When I said we host out, I mean we use a Moodle partner to host our Moodle install. The hosting company used my private email to track down my work email/phone number after I posted something less than complimentary about their buyout.
We have had hosting contracts with both Remote Learner and Moodlerooms. My recommendation would be to know what features are important to you, you can see what they offer by checking out their website. Make sure you have what you are promised, in writing, before you sign a contract, and get references, both clients that they pick, and ones you find on your own. You can find a list of US users here: https://moodle.net/sites/index.php?country=US this list is a mix of all types of users, so it's pretty big. You can find post secondary customers by typing moodle.*.edu into your favourite search engine, and get about 24 M returns.
You bring up an interesting thought, if there is a public university in your general area that uses Moodle, especially self-hosted, you might see if they would be willing to give you a little space. If they are hosted, then 500 users would likely push them to the next tier and cost more than it would cost you for hosting.
There are some advantages to using a Moodle host, they take care of the daily care and feeding of the servers, and have the capability to make disaster recovery backups on a regular basis. That has saved us more than once. The two I mentioned are among the more expensive, and one of the smaller ones might be a good choice for a smaller institution, you can search for Moodle partners, and there is a list.