United States
                     Environmental Protection
                      Office of Water
September 1992
Helping  Small  Systems  Comply
With the  Safe  Drinking Water  Act
The  Role of Restructuring
                                                   Providing Safe, Affordable Drinking

                                                   If you are reading this, chances are you
                                                   know of small drinking water systems that
                                                   are between a rock and a hard place. They
                                                   are trying to figure out how to stay in com-
                                                   pliance with increasingly complex Safe
                                                   Drinking Water Act (SDWA) requirements
                                                   without charging more than their customers
                                                   can afford.
                                                   Requires Doing Business Differently...

                                                   Many small systems are able to provide ex-
                                                   cellent service at a reasonable cost. How-
                                                   ever, small systems facing compliance and
                                                   financial difficulties over the long term may
                                                   want to restructure their ownership or op-
                                                   erations. Restructuring solutions can be as
                                                   simple as several systems sharing a certified
                                                   operator or as ambitious as the creation of a
                                                   regional water authority.
                                                   And Making a Team Effort.

                                                   Successful restructuring takes team work.
                                                   Careful planning is required to bring water
                                                   systems, technical assistance providers, regu-
                                                   lators, and consumers together in a coalition
                                                   that can address everyone's needs,

                                                   This brochure answers some of the most
                                                   commonly asked questions about restruc-
                                                   turing and provides sources of additional
                                                                    Printed on Recycled Paper


A: Restructuring is the adoption of management and/or ownership
   changes that help a drinking water system address new responsibili-
   ties and increased costs.

Systems can restructure in a variety of ways. For example:

  • Groups of small systems can buy and share services together.

  • Systems can contract with a private company or larger water system to
   receive services such as operation and maintenance, meter reading and
   billing, and sample collection and analysis.

  • A small system can merge with or be bought out by a larger one.
   Systems may be physically connected following this kind of restructur-
   ing, but they don't have to be.

  • Small privately owned systems can restructure into a non-profit coop-
   erative  or public service district and become eligible for federal and
   state grants and loans.

A: The primary  benefit is economic.  Restructuring: can give small
    system operators access to technical, managerial and financial re-
    sources they could not afford on their own.

Systems who make management changes through restructuring may
also benefit from:

   • ability to make necessary investments in facilities and personnel
   • more reliable and better quality service
   • larger rate base
    access to grant and loan programs
    improved ability to stay in compliance     •
    long-term savings on increasing monitoring, treatment and operation |

                                Q: WON'T WATER RATES INCREASE DUE TO RESTRUCTURING?

                                A: Water rates are increasing for everyone—small systems may be able
                                    to minimize big increases by restructuring.

                                Changes made to the Safe Drinking Water Act in 1986 are improving health
                                protection. In 1986, EPA required water systems to meet standards for only
                                22 contaminants. Today, systems must comply with standards for more
                                than 80 different substances including micro-organisms and chemical by-
                                products of various industrial and agricultural practices.

                                These new requirements mean new testing and analysis expenses for all
                                systems and increased water treatment costs for many. Small systems will
                                be hardest hit because they have fewer customers to share the costs.  For
                                example, additional water testing costs of $5,000 per year would mean $200
                                per family served by a system with only 25 connections.  However, for a
                                larger system of 2,000 connections the same $5,000 expense would amount
                                to only $2.50 per family.
                                Q: DOES RESTRUCTURING MEAN LOSS OF LOCAL CONTROL?

                                A:  No, not necessarily. Some restructuring options enable systems to
                                    remain independently owned and operated.

                                Local control is a very important issue to consider in choosing whether or
                                not to restructure.  Some restructuring options, such as contracting for
                                operation and maintenance services or cooperative buying, allow for a great
                                deal of local control. These options are also useful to consider when it is not
                                possible or not desirable to physically interconnect separate systems.  Other
                                types of restructuring, such as formation of a public  service district, allow
                                for less local control but may give a system access to grants and low interest
                                loans.  The State drinking water program, technical assistance providers
                                and others can help an individual system decide on  the best option.
Satellite Management Success Story

Shortly after Congress passed the Safe Drinking Water Ac t Amendments of 1986, the mayor and city council of Rolesville,
North Carolina knew the cost of providing water to the town's 714 residents was on its way up.

The town would need a trained operator who could devote more time to running the 256 connection system than did
the current operator, who had many other duties as well. But, town officials knew, the cost of training, wages, and fringe
benefits was unaffordable.

Contract operations and maintenance (O&M) was the only option the town had, felt the mayor. He presented the town
council with a proposal to hire Crosby Water and Sewer Inc. in nearby Wake Forest to run the system. The council agreed
inlate!987.                                               ,                ,

Crosby Water and Sewer maintains Rolesville's wells, tests water quality, installs and reads meters.  The company also
advises town officials on water system improvements and other water related issues, all for $8,500 to $9,500 a year. Thaf s *
less than even a part-time trained operator would cost, according to the mayor.

The benefits of contract O&M were not long in coming to Rolesville, officials note. During the first year that Crosby
operated the system, the company's operational expertise helped reduce by 75 percent town's use of chemicals to treat

                                Q: Is RESTRUCTURING THE ANSWER FOR SMALL SYSTEMS?

                                A:  No. Small systems facing compliance problems over the long term
                                    will need a mixture of solutions.

                                Every small system's situation is different. Its needs and the practicality
                                of meeting those needs through restructuring will vary depending on:

                                  • Local water quality
                                  • Nature and cost of required improvements
                                  • Current user costs and customer ability to pay
                                  • Geography and distance between systems
                                  • Availability of grants and loans
                                  • Availability of technical assistance
                                  • Local political considerations.

                                In many cases, restructuring won't solve all the problems.  In addition to
                                restructuring systems should also consider:

                                  • Improving their mangement and  operations through training and
                                    technical assistance;

                                  • Finding out what flexibility the state drinking water program can
                                    offer—for example, some states may be willing to require less frequent
                                    monitoring in certain circumstances;

                                  • Utilizing appropriate low-cost technology if increased treatment is

                                  • Educating customers about new requirements, increased health protec-
                                    tion and rising costs.
Consolidation Creates a Regional System

Consolidating numerous non-viable drinking water systems into a single, viable one can make system improvements
affordable and ensure the provision of safe drinking water. That's what happened north of Lakeport, California, where
51 small water systems and 500 individual connections were formed into a single water system in December 1990.

Prior to consolidation, 80 percent of the area's small systems were having trouble meeting water quality standards. Both
the ground water and Clear Lake were poor sources of supply.

Residents complained about the water, and a juvenile hall in the area was having severe water quality problems.
Development of a 100-unit subdivision was threatened when the developer's well went dry after only 8 houses were
completed. The county wanted to build a jail in the area, but couldn't without adequate water.

A county-sponsored feasibility study considered eight options, including creation of a regional water system. Although
some residents faced water bill increases of $1-2 a month, voters approved the formation of a County Service Area and
decided to build a new modern treatment facility.


A: Small" systems have limited resources — time, manpower,, equip-
   ment, parts, inventory, and knowledge. Restructuring can sometimes
   help to compensate for these limitations but it does require careful
   upfront planning. The following organizations are interested and
   knowledgeable about drinking water systems restructuring and can
   help a system find a local source of assistance.

  American Water Works Association (AWWA), Small System Department,
  6666 West Quincy Avenue, Denver, CO 80235. (303) 794-7711.

  National Rural Water Association (NRWA), 2915 South Thirteenth Street,
  P.O. Box 1428, Duncan, OK 73534. (405) 252-0629.

  Rural Community Assistance Program (RCAP), 602 S. King Street, Suite 402,
  Leesburg, VA'22075. (703) 771-86361

  State drinking water program staff and EPA Drinking Water Mobilization
  Coordinators can also facilitate restructuring efforts. The SDWA Hotline
  (800-426-4791) can identify the appropriate contact in your area.

A: The EPA Office of Water recently published a restructuring manual.

The Restructuring Manual (EPA570/9-91r035) covers different types of restruc-
turing options and discusses some of the most commonly encountered problems
that can slow or stop a restructuring effort. It is available from the EPA Safe
Drinking Water Hotline (1-800-426-4791) or the Office of Ground Water and
Drinking Water Resource Center, USEPA, 401 M St. SW, Washington, DC 20460.

Safe Drinking Water
    (800) 426-4791
         U.S. Environmental Protection Agency
                 Drinking Water Programs
For More Information, contact the office that represents your state
                              EPA Region 1
                              GW Mngt./Water Supply Branch
                              John F. Kennedy Federal Building
                              Boston, MA 02203
                              Connecticut, Maine,
                              Massachusetts, Rhode Island,
                              New Hampshire, Vermont
                              EPA Region 2
                              D/G Water Protection Branch
                              26 Federal Plaza
                              New York, NY 10278
                              (212) 264-1800
                              New York, New Jersey,
                              Puerto Rico,  Virgin Islands
                             EPA Region 3
                             D/G Water Protection Branch
                             841 Chestnut Building
                             Philadelphia, PA 19107
                             (215) 597-8227
                             District of Columbia, Maryland
                             Pennsylvania, Virginia,
                             West Virginia
                             EPA Region 4
                             Municipal Facilities Branch
                             345 Courtland Street, N.E.
                             Atlanta, GA 30365
                             (404) 347-2913
                             Alabama, Florida, Georgia,
                             Kentucky, Mississippi,
                             North Carolina, South Carolina,
                             EPA Region 5
                             Safe Drinking Water Branch
                             77 West Jackson Blvd.
                             Chicago, IL 60604
                             Illinois, Indiana, Minnesota,
                             Michigan, Ohio, Wisconsin
                                 EPA Region 6
                                 Water Supply Branch
                                 1445 Ross Avenue
                                 12th Floor, Suite 1200
                                 Dallas, TX 75270
                                 Arkansas, Louisiana, New Mexico,
                                 Oklahoma, Texas
                                 EPA Region 7
                                 Drinking Water Branch
                                 726 Minnesota Avenue
                                 Kansas City, KS 66101
                                 Iowa, Kansas,
                                 Missouri, Nebraska
                                 EPA Region 8
                                 Drinking Water Branch
                                 999 18th Street, Suite 500
                                 Denver, CO 80202
                                 (303) 293-1413
                                 Colorado, Montana,
                                 North Dakota, South Dakota,
                                 Utah, Wyoming
                                 EPA Region 9
                                 D/G Water Protection Branch
                                 75 Hawthorne Street
                                 San Francisco, CA 94105
                                 (415) 744-2250
                                 Arizona, California, Hawaii,
                                 Nevada, American Samoa,
                                 EPA Region 10
                                 Drinking Water Branch
                                 1200 Sixth Avenue
                                 Seattle, WA 98101
                                 (206) 553-6648
                                 Alaska, Idaho,
                                 Oregon, Washington