South Williamsport residents will see no increase in borough taxes in 2010, but as the borough embarks on a costly upgrade to its sewage collection system, an increase in sewer rates is inevitable, according to J. Bernard Schelb, a councilman and borough finance committee chairman.

The budget calls for real estate taxes to remain at 3.97 mills, of which .32 mills is dedicated to fire service, Schelb said. One mill equals $1 in real estate taxes for every $1,000 in assessed property value.

The budget calls for sewer rates to increase from $120 a quarter to $135 a quarter, Schelb said.

On Monday, council held a first reading of the budget, which is set to be voted on Dec. 7.

"It's a tight budget. There's not a lot of fat in it," Schelb said. "We pulled in our belts another notch because we knew our senior citizens have not received an increase in Social Security."

The sewer rate increase directly is related to the borough's multi-million dollar sewer system upgrade, which the borough was compelled to do after the state Department of Environmental Protection ordered it to fix problems with ground and surface water entering the system.

The water infiltration overloaded borough pump stations, resulting in untreated waste water being dumped into the West Branch of the Susquehanna River.

"We are governed by a higher authority - the DEP," Schelb said regarding the agency's order.

According to a summary provided by Schelb, the general fund budget is just above $2.2 million, compared to the 2009 budget of slightly more than $2 million.

The budget includes $681,000 for public safety, an increase of 11 percent over the 2009 budget, Schelb said.

The public works portion of the budget is $337,000, a 30-percent decrease from 2009.

The 2009 budget was inflated with the purchase of a street sweeper that cost $145,000, Schelb said. The borough plans to buy a new pickup truck, a portion of the $30,000 purchase price of which will come out of the borough's liquid fuels account.

Other capital outlays for 2010 include a lawn mower for the park, $9,000; a new police car, $30,000; and an office copier, $7,000.

A 3-percent cost-of-living increase will be given to highway workers, police and administrative staff, Schelb said.

The borough pool budget for 2010 is $74,000, compared to $93,500 in 2009. According to Schelb, the borough funds pool operations with $31,000. The rest of the operation is funded through admissions and concession sales, he said.

The budget calls for $10,000 to update the borough recreation park's master plan, which must be updated every five years for the borough to be able to apply for recreation grants.

The budget anticipates $268,000 for employee health care coverage, an increase of 12 percent over 2009, Schelb said.

Borough expenses include debt service on a 10-year, $500,000 loan through Woodlands Bank to upgrade the sewer pump station and swimming pool and to buy new equipment.

Another loan worth $100,000 was taken out to cut down trees on the levee along the south side of the river within borough limits. The tree cutting was mandated by the federal government, Schelb said.

The borough fire tax is expected to bring in about $73,000, which will be distributed among the borough's three fire stations, Schelb said.

The sewer fund budget is expected to be $6.4 million in 2010. The borough obtained a $4.8 million loan through Citizens and Northern Bank at 4.7 percent interest, Schelb said. At the end of one year, the U.S. Department of Agriculture Rural Utilities Service then will take over the loan for 40 years at a lower interest rate.

The fund's capital maintenance account is about $700,000, which will be used for a new sewage pump station and sewage holding tank.

A sewer property inspection program has been launched by the borough to identify areas where water is infiltrating the sewer system. More than half of the borough's homes have been inspected, Schelb said.

The borough's sewer upgrade program requires many sewer laterals - the pipes connecting privately-owned structures with the borough system - to be replaced.

The borough has launched a grant program so low-to-moderate income families may receive funding to defray the cost of the lateral replacement. The grants are funded through the borough's Community Development Block Grant program. So far, 58 people have qualified for 50 percent funding and 34 have qualified for 100 percent funding.

The borough's allocation of liquid fuels funding - money raised by the state through a tax on gasoline - is, at $132,000, slightly less than 2009's allocation.