issued in 2014, which will be paid back by NextLight ratepayers over time.

The $7 million budget appropriation to the NextLight build-out project would come from the Electric and Broadband Utility Fund balance. That fund is an enterprise fund, meaning it is largely self-supported through rate revenues.

Longmont Utility Rate Analyst Brian McGill told the council that NextLight needed the $7 million because staff are seeing the service hit popularity rates twice what was originally expected.

A feasibility study in 2013 predicted that in the areas of the city that have been through a full NextLight marketing study, 27 percent of households would opt to pay for NextLight internet.

Instead, LPC is seeing a take rate of 56 percent in those areas.

But that means that LPC needs more money for contractors, materials and other costs such as bandwidth, McGill told council.

If the council approves the $7 million appropriation, it would cause the Electric and Broadband Utility Fund to go below the required reserves for a period of time, Longmont Budget Manager Teresa Molloy and Utility Rate Analyst Brian McGill wrote in a memo to council.

But, the extra customers means that LPC is projecting an extra $3 million in revenue over time, allowing the NextLight broadband fund to pay back the Electric and Broadband Utility Fund with interest, staff said.

Councilwoman Polly Christensen clarified to the public that the NextLight $7 million had little to do with the electricity rate increase the council would discuss later Tuesday night. Christensen said she had gotten messages from constituents who incorrectly thought the electric rate increase was funding NextLight.

“We’re not using the electric rates to subsidize (NextLight), but we are taking a loan from that fund in order to help NextLight get over this hump,” Christensen said.

Councilwoman Joan Peck said she was concerned that the NextLight broadband fund wouldn’t be able to pay back the other fund in the case that it didn’t make the revenues it was expecting to make from the increased number of customers.

“If the cash flow once again doesn’t outweigh the expenses, then next year you will be asking for more with no reserves left to cover it,” Peck said.

Mayor Dennis Coombs said the city planned from the start to have to outlay cash in order to fund the NextLight infrastructure project and then recoup that money from ratepayers over time.

“We predicted we wouldn’t have positive cash flow at this point anyway. We’re building out 50 percent more and it’s only costing us 17 percent more. I think that’s a good news story we should be proud of,” Coombs said.

The vote on first reading passed 6-1 with Peck dissenting. The issue will come back on second reading.

Karen Antonacci: 303-684-5226, antonaccik@times-call.com or twitter.com/ktonacci