LOCK HAVEN - The city may borrow around $6 million before the end of the year as interim financing to upgrade the sewage treatment plant to meet new environmental mandates.

Borrowing now when interest rates are low can save an average of 3 percent in the long run, according to the city's financial advisors.

The state Department of Environmental Protection is giving the city little choice - it can either upgrade the treatment plant to meet Chesapeake Bay mandates or pay the penalties. The mandates include a deadline, so the project must go forward soon.

The city can take advantage of a good rate now and borrow the funds as interim financing, then apply for a low-interest loan through PennVEST, which would become the permanent financing for the project, City Manager Richard W. Marcinkevage told City Council at its Monday evening work session.

With a proposed $10 million borrowing package, the city also could refinance older debts like the 1990 levee construction bond issue of $4.4 million. This bond issue has been refinanced three other times, always to reduce the debt service, Marcinkevage said.

If it is refinanced again, it still would be paid off in the year 2013 as originally scheduled.

Also to be paid off that same year is the city's share of the $16 million Central Clinton County Water Filtration Plant, constructed in the mid 1990s. The city is scheduled to pay more than half a million dollars on it each year from 2010 through 2013.

The city currently pays around $1.4 million in debt service annually.

Marcinkevage presented detailed figures from Concord Public Financial Advisors Inc., based on the proposal that the city refinance:

n The levee bond issue, now down to about $1.4 million

n The $1.6 million left on the note taken out in 2007 for capital improvements

n A more than $200,000 portion of another note taken out the same year. The $200,000 served as the interim financing for the Ohl Dam project before a PennVEST loan was approved.

The $5.96 million borrowing package for the sewage treatment plant could be handled as a note, according to Concord, while the refinancing plus additional money for capital improvements and a sidewalk program could be combined into a bond issue of $3.7 million.

With the bond issue, council could choose to borrow:

n $250,000 to set up some sort of revolving loan fund to help homeowners fix their sidewalks

n $40,000 for new water meters

n $14,000 for upcoming projects at the airport

n $55,000 for new parking meters, ticket-writers and parking lot improvements.

By combining refinancing and new projects into one borrowing package, the city also can save money in filing fees.

And by changing the due dates for its payments from May and November to November only, the city can face the payment when it's in a more stable position, Marcinkevage said. Many homeowners pay their real estate taxes just before May 1, when the rate goes up, he said, leaving the city in a shaky position for trying to make its first payments. However, most of the taxes are paid by November, he said.

Council will take its first vote on the borrowing next Monday, followed by the second and final vote on Nov. 23.