* Deal seen requiring unpopular water rate hikes
* County to pay $1 million civil penalty
* County lawmakers pull back from big sewer bond issuance
By Zachary Fagenson
May 21 (Reuters) - Florida's Miami-Dade County on Tuesday promised to spend $1.6 billion on fixes for its dilapidated, accident-prone sewer system in a deal meant to settle a lawsuit with federal and state environmental officials.
County commissioners, many of whom complained about proposed user fee hikes of 33 percent over five years, approved a consent agreement detailing repairs in the county's 7,500 miles of sewer lines with a vote of 12 to 1.
The agreement, which must also be approved by a judge and Florida and federal officials, follows another consent pact signed by Florida's most populous county in the 1990s and includes a nearly $1 million civil fine and other payments.
The capital program will run 15 years and will require hiking water fees that now run about $125 quarterly, as well as use of general obligation and revenue bonds, according to Miami-Dade Mayor Carlos Gimenez and other officials.
Lawyers told the commissioners that the agreement limited possible tougher penalties for the county, whose sewage system ruptured 65 times between 2010 and 2012. A sewer pipe burst in 2010 spilt 20 million gallons of raw sewage into Biscayne Bay adjacent to Miami's high-rise towers and other waterways.
Until last week, the commissioners had been considering a bond issue of about $4.25 billion as a down payment for a broader overhaul of Miami-Dade's vast water and sewage system but have backed away amid complaints of raising water fees.
Home to the City of Miami, Miami-Dade has some of the lowest water rates in America. The county's water department has estimated it would require $12.6 billion to overhaul the county's pipes, treatment plants and pumping stations.
The federal government late last year sued Miami-Dade, alleging it was violating the Clean Water Act. Environmental activists last week won the right from a judge to join the federal lawsuit.
While county lawmakers resisted increasing residents' water fees, some acknowledged that the county had no choice in the matter.
"At the end of the day it has to happen," said Commissioner Jose Diaz. "Our infrastructure is falling apart."
Proponents of the curtailed plan also argued that the capital improvements will spur economic growth, which has been stymied by inadequate sewer capacity in fast-growing areas.
Buildings sit empty "because the system is already over capacity on the wastewater limits," said Commissioner Esteban Bovo, Jr. "There are no benefits, no tax revenue. People can grasp that when we need to be building capacity."
Some county commissioners urged Gimenez to consider seeking private investors to fund water treatment plants and a rise in local hotel taxes mostly paid by tourists as ways to reduce the rate increases that still must be approved by the lawmakers.