Cities shouldn’t be fined for violating the Clean Water Act when they have an agreement with the federal government to reduce sewer overflows, local officials told a House panel May 18.

Instead, monetary penalties should go for environmental projects that will actually reduce overflows from sewer systems that transport stormwater and sanitary wastewater in one pipe, the officials told the House Transportation and Infrastructure Subcommittee on Water Resources and Environment.

“Civil penalties should be imposed on cities that are resisting improvements, not cities that are showing progress,” said South Bend, Ind., Mayor Pete Buttigieg, who testified on behalf of...