The city will have to increase sewer fees and seek money from the federal government if it loses its appeal of a U.S. Environmental Protection Agency order that the city upgrade two wastewater treatment plants at a cost of more than $1.2 billion.

In addition to increased sewer fees and federal funds, bond issues and delaying of capital improvements and repairs will be discussed Tuesday when the City Council's committee on public infrastructure meets.

"I think it would be a useful exercise to consider the worst-case scenario, where you see another round of sewer fee hikes, so everyone can see just what it will cost us on the bottom line," Councilman Nestor R. Garcia said. "We stand by what our scientists have been telling us all along. We don't see the kind of impacts in our water and outfall that the EPA says they see. But let's try to weigh all the scenarios and make an informed decision. We can't make decisions based on money alone."

With plummeting tax revenue and a stagnant economy, a $1.2 billion federal requirement to upgrade two wastewater treatment plants is not what the city needed.

When the EPA on Tuesday denied Honolulu's request to exempt the Sand Island and Honouliuli Wastewater Treatment Plants from full secondary treatment, it forced the city to confront the real possibility that it may have to upgrade both facilities after more than 20 years of saying it was unnecessary and receiving EPA approval to keep operating.

The city has said it will appeal the ruling, but barring a unexpected reversal, county taxpayers will have to pay $800 million to upgrade the Sand Island Facility and $400 million to upgrade the Honouliuli plant, according to earlier city estimates.

"The goal is to get them into compliance and have them able to upgrade to secondary treatment rather than looking at fines as a mechanism to get that to happen," said Dean Higuchi, Hawai'i/Pacific press officer for the EPA. "There will be a lot of things to work out between us and the city on a comprehensive schedule. It's not going to happen overnight, and the time period will take into account the city's needs and the city's financial situation."

The mandated improvements would delay countless capital improvement projects and infrastructure renovations such as road repairs and sewer maintenance.

Sewer fees have already doubled in the past two years as part of a $1.1 billion, federally mandated repair of aging sewer lines. Sewer fees increased 18 percent on July 1, 2008, and are scheduled for another 18 percent increase in 2009 and a 15 percent increase in 2010.

Those fee increases are for work unrelated to the upgrade of the treatment plants.

"I like the idea of asking the federal government to include this as part of the stimulus package, and it should be a priority over (other) projects," Councilman Romy M. Cachola said. "If we can buy time and work with the EPA to determine what should be done, incrementally, and we get a lot of money from the feds we can look at ways to finance it."

Larry Lau, the state's deputy health director for environmental health, said the state never took a position on whether the city needed to upgrade the treatment plants. If the EPA decision stands, he said, the treatment plants would be subject to state oversight.

"We acknowledged there were arguments on both sides, and we deferred to the EPA's administrative process," Lau said. "Those are the only two plants in the state (that don't do secondary treatment) for ocean discharge. If they become a regular secondary treatment, then we would take over."

The two main Honolulu treatment plants put sewage through what is known as primary treatment and some secondary treatment before pumping it into the ocean at least 1.7 miles offshore.

After reviewing data from water samples gathered between 1991 and 2003, the EPA concluded Tuesday that the discharges from the two plants do not meet the federal Clean Water Act's standards for municipal sewage.