Chapel Hill's New Sewer Plant Has Room to Grow. Its Water Moratorium Decides When.

"We have plenty of capacity to grow," Chapel Hill Utilities Director Donny Groves told Tennessee Town & City in October, describing the town's new $16.975 million wastewater treatment plant. He's right about the sewer side. The plant is online, and it has more than twice the capacity of the 1988 lagoon system it replaced.

Sewer is no longer what limits new subdivisions in Chapel Hill. Drinking water is. The town has a temporary moratorium on new residential subdivisions because of water supply, and the Board of Mayor and Aldermen has said it will take the issue up again in January 2027, when the moratorium is scheduled to expire. If you're comparing Chapel Hill with other towns south of Nashville, or you own land at the edge of town, the water decision matters more for future housing supply than the ribbon on the new plant.

Two Utilities, Two Different Limits

The sewer plant and the water system are separate systems with separate constraints. Here's where each one stood as of this fall.

The new plant serves 1,180 residential and commercial customers, plus about 10 customers outside town limits. Town Administrator Phillip Dye told Tennessee Town & City that the town also replaced aging pipes and added new lift stations, and that Chapel Hill was the first town in the state to use the Tennessee Municipal Bond Fund's new 30-year fixed-rate loan program to pay for the project. Stiff Contractors built it, and J.R. Wauford handled the engineering.

The plant also serves Henry Horton State Park, which sends its sewage into the town system. That load will grow. Tennessee State Parks is building a new 76-room lodge at the park and expects it to open in summer 2027. Its lodge page warns visitors about construction detours around the Visitor Center, Restaurant and Cabins in the meantime. The sewer system was sized with room for that kind of growth. The water system is a different story.

Where Chapel Hill's Tap Water Comes From

Chapel Hill's 2025 Water Quality Report describes a supply chain with three links:

1. Two town groundwater wells.
2. Water the town buys from the Marshall County Board of Public Utilities.
3. Lewisburg Water System, which supplies the Marshall County BPU.

The third link is the tight one. A May 2026 update from the Tennessee Department of Environment and Conservation to the Duck River Watershed Planning Partnership listed Lewisburg's peak withdrawal in August 2025 at 4.2 million gallons a day. Lewisburg's system capacity in the same table is 4 million gallons a day, and its permitted volume is 6. At that August 2025 peak, the system at the end of Chapel Hill's purchased-water chain was drawing more than it was built to handle. The same TDEC update lists Marshall County BPU's system capacity at 6 million gallons a day with 3 permitted, and says the utility considered 10 supply alternatives, including buying from three different systems.

Tennessee Town & City describes the Duck River as Chapel Hill's primary water source. The town's own water report describes groundwater wells plus purchased water. Either way, the supply sits inside a regional system that several fast-growing communities share, and since 2024 the watershed partnership has been working to balance water conservation, drought preparedness and economic growth.

How the Moratorium Has Played Out at Town Hall

The moratorium already existed in July 2024. On July 8 of that year, the Board of Mayor and Aldermen voted 5-0 to extend the temporary moratorium on new residential subdivisions, citing water supply. Citizen Portal's summary of that meeting says town staff also issued a short-term water-conservation ban and planned infrastructure modeling work.

Here's how it has moved since then:

• November 6, 2024: The board's agenda listed Resolution 2024-032, "Amending the Temporary Moratorium on New Residential Subdivisions Due to Water Supply."
• June 3, 2026: A board work session agenda listed "Water Moratorium Discussion," with no vote scheduled.
• June 22, 2026: The Planning Commission denied the preliminary plat for The Groves at Chapel Hill, Phase 2, off Old Highway 99, according to the meeting minutes. Its grounds included the 2023 Subdivision Regulations, a request for "water moratorium clarification" for the Board of Mayor and Aldermen to decide, a traffic study, and remediation of the rail crossing.
• July 1, 2026: At a work session, the board removed the moratorium from its July 27 agenda and said it would revisit the issue in January 2027, when the moratorium is scheduled to expire, as Citizen Portal reported.
• July 27, 2026: The Planning Commission deferred the final plat for the Ellington Subdivision, owned by CastleRock Communities, at Morningside Drive and Spring Creek Street. It also deferred the Groves Phase 2 item so the developer could attend and make a proposal.
• October 6, 2026: The Ellington final plat was back on the town agenda for approval or denial.

The two subdivisions are at different stages. Ellington came before the commission for a final plat. The Groves Phase 2 was at the preliminary plat stage, and the water question was written directly into the reasons for its denial. In a town with a subdivision moratorium, how far a project has already gotten shapes which new homes can still move forward.

What This Means for Buyers and Sellers

Chapel Hill's records show new subdivisions waiting on a water decision, and sewer capacity is not what's holding them. For now, new-home supply depends on projects already moving through the approval process, while new subdivisions wait on the water decision.

This affects three kinds of people differently.

Buyers weighing new construction. The new-construction homes available in Chapel Hill over the next several months will come from subdivisions already working their way through approvals, like the projects above. A buyer who expects more choices to appear soon is betting on a board decision that hasn't happened yet.

Owners of resale homes. Projects already in the pipeline can still bring new homes to market. As long as the moratorium holds, though, newly proposed subdivisions in town aren't adding to that supply. That's a factor worth weighing when you decide on timing. It's one input, not a forecast of prices.

Landowners at the edge of town. If you're thinking of selling acreage for its development potential, a buyer will look at whether a new residential subdivision can be approved there. Under the moratorium, that question has no settled answer until the board acts. The sewer capacity is there, and Groves said each added basin brings about 100,000 more gallons a day "without adding much cost." Water service is what's still unresolved.

January 2027 is close. The post goes live in mid-November, which leaves about six weeks until the board's stated review. Board and Planning Commission agendas are posted on the Town of Chapel Hill's agendas and minutes page, which is the best place to follow what happens next.

Quick Answers

Does the new sewer plant end the water moratorium? No. The plant expanded wastewater treatment. The moratorium is about water supply, and the board has scheduled its review for January 2027.

What does the moratorium cover? The town's resolutions describe it as a temporary moratorium on new residential subdivisions due to water supply. To find out whether it affects a specific parcel, contact Town Hall.

Who supplies Chapel Hill's water? The town's two wells, plus water bought from the Marshall County Board of Public Utilities, which buys from Lewisburg Water System.

This post explains public records in plain terms. It isn't legal or financial advice, so please check how any town rule applies to your property with an attorney or the Town of Chapel Hill.

If you own a home or land in Chapel Hill and want to think through what the January 2027 decision could mean for your timing, I'm glad to go through the town records with you and talk over your options without any pressure. Let's connect. Aaron C. Lovett | TN Real Estate Professional