You are not responsible for the faulty equipment. You are responsible for the water and sewer usage you used. It *sounds like* what essentially has happened is that you used way more water than what you were actually billed for. If this is true, I do not think you have a good argument for not paying. It sounds like they are making it relatively easy to pay off the debt. Unpaid water bills are a lien on the property, so I would make every effort to resolve this. If they are willing to accept modest installments, I would take them up on it. Since this was a problem for the past 10 years, see if they will accept payments over that time period. That would work out to payments of about $12 per month.
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I would need more details but IF they are correct it appears that you owe for the service, however at least part of the bill is past the statute of limitations and not legally enforceable.
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