Oak Bluffs wastewater officials on Tuesday unveiled a $2.58 million sewer expansion plan along County Road between the Martha’s Vineyard Hospital and town fire station, which would connect some 450 lots to the town sewer system, 119 of which are currently vacant.

Wastewater superintendent Joe Alosso presented the plan at the selectmen’s regular meeting; he said the expansion is intended to dramatically reduce nitrogen loading in the Lagoon Pond. Although the sewer plan has been discussed in the past, this was the first time the plans were made public.

Also present were the Tisbury selectmen, who met in joint session with Oak Bluffs this week to discuss combining services in the future, including possibly police, fire, shellfish and finance. Mr. Alosso said sewer expansion would benefit both towns by improving water quality in the Lagoon.

“Sewering this neighborhood along Lagoon Pond is the wastewater department’s number one priority right now. Because this is such a densely populated area, we definitely get the most bang for our buck,” Mr. Alosso said.

There is no settled plan yet for how to pay for the project. Mr. Alosso said the wastewater commission may decide to use money from its retained earnings account, or it may decide to split the cost between users and taxpayers. The cost will jump to $5.5 million if grinder pumps are installed for every home.

Selectman Ron DiOrio said he supports the plan, but asked whether it would make other lots in the area, including substandard lots, buildable.

Mr. Alosso said that it would.

“Well, that certainly has an impact. I think we need to assume a large percentage [of these lots] will be developed,” Mr. DiOrio said.

“We are concerned about that,” Mr. Alosso agreed.

Selectman Gail Barmakian said the town should consider the impact of development before green-lighting the new sewer line.

“We need to address the capacity for nonconforming lots to [be developed]. We should take this one step at a time,” she said.

Selectman Kathy Burton agreed. “So many people have come up to me who have a problem with [small lots] and very large homes in that area. I hear it all the time, it changes the quality of life for the people who are already there,” she said.

She said public hearings and a town meeting vote will be required.

In other business, selectmen voted to approve new taxi regulations that will require taxi companies to carry more insurance and also change late-night surcharges on fares. An earlier vote on the regulations was delayed so selectmen could meet with taxi owners to discuss the proposed changes.

Taxi owners will be required to carry $100,000 coverage for accidents and $300,000 for policy term insurance, and companies will be limited to a surcharge of one and a half times the usual fare between the hours of 2 a.m. and 5 a.m.

Cab drivers who attended the meeting complained about new staging and drop-off areas at the Steamship Authority terminal on Seaview avenue. They said the drop-off area is too far away from the terminal entrance for people who are elderly, and many people getting off the boats are unclear where the cab stand is.

Mr. Dutton also told selectmen that the powerful thunderstorm early Saturday morning damaged the phones and electrical systems at town hall and town library, and also damaged some wastewater mechanicals buried under Ocean Park. Mr. Dutton estimated the storm did between $6,000 and $10,000 worth of damage.

As of yesterday some town phone systems were still not working.