Dec. 6--Monteagle Mayor Charles Rollins said his town has struggled since a 50-year-old sewer tank collapsed in March and dumped 750,000 gallons of raw sewage.

But with state oversight the city has begun interim repairs, and the announcement in September of a $6.2 million stimulus loan to build a new plant has provided the city with a silver lining for its tragedy.

"It will relieve us of the moratorium on sewer hookups and allow this town to grow," Mr. Rollins said, noting the city has been under a development moratorium for three years. "That will allow businesses to come that have wanted to locate here, and we'll have the infrastructure to accommodate them."

The sad part, he said, is that the unexplained collapse early on a Sunday morning sent raw sewage flowing into the water supplies of a neighboring town, Pelham, Tenn.

"That was an added thing there those people didn't need," he said.

Tisha Calabrese-Benton, spokeswoman for the Tennessee Department of Environment and Conservation, said interim repairs have allowed Monteagle to "limp along" with a second old and existing plant. What sewage cannot be diverted to the second plant now is being chlorinated before it enters Juanita Creek, she said.

She said Monteagle also has been repairing the collection system to reduce leaks of stormwater into sewer lines that cause overflows.

"The biggest update is that Monteagle received a $6.2 million Recovery Act/State Revolving Fund loan to replace its two current wastewater treatment plants with one new plant and to replace old clay pipe in the collection system with a new, conventional gravity collection system," Ms. Calabrese-Benton said.

The new plant will have double the treatment of the older plants.

The project is funded with a 20-year, $3.72 million loan with an interest rate of 1.79 percent, Ms. Calabrese-Benton said. The remaining $2.48 million of the total $6.2 million funding amount will not have to be repaid.

The Monteagle project is one of 24 clean water projects and 13 drinking water projects funded so far this year with the help of the American Recovery and Reinvestment Act, she said.

Mr. Rollins said bids on the Monteagle project will be awarded this month and work could begin first part of 2010. He said the work should take about 18 months.

"I wanted that to happen five years ago, but we just couldn't make it happen," he said.

Despite the partial loan forgiveness, Monteagle still will have to pay back about $4 million plus anticipated state fines for numerous past sewer violations.

To make the payments, Mayor Rollins said the city already has planned sewer rate increases.

"We have figured two different rate increases," he said. The next increase, in 2012, will raise residents' now-$18 minimum sewer rate by about 15 or 16 percent, he said.

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