WASHINGTON — Jersey City will spend more than $1 billion to upgrade the city’s drinking water system and improve its municipal combined sewer system under an agreement with the Department of Justice and the Environmental Protection Agency (EPA), federal officials announced Thursday. The agreement, with the city’s Municipal Utilities Authority, is expected to significantly reduce the amount of pollution being discharged into the Hackensack River, Hudson River and Newark Bay, and benefit many Jersey City neighborhoods that face environmental justice challenges. The agreement is a modification of…