DALLAS -- The San Antonio Water System will need to add about $492 million to its capital plans over the next decade to upgrade leaky sewers under a $1.1 billion settlement with the Environmental Protection Agency, officials said.

SAWS, one of the largest water utilities in the nation, will pay a $2.6 million civil penalty to resolve Clean Water Act violations stemming from illegal discharges of raw sewage, according to the consent decree announced Tuesday.

The state of Texas was a co-plaintiff in the case and will receive half of the civil penalty.

While federal officials said that SAWS is expected to spend about $1.1 billion to repair and replace sewers, SAWS spokesman Greg Flores said that most of that is already included in long-term financing plans.

“A big chunk of this is what we already had planned,” Flores said.

Financing the $492 million will likely be included in future bond issues or on a pay-as-you-go basis, Flores said.

“It will depend on what we find as we inspect our infrastructure,” he said.

San Antonio Water System water and sewer revenue bonds carry ratings of AA from S&P and Fitch Ratings, and Aa1 from Moody’s Investors Service, all with stable outlooks. San Antonio’s general obligation ratings are triple-A.

Chronic sewer leaks prompted the city council to approve a 10% rate increase last year to cover infrastructure costs.

“The costs of the settlement are already built into SAWS' rate increase projections,” Flores said.

Mayor Julián Castro said that the city’s sewer problems are a result of inadequate spending over decades.  In two months last year, SAWS reported nearly 200 sewage spills. By law every spill no matter how big or small must be reported to the EPA.

“The improvements and upgrades agreed to in this settlement will protect the people of San Antonio and the surrounding communities by reducing raw sewage in the water,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance.

Roughly 75% of the sewer spills in San Antonio are caused by grease and debris, according to the utility. SAWS said that aggressive efforts to prevent spills have brought a 30% reduction from their peak.

Last week SAWS reported a leak of more than 100,000 gallons due to soil erosion that caused a 10-inch clay sewer main to collapse. The spilled sewage was contained in a dry creek bed and there are no public or private wells in the immediate area, SAWS said.

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