Knoxville utility flags long-term risks of new state law allowing private developer-built wastewater systems

Knoxville utility flags long-term risks of new state law allowing private developer-built wastewater systemsA recently passed Tennessee bill aimed at easing housing development could leave the Knoxville Utilities Board dealing with failing private wastewater infrastructure in the future, utility officials warned during a June 18 meeting.

Tennessee Bill 876 allows residential developers to bypass public utility connections and build private wastewater treatment systems for new subdivisions.

KUB's Vice President of Communications warned that if these private systems fail, residents could bear the costs and petition the municipal utility to absorb infrastructure not built to its standards.

The utility is concurrently advancing its own major infrastructure upgrades, having recently finalized $146.7 million in wastewater and $111.2 million in water appropriations for FY 2027.

During its June 18 meeting, the Knoxville Utilities Board (KUB) highlighted potential future liabilities tied to new state legislation that permits residential developers to construct their own wastewater treatment systems. The legislation, identified as Bill 876, provides a "by-right clarification" allowing developers to bypass connections to public water and wastewater networks when building new subdivisions. The measure was driven by a state effort to provide regulatory certainty for residential developers amid a housing crunch, allowing them to circumvent varied local community rules. While KUB does not expect an immediate impact from the law, Erin Gill, Vice President of Communications and External Relations, warned that the municipal utility could face difficult decisions if these private systems eventually fail. Because the private infrastructure would not be built to KUB's specifications and standards, a failure could leave local residents burdened with the repair costs. In such scenarios, communities may petition KUB to absorb and rehabilitate the failing systems. The bill also establishes a clear right for alternative utilities to step in and serve a subdivision if the primary public system declines to take over the infrastructure. The regulatory shift comes as KUB manages its own extensive pipeline of municipal infrastructure work. The utility is currently undertaking major water main replacements, including a highly disruptive project affecting multiple subdivisions along George Williams Road. To support its ongoing capital and operational needs, KUB recently finalized its fiscal year 2027 budget, which allocates $146.7 million for the wastewater division and $111.2 million for the water division. The FY 2027 funding strategy also includes the planned issuance of up to $19 million in new water system revenue bonds and $12 million in wastewater system revenue bonds to finance system extensions and improvements.