The City Council tentatively agreed Monday to restructure a $152 million sewer bond by extending the payments for about a year to bolster cash flow in San Diego's wastewater department.

The panel's unanimous vote also stretches the terms of the loan to 2011.

The plan, which includes acceptance of a $10.1 million state loan, is a way for the city to avoid having to begin repaying the bond next year, when $38 million is due, half of it by March 15.

Under the proposal, the city would have to agree to pay penalties of up to 2.5 percent in the case of a "city insolvency event."

Dennis Kahlie, the city's utilities finance administrator, said the department is able to make the required payments on the debt, but needs to free up money for capital improvement projects.

The lack of an audit of San Diego's 2003 financial statements has made it difficult for the city to borrow money.

"It's simply a matter of improving cash flow until we can resolve this audit thing," Kahlie told the City Council. "It enables us to free up some cash until that resolution takes place."

An accounting firm has held up the 2003 audit until the city completes an internal investigation into its financial disclosure practices related to the debt-ridden pension system.

The ordinance approved by the City Council to restructure the loan requires a second reading before it can be enacted.