Storm sewer systems and their associated utility trenches may strongly influence the effects of urbanization on a groundwater system. This study was undertaken to identify the causes of district‐wide basement infiltration in an aquitard system. It comprised widespread continuous monitoring of utility trench wells and dye tracing from storm sewer system exfiltration tests. The results indicate that a major effect of urbanization on shallow groundwater is related to storm sewer system exfiltration, which is marked by a characteristic pattern of head variations in the aquitard unrelated to distributed surface infiltration. The aquitard constrains flow from storm sewer system exfiltration to the utility trench, creating an urban flow path for groundwater discharge. Temporary buildup of water levels in the utility trench drives relatively high‐velocity flow through the permeable sewer bedding material of the utility trench to a separate foundation drainage collector system, ultimately causing a severe “urban karst” effect that produces system surcharging and widespread basement water infiltration. The main conditions causing the “urban karst” are the large hydraulic conductivity ratio between the utility trench material and the aquitard, and the shallow depth and low gradient of the storm sewer system imposed by a very flat drainage basin.