Buying a car or a house is an expense most people need to do some creative financing to afford. Apparently, buying a new municipal building is a similar experience for a borough.

To help fund the construction of its new municipal building, State College Borough has sold an $8 million general obligation bond. The 25-year bond, which was purchased in an online auction at www.muniauction.com by underwriter Dean Witter Reynolds, Inc., helps the State College Borough Council fulfill the $10 million commitment it made to a new municipal building design last November.

Although issuing such a large bond has raised some concerns that taxes will go up to pay off the debt, borough officials denied there will be an increase in the near future.

Council member Elizabeth Goreham said the borough will not need to raise taxes to pay off the first few payments on the bond.

The borough might need to raise taxes at some point in the future, but Council member Jean McManis said she did not believe it would. Because of the cost of the municipal building, the borough council set aside savings for it.

In the long term, however, Goreham said the price of the municipal building might limit the borough's ability to fund other projects, such as a new library or the Eastern Inner Loop, a road that would connect Vairo Boulevard to University Drive.

"It's very premature to say a tax increase will or will not be needed," said Mike Groff, borough finance director.

The borough anticipates tapping other economic resources, he said, such as the natural increase in tax revenue due to the strength of the economy and the reallocation of existing funds.

The borough carefully considered its options before pursuing the bond issue, Groff said.

"We don't go into the debt market often. Only when it is necessary to finance capital projects." Capital projects are those that are expected to last more than 10 years, he said.

Although Goreham did not vote in favor of the design in November, she said she thought the online auction for the bond was an effective way to raise the means necessary.

"We really saved a lot of money," she said. "The planning and the operation were very well represented."

The online auction forced competing underwriters to bid against each other and helped to bring the interest rate down from 5.6074 percent at the first bid to 5.5969 percent on the winning bid, Goreham said.

Myles Harrington, CEO of muniauction, said the company provides the auction service, without an interest in the value of the bond, like auction houses such as Sotheby's.

"The internet auction eliminates a great deal of time that used to be involved with collecting bids," Harrington said.

Before internet bidding, the process involved trying to communicate via fax machines and took up to a half an hour to determine who the winner was due to the complicated calculations involved.

The bond issue works for the borough much like an extremely large mortgage payment or car loan, Groff said. To fund the expensive project, the borough needed to add to the $2 million savings pledge it had already made, and they issued the bond to raise the difference.

Underwriters, such as Dean Witter, buy the bond from city governments and then investors buy individual bonds from the underwriter, he said. The bond is backed by the full faith and credit of the city, meaning it pledges tax money for repayment if absolutely necessary.

Goreham said the bonds will be offered to the public in about a month for $5,000, and carry an interest rate of about 8 percent.