Why Build a New Sewer System?
Communities typically invest in a new sewer system for several important reasons:

• To address public health, environmental, and groundwater concerns caused by failing septic tanks or drain fields.
• To support commercial, business, and industrial growth.
• To serve new residential development.
• To preserve and increase property values.

Consider:

Community Support & Public Education

Before developing a sewer system, city leaders should gauge public support. Implementing a centralized sewer system often requires extensive public education to help residents understand the benefits and necessity of the project.

Sewer systems provide a critical service that safeguards public health and the environment, supports growth, and can increase property values and business tax revenues.

Mandatory Hookups

For financial sustainability, mandatory sewer hookups are essential, particularly for standalone sewer systems (those not connected to a city-owned water utility). Many lenders also require mandatory hookups.

If mandatory hookups cannot be enforced for all properties, the city should at minimum charge a base sewer fee to any property where service is available but not connected. Whenever old structures are demolished and replaced with new construction, new buildings should be required to connect to the sewer system.

Financial Capability

Municipal sewer systems are regulated under state law by the TBOUT, the Tennessee Board of Utility Regulation (under the State Comptroller). Systems must operate as enterprise funds, meaning user fees must cover all operating and capital expenses.

Because construction and other fixed costs are high, many utilities use minimum billing to ensure these costs are covered. This can result in relatively high minimum bills and lower usage-based rates, with the minimum bill generally independent of actual water or sewer usage.

Project Scale & Community Impact

Building a new sewer system is often the largest project a community will undertake. It is administratively and financially challenging, especially in the early years. Centralized sewer service enables growth: development occurs where service is available, and communities without it may be limited in attracting new residents and businesses.

Intermunicipal Wastewater

If your city relies on another municipality for wastewater treatment and that municipality holds the NPDES permit, there are both advantages and disadvantages:

• Advantages: Your city avoids the liability of the NPDES permit and does not have to operate or maintain a treatment plant.
• Disadvantages: Your city depends on the other municipality for short- and long-term capacity and has no control over rates charged.

A formal contract between the municipalities is essential. The contract should be prepared or reviewed by an attorney and include:

• Identification of parties and purpose
• Roles and responsibilities of each party
• Capacity guarantees
• Sewer use and industrial pretreatment requirements
• Dispute resolution and termination clauses
• Rate structures, billing frequency, and adjustment procedures
• Services provided and payment terms
• Indemnity/hold harmless provisions
• Severability clauses

Note: in some instances, it may be beneficial for a city with a collection system to sell or donate those facilities to the city providing the treatment.

Administrative Responsibilities

City leadership must manage a wide range of tasks, including:

• Developing and managing intermunicipal contracts
• Planning, engineering, and construction oversight, including procuring engineering services and obtaining easements
• Securing financing, including establishing tap, connection, and capacity fees with clear definitions
• Keeping residents and businesses informed
• Developing policies, procedures, and customer forms (e.g., service applications, commercial discharge surveys, credit forms)
• Managing billing, collections, and sewer rates
• Handling customer complaints

Operation & Maintenance

City leaders must determine who will operate and maintain the system. Options include hiring certified operators directly or contracting these services. If the city constructs the collection system, treatment facility, and effluent disposal, all responsibilities and costs fall on the city and its new customers.

Project Funding

Municipalities have several options for grants and loans. Consulting engineers often assist in preparing funding packages. City leaders should be aware that sewer system construction is extremely costly, and careful financial planning is critical to ensure sustainability.