By Joan Gralla

(Reuters) - New York's Suffolk County will look at ways to expand its sewer system to boost development, including a possible sale or some kind of deal with the county's water authority.

County Executive Steve Bellone, a Democrat, included this initiative in the $2.77 billion budget plan he presented on Friday for the fiscal year that starts on January 1.

Suffolk's more than 20 sewer districts could be taken over by the Suffolk County Water Authority. Bellone said the county was looking into a "collaborative relationship" with the authority for the sewer district operations in order to spur development.

"I will be working closely with the Legislature on this issue - any proposal, sale, or memorandum of understanding related to a change in sewer operations will have a full public vetting and will require Legislative authorization," he said.

Suffolk, located on the eastern half of Long Island, is home to the Hamptons summer beach resorts that draw millionaires from around the globe. Preservationists have argued against expanding the sewer system, saying this will lead to over-development.

While the county's household median income of $84,506 easily surpasses the national average of $50,046, Suffolk's reliance on one-shot transactions and volatile sales tax revenue led to a string of unbalanced budgets.

For the new budget, Bellone lowered the projection for sales tax revenue to 3.75 percent in 2013 from 3.85 percent in the current budget.

(Reporting By David Gaffen; Editing by Eric Walsh)