With the help of a proposed refinancing of the Secaucus Municipal Utility Authority's debt, taxpayers might not see an increase in the municipal portion of their taxes for the fifth straight year.

Incredibly low interests rates make the refinancing of the SMUA's $29 million debt extremely attractive, said Town Administrator Anthony Iacono when he presented the idea to the Town Council during the March 18 caucus. By refinancing and readjusting the payment schedule over the next eight years, the town can reduce its yearly payments by $1 million over the next two years and save slightly over $1 million over the life of the debt due to be paid off in 2011.

The SMUA runs the town's sewer system and hookups. It is funded through the town budget.

The last refinancing of SMUA debt was done in 1994 when interest rates were significantly higher, at 8 percent. The new rate could be between 4 and 4.25 percent.

"We're looking at it," said SMUA Chairman Mike Altileo. "The low interest rates make it very attractive."

This move must be approved by the Town Council, said Mayor Dennis Elwell, because the SMUA's total funding comes out of the town budget, not from fees to residential homes.

Whereas MUAs in most other towns collect fees for sewerage used by homes and runs their operations based on those fees, Secaucus divides total cost of operations and includes this fee as an attachment to the tax bill.

The municipality collects the money as an additional tax, and issues money to the SMUA as a budgetary line item to cover operational costs.

Councilman Bob Kickey, however, questioned the move, citing legal rulings from 1994 that said the council could not vote on SMUA bonding. The SMUA, despite its dependency upon municipal budget, is considered an autonomous agency, able to pass its own rules or ordinances.

The SMUA board would have to give approval first before the Town Council voted on it.

Frank Leanza, who before taking over as the town attorney in 2000 and served as the SMUA attorney, said the state Local Finance Board - which would have to approve the refinancing - would not look kindly on the refinancing unless the council did vote to approve it.

This refinancing would reduce the overall SMUA debt from $29 million to $28 million. But more importantly for this year's and next year's town budgets, the refinancing would also reduce the yearly debt payment from slightly over $4 million each year to about $3 million. This will likely make the difference in keeping taxes from going up this year and will provide a hedge against possible increases next year, Iacono said.

Iacono also noted that the Local Finance Board - a division of the state's Department of Community Affairs - frowns upon refinancing packages that do not generate a savings of 3 percent or more. Iacono said the proposed SMUA refinancing would save the town 6 percent or better.

The refinancing had one small drawback. Because it has been less than 10 years since the last refinancing, state law requires that a portion of the new bonds issues as a result of the refinancing will be taxable. In refinancing, the town issues municipal bonds to investors. Generally, people buying the bonds do not have to pay taxes on them because they are helping to fund a governmental body. This non-tax status makes them more attractive to investors and increases the interest the town would have to pay on them. But in this case, the $18 million segment would be taxable and cost slightly more until the 10-year period expires, at which point this portion reverts to a non-taxable status.

Both the SMUA board and the Town Council are expected to approve the refinancing in time for the introduction of the municipal budget sometime in mid-April.

"This can be a real home run for us," Iacono said.