BOSTON -- Nowhere is the rebirth of this once down-at-the-heels city more evident than on its waterfront. Along Atlantic Avenue, modern high-rise office buildings, hotels and marinas have taken the place of abandoned warehouses and rotting piers that once lined the seaside.

But the harbor is a throwback to the last century. Because sewage and rainwater drain into the same overflow pipes, untreated human waste runs into the harbor at more than 100 places every time it rains, leaving trails of brown scum within sight -- and smell -- of expensive restaurants and boating facilities.

Worse, two dilapidated sewage treatment plants release nearly 500 million gallons of partly treated sewage each day into water less than half a mile from shore, turning the ocean a milky green on even the clearest day.

The result is one of the nation's filthiest harbors, and federal officials say Boston is far behind other port cities in cleaning up the mess.

"Boston is the most egregious violator of the Clean Water Act in the country," said Michael Deland, regional administrator of the U.S. Environmental Protection Agency.

Planning has begun for a $3 billion cleanup. After two lawsuits were filed against the state in 1982 and 1983 by the nearby city of Quincy and the Conservation Law Foundation of New England, state officials created the Massachusetts Water Resources Authority (MWRA) to revamp a sewer system that serves 2.5 million people in 43 cities and towns in the greater Boston area.

The suits also led to a federal court order that established a series of construction deadlines for state-of-the-art sewage treatment by the year 2000.

But many officials here say that the pollution crisis in Boston harbor has just begun. Although MWRA officials expect to receive some federal and state funds, most of the money for the cleanup will come from consumers through water and sewer bills.

"We're talking about rates quadrupling by 1995," Paul Levy, MWRA executive director, said. "We're paying for the neglect of the last 20 years."

The average household, which now pays $300 a year for water and sewer service, could expect to pay $1,200 within eight years. By comparison, the average oil-heated household spends about $750 in a six-month heating season.

Environmentalists here fear that "rate shock," and the possibility that home owners and landlords will refuse to pay bills, could jeopardize completion of MWRA projects. They also say that skyrocketing water and sewer bills will add to the pressure on householders already struggling in one of the most expensive housing markets in the country.

"I don't think the political system is going to be able to tolerate that kind of imposition of costs on low- and moderate-income people in the MWRA area," said James Hoyte, state secretary of environmental affairs and chairman of the MWRA board.

In large urban areas where authorities began building new sewage treatment plants in the 1970s, the federal government has paid most of the cost of modern sewage treatment plants -- in some cases as much as 75 percent -- with funds provided under the Clean Water Act.

But by the time state officials here began thinking about a cleanup, Clean Water Act funds had dried to a trickle. "By being one of the last areas in the country, Boston has lost out on what was a $40 billion-plus program," the EPA's Deland said.

Some environmentalists put part of the blame on Gov. Michael S. Dukakis, a candidate for the Democratic presidential nomination, because his administration applied for a waiver of a Clean Water Act requirement in 1978.

Peter Shelley, senior counsel for the Conservation Law Foundation, said, "I think their motive was wrong. Their motive was to save money."

Dukakis said this week that in 1978 -- the last year of his first term in office -- the state did not have the money to begin cleaning Boston harbor, despite the availability of federal funds. "Unfortunately, the state was bankrupt at the time," he said, referring to a state deficit inherited from the previous administration. "And I'm very proud of what we've done since 1983," the year he began his second term.

More recently, the harbor cleanup has met with other obstacles. Residents in 12 communities selected as possible sites for a plant to treat sludge -- the product of primary and secondary sewage treatment -- have objected loudly.

And EPA officials say construction planning for the primary and secondary treatment plant is more than a year behind schedule. This week, Deland announced that EPA would hold up more than $13 million in federal funds for sewage pipes in two western suburbs until the MWRA shows signs of meeting its schedule.

"It simply does not make sense to move forward with this project at a time when cleanup of the harbor is in trouble," Deland said. "It would result in increased development and thus increase sewage to the harbor through an outdated and already overloaded treatment plant."

Levy responded that other aspects of the cleanup are ahead of schedule, and said the MWRA would replace the sewage pipes west of Boston without the federal funds earmarked for that purpose.

But in the long run, officials say, the more serious obstacle to cleaning the harbor will be money. Eventually, they predict, the MWRA will be forced to ask for additional federal or state funds to augment the share paid by consumers.

"You can't get money from people who don't have it," Shelley said, "and you can't tell people to stop using their toilets."