The city is looking to refinance $3,306,000 in debt that will come due in December for a lower interest rate.

James TenHoeve, the city’s finance director, reckoned the city has 3.7-percent interest rate on the existing debt that’s being refinanced. He said that rate will likely be 1.75 to two-percent — depending on the market — after refinancing.

Kenneth Morris, councilman at-large, who chairs the council’s finance committee, said the city’s bonds are in actuality junk bonds, but by issuing them as qualified bonds backed by New Jersey the city could command a better interest rate and thereby save on debt service.

The city’s credit suffered a two-notch downgrade in May of this year for its reliance on transitional aid. This year the city received $25 million in state aid to balance its budget.

Council members had to approve a temporary appropriation of $3.3 million to begin the process. That approval was granted Tuesday evening. The city has to go before the state’s local finance board for approval prior to issuing the notes.

The city’s indebtedness stands at $130 million, according to city records.

As the city looks to issue $3.3 million in refunding bonds, Morris noted the city is not taking on extra debt. “We’re not incurring any new debt. We’ll actually end up saving money on interest by going through this procedure.”