The Little Rock Water Reclamation Authority in Arkansas has spent millions of dollars rehabbing its collections system, all aimed at meeting a consent order to reduce I&I and put a stop to manhole overflows.

But those efforts eventually reached a point of diminishing returns. The utility decided to turn to a different source of I&I — customers’ portion of the laterals running to the sewer main. The utility devised a reimbursement program to entice customers to...