THERE is a chemical smell to the air outside the sewage plant here.
A worker assures a visitor that the effluent is 97 to 98 percent pure after it leaves the plant and enters a tributary of the East Branch of the Delaware River that feeds into the Pepacton Reservoir and eventually into New York City residents' taps.
But this particular sewage plant, owned and operated by New York City, has a history of violating its operating permit.
Local residents claim it has spewed raw untreated sewage.
Not so, says Marilyn Gelber, the city's commissioner of the Department of Environmental Protection.
She claims Margaretville got its pipes mixed up at the local high school and ran its own sewage through its drinking-water pipes.
But she admits there have been violations at the plant, which is now budgeted for a $30 million reconstruction. As part of an arrangement worked out with the village, the city is spending $500,000 on community projects such as environmental studies for children.
''I can't wave a wand and make it go away,'' Ms. Gelber says. But the city is spending $120 million to upgrade its sewer facilities.
In the future, it hopes to divert some of the waste water into other areas that have extra capacity or empty it into underground storage.