"The alternatives here are bad or worse," said Sen. Donald F. Munson, R-Washington, during a meeting about the water system with local, state and federal officials.
State Department of the Environment officials contended that their affordability guidelines would have permitted increasing rates to as much as $545 a year - a 247 percent increase.
"They tried that in other parts of the county. I can tell you how it's been received," Del. D. Bruce Poole, D-Washington, told the state officials, referring to Washington County's debt crisis that has led to widespread water and sewer rate increases.
Officials at the meeting agreed to seek additional funding sources, including federal programs, to see if the burden on the towns and their residents can be lessened.
"We're not going to do it unless we get help," Taylor said.
The issue first arose in 1993, when the Maryland Department of the Environment determined that the water sources that serve the two towns needed to be filtered to meet federal clean-water restrictions. The state wants a regional water system that would serve both towns, providing water to 1,154 homes and businesses.
State officials said they have approved a $1.5-million grant for the project, the maximum allowed by law. The towns will have to pay for the remaining $1.6 million through a low-interest state loan to be paid over 20 years.
"What you're seeing is the cost of building a modern system and what it's going to take to keep that system in good working order," said Virginia F. Kearney, capital projects program administrator for the state Department of the Environment.
But Poole said some residents, particularly older people on fixed incomes, would not be able to afford such an increase in their water bills.
"What do we do about those people?" he said.
State officials said there is no immediate date by which the towns must start the project or risk losing the state grant and face other penalties. But they said they would like to see the project move forward soon.