Pollution from Gold Hill's aging wastewater treatment plant exceeded standards set by the Oregon Department of Environmental Quality in July and August 2013.
The DEQ fined the city $415 for releasing poorly treated wastewater into the Rogue River.
City Manager Rick Hohnbaum said the city's wastewater plant to the west of town along Highway 99 has undergone considerable upgrades since last year.
He said he is confident the city will not exceed the pollution levels again.
The city has invested $300,000 into the plant, including adding a new type of disinfectant to treat the wastewater.
"It's leaping centuries ahead," Hohnbaum said.
However, the city is only able to squeeze another five years out of the plant before it will have to invest $5 million to $10 million for a new facility, he said.
As a result, the city is exploring building a $7 million pipeline to connect with Rogue Valley Sewer Services in Central Point, which sends the wastewater to Medford's large treatment plant. Gold Hill already transports sludge from its plant to Medford's.
To deal with the city's mounting costs of treating wastewater, Hohnbaum said he has proposed a rate increase from $38.82 to $44 a month. The rates are already one of the highest in Southern Oregon, he said.
To qualify for grants to pay for sewer lines or a new plant, the city should be charging $47.75 a month, according to analysis by the Oregon Infrastructure Finance Authority.
To pay for some of the repairs to the treatment plant, Hohnbaum said the city had to essentially borrow from fees paid for water service.
The city has been trying to fix a plant that hadn't been properly maintained for years. Parts from a redundant portion of the treatment plant had been cannibalized to keep the main part of the plant operational, said Jon Gasik, DEQ senior engineer.
"They hadn't done maintenance on one side of the plant for 30 years," Gasik said. "It was pretty bad two years ago."
Under an agreement reached with Gold Hill in 2012, the redundant side of the plant was made operational again. Once it was working, the other side of the plant was repaired as well.
The treatment plant had two issues that led to its pollution violations. One of them was a measurement of the oxygen levels, which shouldn't exceed 40 milligrams per liter. In July 2013, the levels hit 47.1 milligrams, then in August it hit 93.8 milligrams.
As an example, Medford's treatment typically is around 5 milligrams a liter, and Ashland's can be as low as 3 milligrams.
In addition, Gold Hill released 168 milligrams per liter of dissolved solids in August 2013, exceeding by 40 percent its allowed weekly average.
Gasik said the repairs should keep the pollution levels within limits in the near term.
"Eventually, in not-too-distant future, they will have to do a major overhaul of the whole system," he said.
Reach reporter Damian Mann at 541-776-4476 or email@example.com. Follow him at twitter.com/reporterdm.