BOSTON -- The Massachusetts Water Resources Authority received another dose of good news yesterday when an engineering study said the agency may be able to lop $165 million off the cost of building the Deer Island sewage treatment facility.

A nearly completed report from the engineering firm of Camp, Dresser & McKee will recommend that the MWRA reduce the size of the facility's secondary sewage treatment plant, the authority said.

The report is also expected to show that the authority will be able to achieve the savings with no sacrifice to the environment.

The amount of sewage that the plant will have to process is expected to be lower than was initially estimated in the MWRA's 1988 plan, according to the report.

The report is expected to be officially released to the public and the authority's board of directors on Nov. 4, 1994. All modifications or changes to the Deer Island plant have to be approved by the federal court overseeing the project.

"Bigger isn't necessarily better, and the recommendation is, in essence, that the MWRA buy a Chevrolet instead of a Cadillac, which we don't need," said Douglas B. MacDonald, the authority's executive director. "This is precisely the kind of expertise and guidance we are looking for as we continue to search for ways to do our job more efficiently and at less cost to MWRA ratepayers."

In the mid-1980s, a federal judge ordered the authority to finance the cleanup of Boston Harbor and the construction of the Deer Island sewage treatment plant, which will consist of both the secondary treatment facility and a primary treatment facility.

To fund the projects, the MWRA decided to sell revenue bonds secured by the water and sewer rate payments that the authority receives from more than 60 communities in the Boston metropolitan area.

So far, the authority has issued more than $2.5 billion of debt for the projects.

At the outset of the bond sales, the authority expected the projects to cost about $7.7 billion. But because of favorable interest rates and many cost revisions, the authority now expects costs of just under $5 billion.

The authority is scheduled to bring the first phase of the Deer Island facility on line sometime next month. The first phase will allow the authority to test the sewage lines and treatment methods. Authority executives hope to be processing sewage in the Deer Island plants sometime next spring.

Earlier this fall, KPMG Peat Marwick, a Texas-based consulting firm, generally praised the MWRA's work on the sewage facilities in a report on the authority's operations. The report also listed approximately $300 million in potential spending cuts to the sewage plant project.

The report stated that the authority could save the money by eliminating certain redundant systems, changing some of the commonwealth's land use standards, and diversifying bond issuance practices.

As far as diversifying the MWRA's issuance, authority executives are in the process of establishing a commercial paper program that they hope will be in place in the early part of 1995.

"This [report] is the culmination of an exhaustive review encouraged by the MWRA advisory board, state and local officials, and other concerned parties," MacDonald said.

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