-------
CHAPTER SIX: FINANCIAL CHARACTERISTICS:
REVENUES AND RATES
VI-1 Reported Annual Revenues for Systems
Which Charge for Water—1975 VI-3
VI-2 Public Vs. Private System Revenue
Levels Mean Annual Revenues—1975 VI-5
VI-3 Mean Annual Revenues by Primary
Source of Water—1975 VI-7
VI-4 Revenue Rates Per Thousand Gallons
Produced—1975 VI-8
VI-5 Revenue Rates by Ownership Type Per
Thousand Gallons Produced—1975 VI-11
VI-6 Reported Residential Rates Based on
Family Usage of 100,000 Gallons
Per Year—1975 VI-14
VI-7 Computed Rates Per Thousand Gallons
Produced VI-16
VI-8 Budget Appropriations Received by
Publicly-Owned Systems—1975 VI-18
CHAPTER SEVEN: FINANCIAL CHARACTERISTICS:
OPERATING EXPENSES, INTEREST AND TAXES
VII-1 Total Operating Expenses (
-------
VII-8
VII-9
VII-10
VII-11
VII-12
Tax Expense for Private Systems—1975 VII-18
Interest Expense, All Systems—1975 VI1-20
Embedded Interest Rates (%)—1975 VI1-22
Surplus or Deficit
(Number Reporting)—1975 VII-24
Reported Surplus or Deficit
(
-------
LIST OF FIGURES AND EXHIBITS
FIGURE n-i
FIGURE V-l
FIGURE VI-1
FIGURE VI-2
FIGURE VII-1
FIGURE VIII-1
NATIONAL PROFILE OF WATER SYSTEM
CHARACTERISTICS
PERCENT OF SYSTEMS WHICH TREAT ALL
WATER— 1975
REVENUES PER THOUSAND GALLONS
PRODUCED, ALL CUSTOMERS—1975
DISTRIBUTION OF SURVEY RESPONSES
REVENUES PER THOUSAND GALLONS
PRODUCED FOR SYSTEMS SERVING
2,500-5,000 PEOPLE
TOTAL OPERATING EXPENSES BY PRIMARY
SOURCE OF WATER
II-6
V-13
VI-9
VI-11
VII-6
TOTAL ASSETS OF COMMUNITY WATER SYSTEMS VIII-5
EXHIBIT 1-1
EPA REGIONS—DISTRIBUTION OF SYSTEMS
EXHIBIT III-l FINAL RESULTS OF THE 1,732 SYSTEMS
WHICH DRC ATTEMPTED TO CONTACT
1-6
111-13
(vii)
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CHAPTER ONE
INTRODUCTION AND BACKGROUND
INTRODUCTION
During the last year and a half the Environmental
Protection Agency, Office of Water Supply, has been conducting
a series 'of research activities to analyze the impacts of the
Safe Drinking Water Act of 1974 and its associated regulations.
One of several components which has been undertaken by Temple,
Barker & Sloane, Inc., is a survey of community water systems
to improve and expand upon existing operating and financial
information on the nation's drinking water suppliers. The
purpose of this report is to present the results of the Com-
munity Water System Survey and to document the information col-
lection process.
The intent of Congress in passing the Act was to in-
sure the high quality of the drinking water supplied to con-
sumers regardless of the size or other characteristics of the
water system providing the water. On the other hand, such in-
suran.ce carries with it potential treatment requirements and
additional costs to water systems (and ultimately to consumers)
which might be infeasible given the existing financial profile of
certain water systems. One of EPA's objectives has been to determine
what financial impact the Congressional legislation and related
regulatory guidelines would have on water suppliers and consumers.
Such determination would permit the Agency to promulgate final
Water systems serving twenty-five persons or more and/or maintaining
fifteen or more service Gonneotions on a year-round basis.
-------
1-2
regulations which would be sufficiently realistic to be im-
plementable and would, at the same time, satisfy the intent
of Congress.
THE NEED FOR A SURVEY
When the Proposed Interim Primary Drinking Water
Regulations were issued in the spring of 1975, a number of
questions were raised which helped to focus EPA's research
efforts. Among them were queries concerning:
• The costs of complying with the regulations
• The differences in the degree of the impacts
which would be felt among different types of
water systems
• The financial profile of the water utility
industry
• The economic and financial feasibility of im-
plementing the regulations.
In the process of addressing these questions through a
2
study conducted by Energy Resources Company, it became clear that
the most substantial relative cost impacts would probably occur
among small systems serving 25 to 500 people. In addition, it
appeared that the relative impacts were distributed unevenly among
systems of different ownerships or water source. The ERCO study
also indicated that there was a severe lack of detailed operating
and financial data for systems serving fewer than 10,000 people.
As a result, EPA determined that a survey should be conducted which
would provide background information on the general operating,
treatment, and financial practices of water systems of all sizes,
2
"Economic Evaluation of the Promulgated Interin Primary Drinking Water
Regulations" for EPA, October 1975
-------
1-3
ownerships (i.e., public and private), and water sources (i.e.,
ground, surface, purchased, or mixed sources).
The results of the survey would then be used in
several ways, including:
• Improving the understanding of the financial
position of small water systems for EPA
analysis of regulations
• Updating and validating existing data which
has been used in EPA's analyses and to
develop a financial impact analysis model
of the water utility industry
• Providing a more complete basis for evaluating
the feasibility and impacts of potential new
regulations under the Safe Drinking Water Act.
SURVEY SAMPLE
TBS conducted the survey during the spring of 1976
and completed the analysis of survey results in the fall of 1976.
The selection of water systems to participate in the survey was
based upon the need to obtain reliable data from small- and
medium-sized systems and verify and update existing information
on large systems. The objective was to include about 1,000
water systems in the final sample which were representative of
the industry in terms of population served, location, ownership,
and water source.
In order to achieve the objective, an original sample
3
of 2,139 community water systems serving between 25 and 100,000
people was randomly selected from the EPA inventory of approxi-
mately 43,000 systems. In addition, all 232 systems serving
over 100,000 people were included as part of the original sample.
3
The original sample consisted of about one thousand systems stratified by EPA
region and size and controlled by ownership and water source. An additional
group of 1,000 with similar characteristics were selected as alternates.
-------
1-4
Once the survey was completed, the final participating
sample (those systems which returned completed questionnaires)
totalled 984 systems. Of these, 48 percent serve fewer than
1,000 people, 22 percent serve between 1,000 and 10,000, and
9 percent serve between 10,000 and 100,000 residents. Finally,
203, or 21 percent, of the total are large systems, those which
4
serve over 100,000 residents.
Among the participating systems publicly-owned systems
are more frequently represented. Sixty-three percent (622) of
the final sample is publicly-owned. Of the 362 systems which
are privately (investor) -owned, 75 percent serve fewer than
500 people.
The distribution of systems by region for all sizes
is relatively even. Region IV, which covers eight states in
the East South Central and South Atlantic area of the country,
has the largest representation with 117 systems. Region X, the
Northwest, which includes three states, has the lowest with 76
sytems. The following table presents the distribution of systems
by size and region; the map following illustrates the regional
subdivisions.
Eighty percent of the population served by community water systems receives
water distributed by these large systems; of the existing 232 sytems, 90
percent participated in the survey.
-------
1-5
Table 1-1
DISTRIBUTION OF SYSTEMS BY SIZE AND REGION
COMMUNITY WATER SYSTEMS SURVEY DATABASE
Population Category
EPA Region
Region
Region
Region
Region
Region
Region
Region
Region
Region
Region
TOTAL
I
II
III
IV
V
VI
VII
VIII
IX
X
25-
99
19
16
27
14
12
11
4
4
15
23
145
100-
499
20
19
21
26
19
24
28
35
24
19
235
500-
999
10
4
6
10
15
6
17
12
8
7
95
1,000-
2,499
6
10
11
10
15
22
14
16
5
7
116
2,500-
4,999
7
7
7
4
7
6
6
8
5
6
63
5,000-
9,999
8
2
4
6
5
1
2
3
8
3
42
10,000-
99,999
11
9
11
6
7
7
5
10
14
5
85
100,000-
999,999
14
26
24
41
26
13
12
5
25
6
192
> 1 mil
-
1
3
-
3
2
1
-
1
-
11
Total
95
94
,114
117
109
92
89
93
105
76
984
STRUCTURE OF THE REPORT
The chapters which follow are intended to provide
information and documentation in a manner which makes the survey
results usable and their source and validity clear. Chapter Two
summarizes the major results of the survey. Chapter Three
describes the methodology for data collection and analysis.
Chapters Four and Five cover the general and operating charac-
teristics of community water systems. Chapters Six through
Eight discuss the financial characteristics of participating
systems. Finally, the Appendix provides references to other
materials on water utility finances as well as copies of the
survey questionnaires and coding procedures.
-------
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-------
CHAPTER TWO
SUMMARY
The results of the Community Water System Survey
provide economic and operating information about water systems
of all sizes and operating complexity. The information is
valuable to on-going research activities in several areas re-
lated to drinking water supplies and lends itself to varying
levels of detail in presentation. The purpose of this summary
is to cover the major findings in a brief manner for the
readers who may not need further detail, and to establish a
context for the discussion in other chapters. The three
perspectives selected for the summary are:
• The structure, size, and economics of the
water supply industry at the national level,
which can be inferred from the survey results.
• The operating and fiscal characteristics of
typical water systems in each of nine size
categories.1
• The major financial patterns and differences
among systems which are indicated by the
survey results.
The first two of these perspectives summarize the
results of the survey in ways which are not done in the later
chapters. First, the other chapters discuss results in terms
of the sample population; this is the only chapter which intro-
duces a national context. Second, the later chapters generally
discuss results individually, on an item-by-item basis; this
For purposes of analysis and reporting, water systems have been grouped
according to the residential population they serve: 25-99; 100-499;
500-499; 1,000-2,499; 2,500-4,999; 5,000-9,999; 10,000-99,999; 100,000-
999,999; over 1 million.
-------
II-2
is the only chapter which presents an integrated and complete
profile of typical water systems in each size category.
In reviewing the summary chapter, it should be
recalled that the data are based on 984 individual water systems.
As one would expect, there are significant differences in the
characteristics reported across size categories. Within each
size category, there is also a wide range of responses, even
among systems of similar size and characteristics. Some of
the reported differences can be attributed to variations in
demand levels, location, water source, customer mix, and
treatments used. Other differences can not be explained by
the data obtained in this survey and may reflect variations in
the historical development of the water systems, local conditions,
individual customers, and so on. The diversity of characteristics
in water production and distribution is reflected in similar
differences in the capital expenditures, operating costs, and
revenue requirements which were reported.
One must be mindful of this variability when inter-
preting and using the results of the survey. The later chapters
facilitate interpretation by addressing the variability ex-
plicitly, often in terms of means, medians, and standard
deviations. In reading this chapter the reader should under-
stand that the typical system characteristics are just that—
"typical" for systems of a certain type, but not uniformly
true for all of them—and that the national extrstpolations
are based upon the averages provided by the survey results.
THE WATER SUPPLY INDUSTRY AT THE NATIONAL LEVEL
The water supply industry includes thousands of
individual community water systems ranging in size from those
serving less than a hundred people to some serving over a
-------
million people. Water systems all produce the same product,
regardless of size; they also have in common the same basic
production and distribution processes, although they vary in
complexity and sophistication. The economics of operation and
the financial capabilities of firms, on the other hand, are
not at all consistent across the range of sizes and favor the
largest systems,
INDUSTRY PROFILE
Some of the survey data have been extrapolated
to the national level to provide a profile of the industry as
a whole. The extrapolation is based upon the- d 1 stribution of
systems in the EPA Inventory of Community Wa'cer Systems. The
Inventory served as the sampling population for the survey
and provided the only statistics available on the number and
size distribution of water systems currently operating nation-
wide. Adjustments have been made to the number and distribution
of systems indicated by the Inventory to include new systems
which would have been formed in the last year, and to exclude
duplicates, systems which serve under 25 permanent residents,
and systems which no longer exist.
On that basis it is estimated that approximately
35,000 community water systems were in operation in 1976,
2
serving a total population of 192 million. The breakdown of
the total estimate into the nine system size categories used
in this report is shown in Table II-l.
The definition of the water supply "industry" as used in this report
includes all community water systems which: a) serve 25 or more year-
round residents or have IS or more connections serving permanent resi-
dents; b) are investor-owned or publicly-owned at the local or state
level; and c) are located in the contiguous 48 states or Washington,
D.C. This definition excludes the following system categories because
representative data was not obtained for them; a) those which serve
only non-residents or which serve only wholesale and no retail customers;
b) those which are federally-owned; and c) those located in the U.S.
territories, Alaska or Hawaii.
-------
II-4
Perhaps the most important observation to be made
from the table is simply the significance of small systems:
half of the total number of systems, over 18,000, serve
fewer than 500 people. At the other end. of the scale, the
systems serving over 10,000 people (the ones to which most of
the public data relate) comprise only 8 percent of the total
systems.
The population figures on the table,_as expected,
display exactly the opposite pattern. Despite their large
numbers, the small systems serving fewer than 500 people
account for less than 2 percent of the population served by
water systems in the country. in fact, the data indicate an
"80 and 8" pattern--8 percent of the systems, in the three
largest sizes, account for 80 percent of the population. The
opposite also holds, that 80 percent of the systems at the
samller end, account for only 8 percent of the population.
Table II-l
NATIONAL ESTIMATES OF SYSTEMS AND POPULATION
SERVED, 1976*
Population Category
No. of Systems
percent
25-
99
6,308
18*
Population Served 0.4
(millions)
percent
**
100-
499
11,714
3«
2.8
2%
500-
999
4,932
14*
3.4
2%
1,000-
2.499
4,850
14*
7.6
4*
2,500-
4,999
2,496
7%
8.7
4*
5,000-
9,999
1,646
5%
10.4
5*
*Based on EPA Inventory (adjusted) and Community Water Systems Survey,
Excludes systems which are federally- owned, directly serve fewer than
residents, or are located in the U.S. territories, Alaska or Hawaii.
**Less than one
percent.
10,000-
99.999
2,442
7%
73.8
100,000-
999,999 >1 mil 11 on
232 11
1* **
58.9 26.2
38} 31* 14*
TBS, 1976.
25 permanent
Total
34,631
100*
192.2
100*
-------
II-5
A graphical profile of the industry in terms of
system size, ownership, and primary water source is shown
on the following page. The first two graphs illustrate the
pattern described above in terms of numbers of systems versus
number of people served in the small and large system size
categories. The other major points illustrated in Figure II-l
are :
• publicly-owned systems make up 56 percent
of the systems and serve 84 percent of the
population;
• investor-owned, or private, systems of course
show the reverse, with 44 percent of the
systems and only 16 percent of the popula-
tion;
• ground water systems number 75 percent of all
systems but produce only 39 percent of the
average daily water production of the U.S.;
• purchased water systems are about even, at 12
percent of the systems and 12 percent of the
water produced, treated, and distributed;3 and
• surface water systems account for only 13 percent
of the systems but 49 percent of the daily water
production.
The breakdown by system size category of two key
operating statistics at the national level are presented in
Table I1-2. One of those items is the average daily pro-
duction of systems. The mean, or average, production level
Of course, purchased water •is originally either ground or surface water
produced and sold twice, once to the purchased water system and finally
to the ultimate customer. To some degree, this volume is included
ttiice in the figures here which are based upon the total water production
and sales of each system. At the same time, however3 a large portion of
purchased water is bought from systems which sell water on a wholesale
basis only (e.g. Metropolitan Water District of Southern California and
the Metropolitan District Commission of Boston). These "wholesale only"
systems were not included in the survey and as a result the water they
sell appears only on the production reported by "Purchased Water Systems."
-------
II-6
FIGURE II-l
NATIONAL PROFILE OF WATER SYSTEM CHARACTERISTICS
25-2,499
2,500-9,999
10,000-
OVER 1 MILLION
SYSTEM SIZE
(RESIDENT POPULATION SERVED)
20 10 60 80 100
% OF SYSTEMS
85?
.1.1.1.1.1
20 HQ 60 80 100
% OF POPULATION
OWNERSHIP
0 20 10 60 80 100
I OF SYSTEMS
16%
.1.1.1.1.1
20 40 60 80 100
I OF POPULATION
PRIMARY NATER SOURCE
PURCHASED
75%
I . I • I .I. I
0 20 40 60 80 100
% OF SYSTEMS
.1.1.1.1.1
20 HO 60 80 100
% OF POPULATION
NOTE: TOTAL SYSTEMS = 34,631; POPULATION = 192,2 MILLION;
DAILY WATER PRODUCTION = 33,300 MGD
-------
II-7
ranges from .006 MOD (million gallons per day) for systems
serving 25 to 100 people, to 496.660 MGD for systems serving
over 1 million people. A production level of 1 MGD is charac-
teristic of systems serving approximately 7,000 people.
The median data presented in Table II-2 illustrate
the relationship of the mathematical average results and the
typical (mid-point in the range) reported figures which is
generally evident in all of the survey results. In the case
of the average daily production presented here, the median or
typical levels are approximately 15 to 40 percent lower than
the mean levels across the size categories.
The second operating statistic shown in Table II-2
is the breakdown of water source within each size category.
These numbers show the predominance of ground water systems
in the small system sizes and therefore in the total industry.
They are presented here primarily for reference by those wishing
to evaluate regulations which would affect systems differentially
by source.
Table 1 1-2
SELECTED OPERATING CHARACTERISTICS
OF COMMUNITY WATER SYSTEMS
NATIONAL ESTIMATES BY SIZE CATEGORY
1976
Population Category
25- 100-
99 499
Number of Systems
(total) 6
Average Dally
Production (MGD)
Mean
Median
Number of Systems
by Primary Water
Source
Ground 5
Surface
Purchased
*Based on EPA Inventory
,308 11
.006
.004
,930 9
63
,714
.025
.019
,488
586
315 1,640
(adjusted)
500-
999
4,932
.075
.063
3,452
888
1,000- 2,500- 5,000- 10,000- 100,000-
2,499 4,999 9,999 99,999 999,999
4,850
.200
.160
3,347
824
592 679
and Community
2,496
.480
.414
1,448
674
374
Water
1,646
.921
.731
1,053
428
165
Systems
2,442
5.059
3.027
1,270
757
415
Survey, TBS
232
48.003
30.948
65
137
30
, 1976
> Immion Total
1] 34,631
496.660
355.700
1 26,054
10 4,367
0 4,210
-------
II-8
FINANCIAL SCOPE OF THE INDUSTRY
The application of the survey's financial results to
the numbers of systems estimated above provides a projection
of the industry's national financial scope. One of the chief
conclusions which results from such projections is that the
industry is one of the nation's most capital-intensive in
terms of asset requirements per dollar of revenue. Other
industries range from less than one dollar to about four
dollars of-assets per revenue dollar—airlines at $1, rail-
raods at $2, telephone companies at close to $3, and electric
utilities at $3 to $4. Water systems, however, according to
the survey data (and confirmed by other sources) are operating
at approximately $6 to $10 of assets per dollar of revenues.
The reason is a combination of low revenues, high investment,
and long physical lives for the assets (often fifty years
and more).
The national financial projections for the industry
based upon the survey data are displayed in Table I1-3.
As the table shows, the industry's projected annual revenues
were approximately $4.9 billion in 1975. For residential
customers that amounted to about $18 per capita for the year.
Revenues from all sources, for perspective, were $25 per capita,
For the same year, 1975, the industry's total assets
are projected to have been $49.6 billion based on the survey
4
averages. That level is significant on any scale, although
.it is by no means the largest utility industry. Total assets
for water systems amount to approximately half the investment
Again, note the "industry" definition is community water systems which
serve retail customers. That excludes certain federal arid other dams,
reservoirs, and distribution and treatment systems which would add
significant revenues and assets to these totals. See footnote on page
I I-3.
-------
II-9
of the telephone industry and one-fourth that of the electric
utilities. At an individual level, total water system assets
across the country average $258 per capita for the population
served.
•
The industry's capital expenditures for the six-
year period, 1970-1975, are estimated to have been approxi-
mately $7.6 billion based upon the reports of the individual
systems in the survey. On an annual basis that was an aver-
age of $1.3 billion per year. The sources of funds for cap-
ital projects, according to the survey responses, are esti-
mated to have been 28 percent from internally-generated funds
and 72 percent from the capital markets.
Table II-3
NATIONAL FINANCIAL PROFILE
COMMUNITY WATER SYSTEMS*
(totals for all systems in millions of dollars)
Revenues
Total Assets
Capital Expenditures,
1970-1975
Cumulative
External Financing,
1970-1975
Cumulative
25- 100-
99 499
$ 14 86
$ 107 1.148
$ 13 216
$ 2 166
•Based on Community Water System Survey
directly serve fewer than 2S permanent
500- 1,
999 2.
99
1,046 1.
144
000-
499
198
930
437
107 354
results--mean
residents, or
1975
2,500-
4,999
221
2,995
619
5,000-
9,999
249
2.658
810
581 447
values. Excludes
are located 1n the
10,
99.
1.
20,
2,
000-
999
951
247
676
100
999
1
14
2
,000-
,999 > 1
,511
,793
,093
Million
556
4.654
562
1,600 1,573 394
systems which are federally-owned,
'J S. territories, Alaska or Hawaii.
Total
4,885
49,578
7,570
5,458
-------
11-10
TYPICAL SYSTEM CHARACTERISTICS IN EACH SIZE CATEGORY
The information presented above portrays an unusual
industry, one dominated in numbers by very small systems, and
at the same time one w*Lth relatively high investment demands.
This section presents a profile of the individual systems which
make up the industry.
The data is presented in terms of typical systems in
each of the nine size categories used in the analysis. The
values which are used here are equal to or near the median
values in the survey data. Accordingly, these profiles re-
flect situations which are "typical." For any given item ap-
proximately half of the systems will have reported higher val-
ues and half will have reported lower values. It should be
noted however that the typical system financial statements do
not literally include the median values reported for each of
the individual line items. The purpose of these financial
statements is to describe a financial profile which is both
representative of relatively common situations and is inter-
nally consistent. The reported median values for each item
may each be from different water systems. Therefore, some val-
ues have been modified slightly in order to contrast an income
statement and balance sheet which are based on reported values
but which are also logical and consistent.
Some selected operating characteristics of typical systems
in each size category are listed in the table below. As the ownership
and age rows indicate, the large systems tend to be old and publicly-
owned, while the small systems serving fewer than 500 people are
generally much newer and are privately-owned. These small systems
have also much less complex operations than the large systems. The
systems in the smallest categories typically use ground water with
no treatments at all and often serve only residential customers.
The systems serving 500 to 100,000 people have more diversified
customer groups but still tend to use ground water with only one
-------
11-11
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-------
11-12
treatment, disinfection. Only in the largest two size cate-
gories were surface water and more extensive treatments reported
by over half the survey respondents.
A set of typical water system income statements and
balance sheets as determined from the survey data, is presented
in the two tables below.
Table II-5
INCOME STATEMENT
FOR A TYPICAL WATER
SYSTEM IN EACH SIZE CATEGORY— 1975*
(thousands of dollars)
Population Category
25-
99
Annual Revenues $1.1
Expenses
04M .7
Depreciation .2
Taxes t Payments 1n
L1eu of Taxes
Other .1
Total Oper. Exp. 1.0
Interest
Total Expenses 1.0
Profit or Surplus .1
100-
499
6.6
3.6
1.3
.4
.5
5.8
_
5.8
500-
999
16.0
7.5
2.8
1.3
1.2
12.8
2.6
IS. 4
1,000- 2
2.499 4
35.6
22.1
3.1
1.0
3.1
29.3
5.0
35.3
,£00-
.999
86
51
12
.7
5
75
iP-
85
0.8 0.6 0.3 1
*These figures generally represent the median levels reported and
the wide degree of variations among the Individual systems.
5.000-
9.999
156
81
17
17
5
120
29
149
10,000-
99.999
540
263
'9
101
3
416
90
476
7 34
do not reflect
100,000-
999,999
4,650
2,390
370
550
50
3,360
690
4,050
600
> 1 million
30,300
12,300
3,400
6,000
.
21,700
6,700
28,400
1,900
The income statements for the various size categories
highlight the range and diversity of systems in the industry.
For example, the typical system in the smallest size category
has fewer expense accounts than the larger systems and revenues
which are only $1,100 per year. The typical system serving
5,000 to 10,000 people per year in contrast has revenues of
over $150,000 per year, and the typical system serving over
1 million people has revenues of $30 million per year.
-------
11-13
One cannot help but notice as well the relatively
low operating budgets of the small systems, considering the
number of people they serve and the volume of water they pump
to their customers daily. The annual operating and maintenance
(O&M) expenses for these typical systems are only $700 for a
system serving 60 people, $3,600 for one serving 240 people,
and $7,500 for one serving 700 people. Except for miscella-
neous other expenses, the remainder of the system costs, about
a third, are essentially fixed costs—depreciation, taxes or
payments in lieu of taxes, and interest.
The data here do not highlight the economies of
scale which exist in virtually every expense category.
The data, if recalculated on the basis of dollars per thou-
sand gallons produced, would reveal significantly higher
costs in the small system sizes than in the large sizes.
The system serving 100 to 2,500 people typically have the
highest unit costs, usually 30 to 100 percent higher than
systems serging 10,000 to 1 million people.
Table II-6
BALANCE SHEET
FOR A TYPICAL WATER SYSTEM IN EACH SIZE CATEGORY--1975*
(thousands of dollars)
Population Category
Gross Plant:
Production/Treatment
Distribution System
Other
Total Gross Plant
Depreciation
Current Assets
Other Assets
Total Assets
Long-Term Debt
Other Capital
Current Liabilities
Total Capital &
Liabili ties
* Thise figures
of variation a
25-
99
$4.3
4.3
2.1
10.7
(3.3)
2.4
.3
$10.1
9.1
1.0
$10. 1
generally
mong 1ndU
100-
499
19.7
33.5
12.5
65.7
(5.9)
7.7
2.5
70.0
56.0
14.0
500- 1,000-
999 2,499
38
87
16
141
(27)
21
6
141
62
58
21
70.0 141
represent the
idual systems.
65
155
50
270
(40)
55
20
305
„ ("APT TA1
115
140
50
305
median levels
2.500-
4,999
ASSETS
140
510
120
770
(100)
80
40
5.000
9,999
310
840
130
1,280
(230)
70
60
790 1,180
4 LIABILITIES--
260 530
510 610
20 40
790
reported
1,180
and do
10,000
99,999
1,370
4,290
840
6,500
(1.840)
360
230
5,750
1,800
3.800
150
100,000
999.999 >
12,300
30,500
6,400
-19,200
(11,900)
3,800
_2.400
43,500
12,500
29,000
2,000
5,750 43,500
not reflect the wide
1 ml 1 1 i on
104,000
266,600
81,400
452,200
(125,900)
IP, 700
28,000
373,000
131,600
230,400
11,000
373,000
degree
-------
11-14
The balance sheet data (Table I1-6) for typical
system affords similar comparisons. The total asset balances
are approximately ten times the annual revenue levels reported
above, so the range is from approximately $10,000 for the
typical system serving fewer than 100 people to over $370
million for one serving over .1 rail lion people. For all sizes,
however, some patterns remain relatively constant. One example
is the level of distribution system assets: it is the highest
asset category for all system sizes. That one item accounts
for over half of total gross plant assets for the typical
system in all but one size category.
On the capital, side of the balance sheet, the
major item shown for these typical systems is "other capital."
That represents "equity" in the form of paid-in capital,
assessments, cumulative retained earnings and other contri-
butions. Long-term deb*' is typlca'i 1 v a^out •-me-third of a
system's total capital,
MAJOR FINANCIAL PATTERNS
A number of patterns such aw those described above
have emerged from the survey data and help to characterize
the economics of the industry, They are described throughout
the report, topic by topic, and the major ones are also
briefly listed below. Many can be observed in the typical
system financial statements in this chapter as well. The
major ones are:
REVENUES AND RATES
• A pattern of dee lining mean and median revenue
rates with increasing system size, ranging from
aprn •-<;•• j'*•) -Oy no crai,s per thousand gallons pro-
tineeo .'"••,; •'.*
-------
11-15
• wide variation on revenue rates among systems,
even of the same size, ownership, and water
source, with some systems not charging at all
for water and others charging over $2 per
thousand gallons produced; and
• a higher, flatter pattern of reported rates for
residential customers, with the mean rates
ranging between 71 and 94 cents per thousand
gallons delivered for systems serving fewer
than 100,000 people, and dropping only as
far as 54 cents for the largest systems.
OPERATING EXPENSES
• clear economies of scale in total system oper-
ating expenses (O&M, depreciation, taxes, and
miscellaneous other expense), with expenses of
65 to 80 cents per thousand gallons for systems
serving fewer than 2,500 people, dropping to 50
cents for systems up to 10,000 people, 40 cents
for the next step up to 100,000 people, and 24
to 30 cents above that; and
• interest expenses which follow a similar pattern,
from 23 cents for systems serving 100 to 500
people down to 5 cents per thousand gallons for
the largest systems.
• operating surpluses or profits reported by
approximately 70 to 80 percent of the publicly-
owned systems in each size category, 40 to 67
percent of the private systems below the 2,500
population size, and 100 percent of the
private systems above that size.
ASSETS
a pattern of declining mean assets-to-production
level requirements with increasing system size,
dropping from mean rates in the two smallest
sizes of $4.81 and $6.84, respectively, in
assets per gallon of average daily production
down to an average of only $1.02 for systems
serving over 1 million people;
a similar, but lower, pattern of median asset-
to-production level requirements, declining
from levels in the smallest two categories
of $3.37 and $3.92 to $0.80 in the over 1
million population category; and
-------
11-16
• an exception to the general patterns of declining
costs to scale in the area of distribution system
assets, which increase in dollars per connection
with increasing system size, ranging from mean
levels of $285 per connection in the smallest size
category to $549 in the largest.
CAPITAL
• a capital structure which, for systems serving
over 500 people, is approximately 20 to 40
percent long-term debt, and 60 to 80 percent
equity, both for public and private systems
(although many apparently have not carried all
the contributions' and other equity on their
books); and
• a pattern of financing current capital ex-
penditures approximately 20 to 40 percent
from internal sources of funds and 60 to 80
percent from external sources, almost all of
which is debt.
-------
CHAPTER THREE
METHODOLOGY FOR
DATA COLLECTION AND ANALYSIS
The primary objective of the survey was to present
information which was representative of water systems of all
sizes, ownership types and water sources, in all regions. The
achievement of that objective was dependent upon selecting an
appropriate sample and upon receiving a maximum number of com-
pleted questionnaires from the systems which were contacted.
In addition, the validity of the results depended upon the
verification of responses and upon the approach used in pro-
cessing the data. These components:
• selection of the water system survey sample
• the survey procedures
• the data coding and review, and
• the data processing
all received particular attention and are described in the
sections which follow.
SELECTING THE SAMPLE
Before describing the sampling procedure, there are
a few terms and guidelines included below for purposes of
clarity.
Community Water Systems. The survey was in-
tended to cover systems which provide regular service
to residential customers. The possible health ef-
fects of contaminants in drinking water may differ for
persons exposed over long time periods and those drinking
the water briefly or intermittently. The Safe Drinking
Water Act and the IPDWR describe the water systems
-------
III-2
covered as "public" water systems. These systems
are further categorized as (1) community water
systems—those which serve residents, and (2)
non-community water systems which service tran-
sients or intermittent users.2 The IPDWR further
defines community water systems as those which
serve at least 15 service connections used by
year-round residents or which serve at least 25
year-round residents. The survey was confined
to those systems which are classified as community
water systems.3
Water System Size. Residential population
served was the characteristic used to group water
systems according to size. The number of year-
round residents which are served by each water
system was the basis for stratifying the survey
sample and for analyzing the questionnaire re-
ponses.
Ownership. All systems in the sample are
"public" insofar as they regularly provide piped
water for human consumption to 15 service con-
nections or 25 people. However, "public" systems
include those which are privately (or investor)
owned as well as those which are owned by a local
government (a municipality, state, district, or
authority). Public ownership, in the case of the
survey, refers to systems owned by a local govern-
ment .
Systems which are federally-owned and
operated have been excluded from the survey sample,
Since these systems are in a unique financial po-
sition, they are not representative of either the
public or private segments of the industry. At
the same time, there are few enough that a random
sampling technique would not include a sufficient
number of observations to report on as a separate
category of systems.
IPDWR—Interim Primary Drinking Water Regulations. Publia water systems
include both publicly and privately-owned systems which serve an average
of at least 25 individuals at least 60 days out of the year.
2
The reason for the distinction is that different regulatory considera-
tions may apply to each.
By using this definition to determine which systems should be included in
the surveyj those systems which only sell water on a wholesale basis were
not included.
-------
III-3
Geographic Location. In order to insure ade-
quate representativeness across the country, the
basic geographic guidelines for the sample specified
that about one hundred systems would come from each
of the ten EPA regions (see map on page 1-6). Ap-
proximately ten systems would be located in each of
the contiguous forty-eight states. Alaska, Hawaii
and the territories were excluded as a matter of
convenience for the conduct of the survey.
Within the boundaries of these guidelines, a sample
of community water systems was to be drawn which was represen-
tative -of the industry along three dimensions.'
(1) Size (nine population size categories:
25-99, 100-499, 500-999, 1,000-2,499
2,500-4,999, 5,000-9,999, 10,000-99,999,
100,000-1 million, >1 million)
(2) Ownership (public or private)
(3) Primary water source (surface, ground,
or purchased)
The sample needed to be large enough to draw jus-
tifiable conclusions for the industry at the national level.
At the same time, it was hoped that the responses would be
adequate to draw conclusions at the regional level as well.
USE OF THE EPA INVENTORY
The sampling population was the EPA Inventory of
water systems. The Inventory is a result of an original list-
ing of public water systems compiled by the Public Health
Service and expanded and updated through the cooperative ef-
forts of EPA's national and regional offices. When the
survey sample was drawn in January 1976, the Inventory con-
tained about 43,000 systems; it is the only source which
even approximates a comprehensive listing of all public
water systems.
-------
III-4
The following describes the sampling procedure:
1. Water systems in the inventory were first
separated into community and non-community
classifications as defined by the systems
on a standard coding form used for entry
into the inventory.
2. Community systems were further sorted by
state, ownership, and size.
3. For those systems serving fewer than 100,000
people each, an equal interval sampling
procedure by state was used to select a
primary sample of 1,092 systems and an al-
ternate sample of 1,042 systems with matching
characteristics,4
4. All community systems in each state serving
over 100,000 people, which appeared in the
Inventory, were also included.
5- In order to eliminate any duplicate or in-
eligible systems, each regional office
received a list of the sample systems under
its jurisdiction.
This process produced a list of systems which was
to be used to conduct the survey. Unfortunately, the ef-
forts did not fully satisfy the needs for the survey master
list. Even after screening for obvious duplications or er-
rors, a certain number of water systems on the master list
were found to have one or more omissions or inaccuracies.
The major categories of problems encountered are listed
below:
Incomplete, inaccurate or missing addresses,
telephone numbers, system names
The purpose of the alternate list was to enable the substitution of
systems with similar characteristics in the event that the system on
the primary list was ineligible (not a community water system)3 non-
existentf uncooperative, or otherwise could not be used.
-------
III-5
Misclassification as a community water system
(e.g., resort, church, business convention
center, fewer than 25 permanent residents)
Systems no longer in existence (i.e., merged
into another system, trailer park closed,
etc. )
Inaccurate population or ownership information
These problems delayed the completion of the survey;
however, the documentation of water systems with these or other
inaccuracies, has been submitted to EPA for use in its con-
tinuing effort to update and revise the inventory. Exhibit
III-l, at the end of this chapter, is a summary of the dis-
tribution of systems according to the results of attempted
contacts.
SUMMARY OF SURVEY PROCESS
The survey itself was conducted by Decision Research
Corporation (DRC), a survey research group associated with
Temple, Barker & Sloane, Inc. (TBS). DRC was responsible for
all major components of the survey process, although DRC staff
members consulted frequently with the TBS project team. TBS
participated whenever necessary and appropriate during the en-
tire course of the survey.
The major components of the survey process were as
follows:
1. Two questionnaires were designed, pre-
tested and revised, one for private sys-
tems and one for public systems;
2. A preliminary telephone call was made to
each water system;
-------
III-6
3. A five-page questionnaire was mailed to
each system;
4. Follow-up telephone calls were made to
encourage the return of the questionnaire,
to clarify information on returned ques-
tionnaires and to interview by telephone
those systems which had not returned their
questionnaires;
5. The data were transferred to coding forms
and keypunched.
6. The data was then processed through sev-
eral cycles to produce tabulations which
could be further analyzed.
Each of these steps is described briefly below.
QUESTIONNAIRE DESIGN AND TESTING
The questionnaire was designed to capture operating
and financial information. Toward this end, an effort was made
to formulate a questionnaire which was suitable for all size
and ownership categories and which was short enough that the
water systems could be likely to respond to all questions. It
was necessary to develop two questionnaires, one for publicly-
owned and one for privately-owned systems, in order to establish
financial categories which were relevant to the systems' finan-
cial structures.
The questionnaire used to collect the data was re-
viewed and revised several times prior to mailing to the sam-
ple of water systems, for example:0
1. It was reviewed by EPA (national and re-
gional Water Supply Office staff);;
2. Four pre-test interviews were conducted
with water systems in the Boston area;
The questionnaires were reviewed through the standard federal government
procedures for such surveys and received clearance from the Office of
Management and Budget (OMB # 1S8-S75020—expires 10/77).
-------
III-7
3. It was reviewed by representatives of
the water utility industry.
These procedures resulted in substantial improvements as ques-
tions were changed, added, and rephrased; and answer categories
were clarified, and as much as possible, made to conform with
standard industry phraseology and record-keeping methods. (See
Appendix A for copies of the public and private questionnaires).
PRELIMINARY TELEPHONE CONTACT6 AND MAILING
To assure the largest possible return of question-
naires, a preliminary telephone call was made to each system
to determine:
1. if the sytem was ineligible (i.e., served
25 or more permanent residents or had 15
or more active service connections and was
not owned by the federal government);
2. the name of the appropriate person within
the system who should complete the ques-
tionnaire;
3. the current address of the system;
4. the willingness of the system to parti-
cipate in the study.
Prior to making any calls, each interviewer was thor-
oughly briefed on the methodology to be followed and given sub-
stantial background on the project.
At the end of each day of interviewing, a copy of the
survey questionnaire, a letter from the EPA, and a request for
t*
These preliminary calls were made between February 18 and March 2, 1976.
-------
III-8
participation from the AWWA, NAWC, and CSSE was mailed out to
each system contacted that day.
A major problem during this phase involved locating
and contacting many of the water systems in the sample which
lacked an address and/or telephone number. Every effort was
made to contact each system. Beyond calling telephone infor-
mation, town, city and county government offices were called.
In some cases, private individuals who lived in the area were
contacted. An effort to contact each system was made at least
three times and usually five or more times. Calls were made
in the evening to those systems (especially mobile home parks)
which consistently did not answer their phones during the day
or asked us to call back after 5 p.m.
At the conclusion of the preliminary contact phase,
120 water systems (mostly in the two smallest size categories)
could not be contacted and had no remaining alternates in the
same size category and region. Questionnaires were mailed to
g
these systems without prior contact. The return rate was 53
percent compared to a 77 percent return rate for those which
were contacted.
RECONTACT PHASE
A series of second calls was made to clarify con-
flicting data, fill in missing information and encourage the
return of each questionnaire. Those systems which were having
difficulty completing the questionnaire either due to lack of
time or lack of information, were given a list of minimum data
requirements and asked to complete at least those portions of
7
American Waterworks Association, National Association of Water Companies,
Conference of State Sanitary Engineers.
8
An additional 11 systems were ineligible and had no similar alternates.
Therefore, a total of 1,258 systems received questionnaires.
-------
III-9
the questionnaire and return it. Of the 984 systems in the
final data base, 125 (13 percent) were completed by telephone.
Returned questionnaires were coded and, if certain essential
information was missing or if inconsistencies were apparent,
the water system was called back.
DATA CODING AND REVIEW
Questionnaire responses were coded onto separate
coding sheets as soon as possible after receipt. The coding
phase accomplished the dual purpose of preparing the data for
keypunching and allowing the coders to identify any obvious
inconsistencies or errors in the responses. As indicated
above, if key responses were unclear, the water system was
recontacted if possible to clarify the problem. All questions
which were left blank or responses which could not be clari-
fied or deduced either from other responses, materials in-
cluded or written comments, were left blank on the coding
form and excluded from later statistical tables.
During the course of the coding phase, approximately
one hundred and fifty questionnaires were reviewed by TBS be-
cause responses were unclear or inconsistent. An effort was
made to maintain the integrity of the questionnaires by at-
tempting to recontact the water systems. Reported data was
excluded from the database when recontact or other responses
on the questionnaire indicated that the item was in error.
Once the coding and keypunching process was completed
the data was ready for processing. A tabulation was made to as-
certain that the final number of systems included in the data-
base approximated the breakdown required for representativeness
The final number included 780 primary systems and 204 alternates.
-------
111-10
by size. During this process, DRC enumerated the water systems
which they had attempted to contact. They further categorized
the contacted systems into those which had returned completed
questionnaires, and those completed questionnaires which could
be included in the final database. The table below summarizes
the disposition of the sample of systems from the 2,371 names
originally drawn from the inventory through the 984 ultimately
included in the database.
Table III-l
DISPOSITION OF WATER SYSTEMS
DRAWN FROM EPA INVENTORY
Total Sample Drawn from
EPA Inventory (Including Alternates) 2,371
Total Systems which DRC Attempted
to Contact (After Elimination of
Obvious Errors and Duplications) 1,732
Systems which DRC Attempted to
Contact which did not Receive
Questionnaires 474
Systems which Received Questionnaires 1,258
Systems which did not Return
Questionnaires 202
Systems who Returned Questionnaires which
were not Included in Database 72
Questionnaires Included in Database 984
The various reasons which caused the elimination of
systems during the preliminary contact phase through the
coding phase appear in Exhibit III-l. In addition, Appendix
A includes a brief description of the specific coding prac-
tices followed for each question on the survey instrument.
-------
III-ll
The following section addresses the final phase of
the survey process prior to analysis: data processing.
DATA PROCESSING
The data processing phase proved to be the most
time-consuming aspect of the survey. TBS had specified a
number of statistical calculations (primarily arithmetic means,
ratios, and standard deviations) which were to be cross-tabu-
lated according to specified cross-sections of the database.
Some 76 different ratios were calculated on approximately 800
cross-sectional tables using CROSSTABS, a statistical package
specifically developed for multi-dimensional cross tabulations.
Three significant problem areas arose in the data
processing which required several cycles of review and change.
The first was the wide range in the magnitude of the numbers.
In the financial background information, for example, re-
sponses on total assets ranged from $1,600 to almost $2 bil-
lion per system. To scale these numbers consistently and
present them in terms of ratios repeatedly posed the problem
of losing systems whose scaled numbers were too small or
creating an interim calculation which was too large for the
program and therefore could produce no results. In the sec-
ond area, the calculation of means required the inclusion or
exclusion of responses on a consistent basis throughout the
tabulations. This requirement occasionally produced further
errors. Thirdly, unusual (or incorrect) responses tended to
skew the results in a particular cell or for the overall mean
in a size category.
For example, mean total assets *• million gallons produced pep day ar-
rayed by region, system size, and ownership or water source.
For example, operating and maintenance expenses per 1,000 gallons in
the 5,000-10,000 size category in Region I might show an average of
$2.60 while the same result for other regions would be $0.15.
-------
111-12
CROSSTABS did not have the flexibility to address
any one of these problems adequately. The lack of flexibility
ultimately resulted in transferring the database to another
computer system and using a more standard statistical pack-
12
age with some specific program tailoring. The transfer had
three major benefits: (1) the range in the size of numbers
could be easily handled; (2) medians could be calculated to
compare with the means during analysis; and (3) special cap-
abilities allowed the flexibility of including observations
which met specific criteria and excluding those which were
unusual or did not fit the criteria.
The three most significant drawbacks to the transfer
were: (1) the inability to produce results on more than two
dimensions at a time; (2) the time lost in repeating many of
the statistical analyses; and (3) the expense of repeating
computer work. None of the drawbacks seriously affected the
analysis of the results which was begun upon completion of
the data processing. The materials in other chapters of this
document will clarify the specific analytical approaches.
Finally, it should be noted that the "Database for
Operating and Financial Characteristics" appears in a document
submitted to EPA's Office of Water Supply entitled Support
Materials for Community Water Systems Survey Report (11/76).
12
INFORM -information management system on the Standard Information Time
Sharing System. Special program modifications were made to handle
the survey database.
-------
111-13
o
to
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-------
CHAPTER FOUR
GENERAL CHARACTERISTICS OF WATER SYSTEMS
The first section of the survey questionnaire was
designed to determine some of the basic identifying charac-
teristics of each water system: its location, ownership
category, the first year of operation, population served year-
round, seasonal population, primary water source, and number
of service connections by type. Some of this information was
available from the EPA Inventory and was the basis for sample
stratification. The information was requested in order to
verify or update the Inventory data and to provide a framework
for the discussion on operating and financial characteristics.
This chapter covers the distribution of water systems by the
categories mentioned above; all systems in the sample supplied
information in most of these categories.
AGE OF SYSTEMS
The survey confirmed several assumptions regarding
the average age of water systems, the ownership structure, and
primary source of water. The average age of systems illus-
trates that the larger the system is, the older it is. The
small systems are primarily mobile home parks and housing de-
velopments and have consequently been in operation a shorter
time. The table below illustrates the average for systems in
all size categories and by ownership category.
Tables will include, when appropriate, the number of observations upon which
the results are based. The niarber is designated with a parenthesis ().
-------
IV-2
Table IV-1
AVERAGE AGE OF WATER SYSTEMS (YEARS)
IN 1976
Population
Average Age (years)
All Systems
Public
(# obs.)
Private
(# obs.)
Median Age (years)
All Systems
25-
99
18
30
(8)
18
(124)
11
100-
499
24
30
(78)
21
(120)
15
500-
999
32
36
(47)
20
(16)
26
1,000-
2,499
38
42
(69)
25
(15)
39
2,500-
4,999
47
48
(41)
40
(3)
47
Category
5,000-
9,999
45
48
(29)
22
(2)
38
10,000-
99,999
64
62
(43)
75
(11)
65
100,000-
999,999
81
77
(112)
97
(19)
84
> 1 mi 11 ion
95
100
(5)
72
(1)
94
The rate at which new water systems are formed can
also be inferred from the question on the year the responding
systems began their operations. As expected, most of the sys-
tems which have begun operating since 1970 are in the smaller
size categories. In fact, no system larger than those in the
2,500 to 5,000 category began operating after 1970. There-
fore, the annual rate of new systems start-up is estimated as
follows:
Table IV-2
ANNUAL RATE OF NEW SYSTEM FORMATION
1970-1974
Population Category
Rate/Year
* Of New
Systems
25- ICO- SCO- 1,000- 2,500- 5,000- 10,003- 100,000-
99 499 999 2,459 4,999 9.999 99,993 999,959 >lmill1on
5.2$ 2.7* 3.2% 0.8?. 0.4*
38 28 11 3 1
This rate of new system formation reflects an average over the
1970-1974 period. It should be noted that the majority of the
activity occurred in the 1970-1971 period before the substan-
tial slow-down in housing starts. Consequently, the prolifera-
tion of new systems in the 1975 to 1980 period will depend in
part upon the revitalization of the housing industry.
-------
IV-3
On a regional basis, all regions had some new sys-
tems in the period, although the majority of the new water
systems were reported in Region IV (the Southeast) and Re-
gion X (the Northwest).
OWNERSHIP
The two categories of ownership which were included
in the survey database were defined as follows:
Public: owned by local government (municipal,
state, district, authority, etc.)
Private: investor-owned or owned by other non-
government organization.2
The table below illustrates by size category the distribution
of systems in the sample according to their ownership structure,
Table IV-3
DISTRIBUTION OF SYSTEMS
1975
BY OWNERSHIP
Population Category
Public
Private
TOTAL
25-
99
12
133
145
100-
499
98
137
235
500-
999
77
18
95
1,000-
2,499
100
16
116
2,500-
4,999
54
9
63
5,000-
9,999
39
3
42
10,000-
99,999
70
15
85
100,000-
999,999 *
162
30
192
1 million
10
1
11
Total
622
362
984
The pattern of ownership reverses at a system size
of about 500 people. Below that level, a majority of the
systems are privately-owned: 92 percent of the smallest
category and 59 percent of the 100 to 500 category. Above
that size, over 80 percent of the systems are publicly owned.
While there are some variations among regions, and in the
eighth size category, the strong trend linking increasing
size and public ownership is amply illustrated in the table
below.
2
As described in Chapter III,, systems which are federally-owned and operated
have been excluded.
-------
IV-4
PUBLICLY-OWNED WATER
Table
SYSTEMS
IV-4
(%) BY
Population
Region I
Region II
Region III
Region IV
Region V
Region VI
Region VII
Region VIII
Region IX
Region X
National
Average
25-
99
.
6%
-
-
-
27%
25%
25%
13%
4%
8%
100-
499
10%
37%
10%
19%
21%
63%
86%
69%
25%
47%
41%
500-
999
100%
75%
67%
80%
87%
67%
82%
100%
38%
86%
81%
1,000-
2,499
100%
70%
73%
80%
100%
82%
100%
75%
100%
100%
86%
2,500-
4,999
71%
86%
100%
100%
100%
67%
67%
88%
80%
100%
86%
REGION
AND SIZE— 1975
Category
5,000-
9,999
100%
100%
100%
1007.
100%
100%
100%
100%
63%
100%
93%
10,000-
99,999
73%
100%
64%
83%
86%
100%
100%
90%
64%
100%
82%
100,000-
999,999
86%
65%
75%
95%
88%
100%
92%
100%
76%
83%
84%
> 1 million
_
100%
100%
-
100%
100%'
-
-
100%
-
91%
In addition to the exclusion of water systems owned and op-
erated by the Federal government, the ownership profile does
not include water systems in non-contiguous states or terri-
tories.
POPULATION SERVED
A primary determinant of the size and economics of
water systems is the number of people they serve.. Population
served was defined in the survey as the number of permanent
(year-round) residents served directly by the water system
(excluding transient users and population served through
wholesales to other water systems).
-------
IV-5
The average number of people served by water systems
varies relatively little among regions for each size category
under 10,000 people, although all average population figures
were somewhat higher than expected. The range within each size
category was, of course, as extreme as the category itself and
therefore, the larger the category, the wider the range. The
table below illustrates the average population served by size
category and region. Also shown at the bottom of the Table are
the median population levels for each system size category. For
systems serving fewer than 10,000 people'the median and average
are virtually identical. For larger system categories, however,
the systems are skewed toward the smaller populations in each
category, so the medians are somewhat lower than the means.
Table IV-5
AVERAGE POPULATION SERVED
BY REGION AND SIZE--1975
Population Category
Region I
Region II
Region III
Region IV
Region V
Region VI
Region VII
Region VIII
Region IX
Region X
National
Average
National median
*
One system
25-
99
55
63
48
56
56
59
64
62
53
58
56
50
100-
499
209
261
248
230
215
280
271
258
198
221
241
225
500-
999
644
760
629
707
710
673
716
667
684
748
693
694
1
2
1
1
1
1
1
1
1
1
1
1
1
1
,000-
,499
,900
,328
,675
,563
,680
,552
,562
,438
,338
,555
,557
,500
2,500- !5,000-
4,999
3,475
3,360
3,906
3,612
3,926
3,128
3,541
2,968
3,478
3,277
3,477
3,500
9,999
6,100
7,989
6,487
5,843
6,967
8,378
5,897
6,200
6,017
5,828
6,310
6,000
10,000-
99,995
33,818
22,667
34,000
25,500
25,429
33,429
15,200
33,500
31,786
22,667
30,212
20,000
100,000-
999,999
228,071
281 ,846
228,208
244,951
271,538
237 ,846
255,667
327,200
250,560
262,333
253,828
181,000
>
8
1
2
1
1
2
2
1
1 million
^
,452,000*
,552,000
-
,196,333
,381 ,500
,000,000*
-
,786,000*
-
,386,000
,500,000
-------
IV-6
SEASONAL POPULATION
Water systems were also asked to specify the size,
if any, of seasonal population which was served. An identi-
fiable seasonal population was specified by about 18 percent
of the systems in the first six size categories (25-9,999) and
4 percent in the systems in large categories. While this
suggests that a relatively small portion of the water systems
serve seasonal populations in addition to the permanent resi-
dents, it can represent a significant increase in the demand
for water placed on small and medium-sized systems at certain
times of the year. As the table below illustrates, the
seasonal population is in some instances higher than the per-
manent population for systems which have such customers.
Table IV-6
AVERAGE SEASONAL POPULATION*--1975
(for systems with seasonal residents)
Population Category
25- ICO- 500- 1,000- 2,500- 5.0RO- 10,000- 100,OCO-
99 499 999 2,499 4,999 9,999 99,999 999,999 >lmW1on
Average
Median
(# obs.)
27
11
(19)
239 204 786 2,090 3,891 36,321 89.605
75 30 254 1,066 1,230 5,500 10,000
(33) (23) (23) (11) (14) (10) (19)
*Includes only systems reporting seasonal populations
Among the smaller systems with only residential customers,
those with seasonal populations have average daily production
per capita figures a bit higher than those without additional
population. The effect can be most clearly seen in a case such
as a small resort community which has 25 permanent residents
and 200 seasonal occupants during part of the year.
-------
IV-7
CUSTOMER CATEGORIES
Average population served is a convenient way to
categorize water utilities by size. Population served also
provides a consistent unit for expressing volumes of water
(i.e., gallons per capita per day) and an alternative manner
for discussing consumer charges and other financial charac-
teristics ($ per capita). However, water systems serve a
variety 'of customer types and the mix of customers can be an
important determinant of a water system's overall operating
and financial profile. The four customer categories identi-
fied in the survey questionnaire were residential, commercial/
industrial, wholesale and other (agricultural, municipal-town,
fire districts, institutional-hospitals, prisons). The cate-
gories are discussed below.
RESIDENTIAL CONNECTIONS
Residential customers represent the majority of the
total connections for all size categories; they range from 96
percent for the smallest size down to 86 percent for the lar-
gest systems. For most small systems, residential service is
the only type provided. This fact is not surprising since 48
percent of systems in the 25-100 category are mobile home parks,
as are 33 percent of the 100-500 category.
While the residential share of total connections varies
little among size categories, a more distinct pattern emerges when
examining the number of people per residential connection. Gener-
ally, the pattern is more people per connection for the larger
systems than for the smaller ones. This number varies from 2.5 for
the small systems to 6.2 for the large ones and reflects the
higher incidence of multi-family dwellings and other indicators
-------
IV-8
of population density which are characteristic of urbanized
areas. The smaller systems operate in more isolated, non-urban
localities with fewer multi-family hook-ups. The table below
summarizes these characteristics of residential connections
for each size category.
Table IV-7
AVERAGE CONNECTIONS AND RESIDENTIAL SHARE- 1975
Population
Average Total
Connections
! (# obs.)
Residential
Portion (*)
People per
Residential
Connection
Median Total
Connections
"Includes New York
of connections In
25-
99
23
(143)
96%
2.5
100-
499
94
(230)
95*
2.7
22 79
City. Excluding
the largest size
500-
999
263
(91)
90%
2.9
1,000-
2,499
537
(115)
91%
3.2
2,500-
4,999
1,064
(63)
90%
3.6
Category
5,000-
9,999
1,948
(42)
92%
3.5
245 506 1,069 1,770
New York, the average number
category would be 250,000.
10,000- 300, OCO-
99,999 999,959
8,455 62.747
(84J (191)
92% 90*
4.1 4.5
5,877 47,523
> 1 million
428,371*
(11)
89%
6.2
365,000
Residential connections are by definition the least
varied in characteristics of the connections serviced by water
utilities. The service requirements vary within a relatively
limited range, and are primarily variable only by the number of
individuals at each point of service. Non-residential connec-
tions, on the other hand, are characterized by much greater
differences in type and demand. The following section will
cover the kind and number of non-residential connections; Chapter
Five will amplify on the topic as it affects production levels.
NON-RESIDENTIAL CONNECTIONS
The number and type of non-residential connections
served by a community water system are the major variables
-------
IV-9
which cause the variation between the production levels of
systems within a size category. The differences between size
categories are primarily a function of the diversity of com-
mercial and other activity that goes hand-in-hand with increasing
population. A brief look at the distribution of non-residen-
tial connections by category and size of systems lays the basic
context for an examination of the operating characteristics.
A community water system often provides the water
used for drinking and other purposes for the commercial and
industrial establishments within its service area. On the
table below the percentage of systems listed as having no com-
mercial or industrial customers illustrates that most of the
systems serving over 500 people also provide at least some ser-
vice in this category, only 17 percent of the systems in the
third category provide no service of this type; and only 2 per-
cent of the systems serving 5,000-10,000 have no commercial/
industrial connections.
The percentage of water systems having no wholesale
connections is higher; in fact, a majority of the systems
serving fewer than 100,000 people have no wholesale customers.
Conversely, over 90 percent of the systems serving over 1
million people do sell to wholesale customers.
The "other" customer category includes a variety of
non-residential customers, such as specific municipal or fire
district hook-ups, institutions, agricultural irrigation, and
so on. It is a miscellaneous category for those services con-
nections not easily included in the other major categories. Con-
sequently, the volume of water delivered to such customers varies
tremendously depending upon whether the purpose is playground
irrigation, a hospital or fire hydrant water supply. The fact
-------
IV-10
that a smaller percentage of the systems in each category re-
ported having no "other" connections than reported having no
wholesale connections is probably linked to the lack of spec-
ificity in the miscellaneous category. The table below sum-
marizes the average number of non-residential connections for
systems which have such connections, as well as the percent of
systems reporting no service in each category.
NON-RESIDENTIAL
Table IV-8
CONNECTIONS BY
SIZE CATEGORY--1975
Population
Commercial /Industrial
Connections
% of Total *
Average #
Systems with None
(%)**
Wholesale Connections
Average #
Systems with None
(«)**
Other Connections
Average #
Systems with None
(«)
25-
99
12%
3
79%
0
100%
2
100-
499
7.4%
7
54%
5
98%
8
88% 81%
*Percent of total connections for systems
**Systems which reported "0" connections 1n
500-
999
8.4%
22
17%
1
94%
7
1,000-
2,499
8. '9%
48
13%
7
89%
9
63% 62%
which reported
the customer
2,500-
4,999
8.3%
88
7%
4
86%
25
Category
5,000- 10,000-
9,999 99,999
7.52! 7.8%
146 673
2% 1%
2 46
78% 71%
15 55
100,000-
999,999 >
8.5%
5,357
2%
15
38%
593
41% 30% 39% 29%
commercial industrial/connections.
category.
1 million
9.4%
40,223
0%'
24
9%
3,319
9%
-------
IV-11
WATER SOURCE
The final identifying characteristic of community
water systems is the primary source (ground, surface, or pur-
chased) of the water which they distribute. The water source
is of particular importance to the analysis of potential treat-
ment additions which may be required by federal regulations.
The treatment practices currently followed are also linked to
the existing sources used, and will be discussed in the fol-
lowing chapter.
The results of the survey confirmed the generally
accepted premise that the smaller the system is the more likely
it is to have ground water as its primary and, generally,
only source. Systems serving over 1,000 people are less
dependent upon ground water, although in the largest category
one system (out of 11) did report ground water as its primary
source. Approximately one-quarter or fewer of the systems
serving under 1,000 use surface water. It should be noted,
however, that those systems which purchase their water may do so
from systems which use surface water. There were 121 systems
reporting use of purchased water which came from surface sour-
ces. Of these, 82 were systems serving over 2,500 people.
The table below presents the distribution of all
systems by water source as well as by ownership. The over-
all pattern does not differ significantly by ownership.
-------
IV-12
Table IV-9
DISTRIBUTION OF SYSTEMS BY WATER SOURCE (*)--1975
Population Category
Total Systems
1n Survey
Primary Source
Ground (X)
Surface ('»)
Purchased (X)
Private Systems
Ground (%)
Surface («)
Purchased (t)
(# obs.)
Public Systems
Ground (%)
Surface (»)
Purchased («}
(1 obs.)
The small number
25-
99
145
93
1
6
94
2
5
(133)
83
-
17
(12)
of systems
100-
499
235
80
5
15
80
3
17
(137)
81
7
12
500-
999
95
69
18
13
72
11
17
(18)
69
19
12
(98) (77)
responding 1n
1.000-
2,499
116
68
17
15
75
6
19
(16)
67
18
14
2.500-
4,999
63
57
27
16
67
.
33
(9)
56
31
13
(100) (54)
this category
5K-
9,999
42
64
26
10
100
.
.
(3*)
62
28
10
10 K-
99,999
85
52
31
18
47
47
6
(15)
53
2;
20
(39) (70)
1s Insufficient
100K-
999,999
192
28
59
13
40
50
1.0
(30)
26
61
13
(162)
to allow
> ImiTHon
11
9
91
-
100
.
(1)
10
90
.
(10)
generalization.
The distribution of systems by primary water source
from a regional perspective indicates that uniformly across the
country most systems use ground water. The ground water share
varies from 52 percent to 73 percent of the systems in each
region, in addition, there are slightly more systems using
ground water in the Midwest, Southwest, and Far West (Regions
VI-X) than in the Northeast, Mid Atlantic, and South.
Table IV-10
DISTRIBUTION OF WATER SYSTEMS BY PRIMARY WATER
SOURCE
AND REGION
1975
REGION
Total Systems
Ground 1
X
Surface 1
X
Purchased 1
X
*X may not equal
I
95
58
6 IX
30
32X
7
7X
II
94
49
52X
26
28X
19
20X
III
114
67
59X
38
33X
9
8X
IV
117
74
63X
33
28X
10
9X
V
109
65
60X
24
22X
20
18X
VI
92
66
72X
10
11X
16
17X
VII
89
65
73X
19
21X
5
6X
VIII
93
62
67X
22
24X
9
10X
IX
105
75
7 IX
12
11X
18
17X
X
76
50
66X'
14
18X
12
16X
due to rounding
-------
IV-13
The number of systems which supplement their primary
source with others is quite small in most size categories. The
only exception is size category 8 (100,000 to 1 million). In
this case, 37 percent of the surface systems also use ground
and/or purchased water and 33 percent of the ground systems use
additional sources.
GROUND
Table IV-11
AND SURFACE SYSTEMS WHICH SUPPLEMENT
Population
Ground Systems
Also Using:
- Surface Sources
- Purchased
Sources
Surface Systems
Also Using:
- Ground Sources
- Purchased
Sources
25-
99
0
0
1
0
100-
499
1
1
2
0
500-
993
0
1
3
0
1,000-
2,499
1
2
1
1
2,500-
4,999
0
2
1
1
THEIR PRIMARY SOURCE--1975
Category
5,000-
9,999
0
0
1
1
10.000- 100, COO-
99,999 999,999 >1 million
6 8 1
5 10 0
7 25 1
3 17 2
Total
17
20
42
20
-------
CHAPTER FIVE
OPERATING CHARACTERISTICS OF
COMMUNITY WATER SYSTEMS
The production and distribution of water are the two
basic operating functions of community water systems. De-
pending upon the size and complexity of the system, these two
major activities include a number of intermediate steps. The
processing begins with the raw water collection system and
maintenance of raw water reservoirs. It then continues through
the conversion of raw water into finished water through a var-
iety of treatment techniques and concludes with the delivery
of finished water through pipelines to the customer. In many
cases, water testing is conducted at various points in the dis-
tribution system.
The survey was designed to capture these operating
characteristics only at the broadest level, primarily through
the specification of production levels, distribution levels by
customer category, and treatment capacities and practices. In
addition, operating revenues and expenses were expected to pro-
vide an indication of the level of operating complexity for
systems in each size category. This chapter covers the operating
practices and Chapters Six and Seven will translate these prac-
tices into revenues and costs.
It should be pointed out at the outset that "water
supplied to your system" was the phrase used in the survey
instrument to describe all the water collected during a par-
ticular year. The phrase attempted to cover all the definitions
-------
V-2
of water "production" regardless of the source, or degree of
treatment if the water was purchased from other systems. Further,
"production" was the term used to cover the annual or daily out-
put of finished water. "Deliveries," on the other hand, were
intended to denote the volume of water actually delivered to
customers. The difference between the two measures was expected
to reflect primarily losses in transmission and distribution,
unmetered or unidentified users and so on. Consequently, total
production (or water supplied to the system) could be expected
to exceed deliveries by at least a small amount..
However, two areas of confusion arose among respondents
which made the comparison of production and deliveries difficult,
although the breakdown of deliveries by customer class was not
affected. First many respondents provided the same figure for
both production and deliveries. The first case was most frequent
among the smaller systems and often reflects metering at only
one point in the system. In other cases the water delivered was
unmetered and production and deliveries were estimated from the
system's pumping capacity. Second, some included a lower figure
for production than for deliveries. The confusion arose over
the inclusion of raw water collected from sources and reserved
from year to year and not, therefore, interpreted as water
"produced" in a single year.
The reporting of results has generally compensated
for these discrepancies wherever possible and is described in
specific sections or tables.
PRODUCTION
Water production is the basic operating characteristic
;. ,ich permits comparative analysis among systems of different
-------
V-3
sizes. The information included in this section is used through-
out the remainder of the report. Production levels are pre-
sented in three forms:
• Average daily production by size category
• Production per capita per day
• Percentage of total production actually
delivered to customers
As indicated in the discussion on customer categories,
production levels vary depending upon customer mix, both within
a size category and across all categories. Daily production in
the smallest size category averages about .006 MOD (million
gallons per day). The production levels for individual systems
in that category, however, range widely—from about one-fifth
the average to five times the average (i.e., from .001 to .033
MGD). In the 5,000-10,000 category, the range is from one-eighth
to more than double the average level.
The variations reflect differences in population,
customer mix, and usage per customer, especially for commercial
customers. However, the extremes among the smaller systems are
most directly a function of customer mix, while the extremes
among larger systems are probably most influenced by the wide
spread in population served.
The median level of production tends to be lower than
the average in all size categories, indicating that the average
reflects the existence of a few systems with very high production
levels. The median provides a better indication of the typical
production levels while the mean accounts more accurately for
the total water production of the sytems in each category.
-------
V-4
Both the mean (average) and the median levels are shown in the
table below, along with the minimum and maximum production
levels in system size category.
AVERAGE
(millions
Mean Dally
Production
(# obs.)
Median
Minimum
Maximum
25-
99
.006
(54)
.004
.001
.033
100-
499
.025
(127)
.019
.001
500-
999
.075
(78)
.063
.011
Table V-l
DAILY PRODUCTION*
1975
of gallons per day)
Population Category
1,000- 2,500-
2,499 4,999
.200
(96)
.160
.020
.480
(56)
.414
.073
5,000-
9,999
.921
(42)
.731
.117
10,000- 100,000-
99,999 999,999 >1 million
5
3
.049
(80)
.027
.358
48
(
30
1
.003 496
187) (
.948 355
.370 117
.164 .416 1.066 1.426 2.234 24.673 258.526 1,479
.660
11)
.700
.586
.245
*The figures presented in this table are based on the data provided by 730
community water systems. 254 systems were excluded because (1) no production
figures were provided (222 systems), (2) production per capita per day fell
below 10 (16 systems) or over 600 (16 systems).
Because of the significant differential in production
levels among size categories, it can be helpful to examine
production on a per capita basis which provides a consistent
basis for comparison. The impact of customer mix is more
clearly reflected in the per capita figures. In the smallest
two categories, which serve almost exclusively residential
customers, the numbers are lowest; the values increase as the
systems get larger and serve a greater variety and number of
non-residential customers. The average ranges from 98 to 214
gallons per person per day. The median is lower, 75 to 185, but
maintains the same increasing pattern from small to large systems
-------
V-5
Table V-2
PRODUCTION PER CAPITA PER DAY*
1975
(gallons)
Population Category
Average per
Capita per Day
(# obs.)
Median
Minimum
Maximum
*Based upon data
or more than 600
25- 100- 500-
99 499 999
98 98 109
(54) (127) (78)
75 73 88
11 10 16
365 469 511
provided by 730 systems.
gallons per person per
1,000- 2,500- 5,000-
2,499 4,999 9,999
128 138 142
(96) (56) (42)
106 120 124
11 24 23
533 317 358
Systems producing
day were excluded.
10,000-
99,999
160
(80)
128
25
516
less than
100,000-
999,999
183
(187)
168
13
591
10,
> 1 million
214
(10)
183
118
493
MAXIMUM DAY PRODUCTION
In addition to average production levels over a
year's time, the survey requested information on production
patterns at peak periods of demand. Specifically, water
systems were asked the maximum volume of water produced on
a single day during the year. The original intent was to
determine the production capacity of the system. However,
"capacity" is a term which is subject to various interpre-
tations. In particular, there was concern regarding the
time frame for determiniation of capacity production. Some
systems for example, could produce several times their
average day production for very brief periods, others were
limited by: storage capacity, primary source constraints,
pumping capacity, or treatment capacity. Therefore, the
data provided for maximum day production can only be in-
terpreted as that—the highest volume of water demanded and
produced at a single point during the year.
-------
V-6
The mean ratios of maximum day production to av-
erage day production for system size categories fell into
three distinct groups. The smallest size (25-100) had a
maximum day to average day ratio of over 4; the next six
categories (100-10,000) all fell between 1.4 and 2.3, and
the two largest sizes reported a mean of 1.6 times as much
production on the busiest day as on an average day. This
pattern would suggest that larger systems, by necessity,
have a much better idea of the extremes in demand of water,
and have sized their production capacity and auxiliary
storage capacity accordingly. Further, the mix of customers
for larger systems may have compensating extremes in demand
which help to keep total production requirements relatively
stable. Small systems, on the other hand, usually have
little if any storage capacity, and few non-residential
customers, so that one week of extremely hot weather could
cause a level of demand not present at any other time.
The table below illustrates that while the mean
ratio for maximum day to average day production varies as
suggested above, the medians for all size categories cluster
a little bit more tightly in 1.4 to 2.0 range, but maintain
the same generally declining pattern between small and large
systems.
-------
V-7
All Systems
-Mean
-Median
(i obs.)
Table V-3
RATIO OF MAXIMUM DAY TO AVERAGE DAY PRODUCTION
1975
Population Category
25- 100- 500- 1,000- 2.500- 5,000- 10,000- 100,000-
99 499 999 2,499 4,999 9,999 99,999 999,999 > 1 million
4.1 2.3 2.2 2.3 1.9 1-7 2.0 1.6 1.6
2.0 1.7 1.8 2.0 1.7 1.5 1.6 1.5 1.4
(23) (62) (50) (67) (41) (36) (54) (158) (8)
DELIVERIES (SALES)
In spite of the confusion which arose over the rela-
tionship between water produced and water delivered, the re-
sponses were sufficient to indicate that 83 to 91 percent of
the water produced finds its way to customers. However, the
number of observations which reported enough information to
determine the ratio of deliveries to production was relatively
small in some size categories. For those systems included in
the tabulation, the median was slightly higher than the average
in six out of the nine size categories, over 90 percent of the
water produced was delivered. This suggests that most systems
in each category lost less than 10 percent of their water;
a few had a much higher percentage which caused the average
to be lower than the median.
-------
V-8
\
Table V-4
RATIO OF DELIVERIES TO PRODUCTION--1975*
(percent)
Population Category
Deliveries as %
of Production
(mean)
Median
(1 obs.)
% of Total
Systems
Responding
*These figures are
both were greater
and (2) production
25-
99
87
95
(6)
100-
499
87
81
(14)
500-
999
87
86
(13)
1,000-
2,499
83
84
(25)
2,500- 5
4,999 9
89
91
,000-
,999
83
90
(18) (23)
4 6 14 22 29
based upon systems which (1) reported
than 10 gallons oer person per day and
exceeded sales.
55
both
less
10,000-
99,999
86
90
(35)
41
sales and
than 600
100,000-
999,999 > 1 million
89 91
90 92
(118) (4)
61 36
production and
gallons per day,
RESIDENTIAL DELIVERIES
Most systems provided data on deliveries by customer
type which was consistent with the figure for total deliveries
Given the relative stability of the loss ratio and the dif-
ferences in deliveries among customer classes, we can infer
that the mix of customers is largely responsible for the dif-
ferences in overall production levels by size category and,
as described earlier, also responsible for the wide ranges
within size categories. On a per capita basis, total prod-
uction increases steadily from the smallest to the largest
categories (98 to 214 gallons per person per day) because of
an increasing number of non-residential customers. These
figures can be interpreted more specifically by examining the
daily deliveries by customer category.
Residential deliveries on a per capita basis de-
crease from 109 to 72 gallons per person per day across system
-------
V-9
size categories. When examined in conjunction with residential
deliveries per residential customer (connection) per day, that
pattern generally substantiates the earlier observation that
there are more people per residential connection in urbanized
areas. The table below illustrates the residential deliveries
per day for residential customers and per person.
Table V-5
DELIVERIES TO RESIDENTIAL CUSTOMERS*
1975
(gallons per day)
Population Category
Average Residential
Deliveries per
Customer per day
Median
Standard Deviation
(# obs.)
Average Residential
Deliveries per
Capita
Implied Number of
People per
Connection
*Includes systems
**Does not include
deliveries.
25-
99
411
149
913
(49)
109
3.7
reportinj
New York
100-
499
303
158
585
(97)
108
2.8
both
City
500-
999
320
214
512
(53)
104
1,000-
2,499
295
223
235
(65)
94
2,500- 5,000-
4,999 9,999
304
248
191
(35)
79
322
184
262
(31)
89
10,000-
99,999
451
370
330
(52)
104
100,000-
999,999
334
287
187
(128)
79
> 1 million
448**
453
252
(9)
72
3.1 3.1 3.8 3.6 4.3 4.2 6.2
deliveries and customers greater than 0.
or Cleveland because they did not specify residential
-------
V-10
NON-RESIDENTIAL DELIVERIES
The residential business of water systems accounts
for about 90 percent of their total customers and about 60
percent of total water deliveries. As the following table
on non-residential deliveries indicates, the volume of water
delivered per non-residential connection is considerably
higher than for residential connections. In the case of com-
mercial and industrial customers, the average volume per
customer is 1.5 times higher than the residential volume in
the smallest category, 6.5 times higher in the fifth size
category, and 17.4 times higher in the 100,000 to 1 million
category. A large restaurant, for example, consumes much
more water per day than a family of four. Other types of
commercial and industrial customers, such as laundries or
manufacturing plants, use water at even higher rates. This
relationship of increasing volume per customer with increasing
system size is even more pronounced in the other non-residential
categories, particularly in that of wholesale customers.
In general, the pattern of increasing deliveries for
non-residential customers is the logical result of water sys-
tems serving a larger and more complex mix of customers as the
water systems themselves serve larger numbers of customers.
What is not reflected in the averages or even the medians, is
the tremendous range within size categories. In size five
(2,500-5,000), for example, one system reported 20 wholesale
customers with a total of 200,000 gallons per year delivered
or only 30 gallons per wholesale customer per day. At the
same time, another system in that category reported only one
wholesale customer but deliveries of 24,000,000 per year or
65,750 gallons per day. In category seven (10,000-100,000),
one system serves 999 wholesale customers, and deliveries of
500,000,000 gallons per year, an average of 1,370 per day.
-------
V-ll
Median
Gallons/Day
(# obs.)
Wholesale
Customers
Mean Gallons/Day
Median
Gallons/Day
{# obs.)
Other Customers
Mean Gallons/Day
Median
Gallons/Day
(» obs.)
Table V-6
DELIVERIES TO NON-RESIDENTIAL CUSTOMERS*
1975
(gallons per customer per day)
Population Category
25- 100- 500- 1,000- 2,500- 5,000- 10,000- 100,000-
99 499 999 2,499 4,999 9,999 99,999 999,999 >1 million
Commercial/
Industrial
Customers"
Mean Gallons/Day 614 1,126 1,638 1,348 1,963 1,407 3,846 5,802
5,415
500 266 456 504 797 872 1,492 2,582 2,493
(3) (38) (42) (57) (34) (29) (47) (120) (8)
- 9,130 2,190 6,040 17,556 102,625 388,193 762,899 20,149,951
- 13,192 2,192 5,388 2,867 24,657 239,505 348,325 1,027,690
- (4) (2) (5) (5) (7) (12) (77) (8)
380 9,408 1,548 2,401 4,484 7,799 10,574 29,959
493 616 1,005 1,370 1,952 4,147 5,889 6,205
(3) (16) (19) (25) (20) (19) (26) (85)
8,275
7,228
(7)
*For systems which reported both deliveries and customers greater than 0.
The survey did not explore what particular variations
in operating practices are caused by such differences in cus-
tomer mix and demand. Clearly the impact on the distribution
system will be reflected in capital expenditures and operating
costs. The variability in those numbers, even on a per thousand
gallons basis, can in part be anticipated because of the dif-
ferences in the production and distribution processes which are
characteristic of systems within the same size category and which
have been reflected in the discussions above.
-------
V-12
TREATMENT PRACTICES AND WATER
PRODUCTION BY
Treatment practices of community water systems are
as varied as the collection and distribution processes and
depend not only upon system size but also upon water source,
age of system, existence of raw water storage, and pre-treat-
ment processing. Prior to the passage of the Safe Drinking
Water Act, many systems already provided a variety of treat-
ments such as those to disinfect, add fluoride, control for
taste, odor, color and water hardness. Larger systems also
provided complex coagulation, sedimentation, filtration, and
corrosion control processing.
The survey attempted to document the types of treat-
ments in use before the Interim Primary Drinking Water Regula-
tions by systems in all size categories. This included spec-
ifying, at one extreme, those systems which treated none of their
water or added only chlorine, and, at the other extreme, those
which used each of the many available treatment equipment and
techniques. It is noteworthy that 45 percent of the systems
serving under 10,000 people provide no treatment to the water
o
which they distribute. Among the sytems in the larger categories
(10,000 to 1 million) approximately 9 percent of the systems do
not treat the water which they distribute. On the other hand,
above 50 percent of the systems serving over 500 people treat
all their water.
The following graph provides an indication of in-
creasing proportion of systems treating 100 percent of their
water as the number of people served per system gets larger.
2
This does not necessarily mean that none of the water is treated at all.
Many of the smaller systems and some larger systems purchase water which
may have been treated by the- wholesaler.
-------
V-13
The only significant break in the pattern occurs in the size
category serving 2,500 to 5,000 people. An examination of the
data did not provide any unique characteristic for systems of
that size which could account for the aberration. As shown in
Table V-7 on 100 percent treatment by primary water source, the
same break in the pattern occurs for ground, surface and pur-
3
chased systems in that size category. It appears that the
characteristics of the sample for both size category five and
six (5,000-10,000) have combined to indicate an artificially
high portion of systems treating all their water. These two size
categories have a relatively low number of systems in total;
thus, while the number of systems treating all their water is
not usually large, the percentage is higher than expected.
Figure V-l
PERCENT OF SYSTEMS BY SIZE WHICH
100
90
80
70
60
Percent eg
of
Systems
40
30
20
1
25-
99
10
!—
-
TREAT ALL WATER-1975
7'"~-
n
-
A. /
/'
,«55t <
" /
"" ym
- 3*
—
mm
\ \ I \
1234
Size
234 5
100- 500- 1,000- 2,500-
499 999 2,499 4,999
/
63%
|
5
N-
|
6
69t
| [
? 8
—
—
*^
™-
—
—
—
i
9
Category*
6
5,000
9,999
7
10,000
99,999
8
100,000
999,999
9
> 1 Million
Systems are defined as "ground" or "surface" depending upon which is the
source for over 50 percent of their water.
-------
V-14
Table V-7, mentioned previously, expands upon the
graph (Figure V-l) by providing additional detail on the portion
of systems by primary water source which treat all their water.
Generally, it illustrates that more systems which use surface
water as their primary source tend to treat all their water
than is the case with ground water systems. The table also
indicates that, even when categorized by source, as a system
gets larger it increasingly tends to treat all of its water.
The purchased water systems show a much less distinct
pattern than surface or ground systems. This is the result of
two factors: (1) There are relatively few systems in the sample
for which purchased water is a primary source, and (2) Treat-
ment provided by the distributing system is in part a function
of the treatment received prior to purchase. These systems
were not asked to specify whether the water they purchased had
been treated.
Table V-7
PERCENT OF SYSTEMS BY WATER SOURCE
AND SIZE WHICH TREAT ALL WATER*
1975
Population Cateqory
Surface Systems
I Treating All
Water
(1 obs.)
Ground Systems
X Treating All
Water
(1 obs.)
25-
99
0
2
33X
135
100-
499
82X
n
43X
189
500- 1
999 2
77X
17
58X
66
,000-
.499
90X
20
65*
79
2.500-
4.999
100X
17
78*
36
5,000-
9,999
91X
11
70%
27
10,000-
99,999
883!
26
68$
44
100,000-
999,999 >1 million
97X 100X
114 10
80% 100X
54 1
Purchased Systems
% Treating All
Water
(1 obs.)
Total Systems
X Treating All
Water
(1 obs.)
*In this table,
which reported
systems 1n each
29*
7
33%
22X
32
42*
9X
11
55X
144 232 94
the number of observations
their primary water source
category which treat all
19X
16
63%
33*
9
77X
0
4
69%
40%
15
69%
115 62 42 85
indicates the number of systems in
; the percentage figure represents
the water they distribute.
58X
24
88% 100*
192 11
each size categcry
the number of
-------
V-15
For those systems which treat all or some of their
water, disinfection (usually through chlorination) is by far
the most commonly used treatment; 60 percent of all systems
responding use disinfection, as do 49 percent of systems under
10,000. The following table illustrates the percent of systems
in each size category using various treatments to treat some
or all of the water they produce.
Table V-8
PERCENT OF SYSTEMS USING VARIOUS STANDARD TREATMENTS— 1975
(percent)
Population
Treatment
Disinfection
Coagulation
Sedimentation
Filtration
Pre Chlorinatlon
Flouride Adjustment
Corroslan Control
Taste and Odor
Aereation
Lime Soda
Iron Removal
Ammon1at1on
Activated Alumina
Ion Exchange
Other
25-
99
30
.7
1
6
1
.7
2
0
2
3
4
0
.7
0
2
100-
499
40
1
4
9
4
2
3
1
2
2
6
.8
.4
1
2
500-
999
56
8
8
18
6
19
12
6
15
6
15
0
2
2
1
1,000-
2,499
61
10
11
20
13
13
13
4
11
8
10
.9
4
4
.8
2,500-
4,999
79
21
27
31
19
24
29
6
15
10
16
0
3
5
2
Category
5,000-
9,999
71
20
20
34
39
27
41
12
17
7
22
2
2
7
2
10,000-
99,999
79
32
33
39
32
33
36
18
14
18
15
4
5
6
2
100,000-
999,999
92
62
62
69
62
54
68
44
25
22
20
20
9
3
5
> 1 million
100
100
91
82
73
73
91
55
9
18
9
27
0
0
18
Average for
All Systems
60
20
22
28
22
20
25
13
11
9
13
5
3
3
3
TREATMENTS BY SOURCE OF WATER
In general, on a percentage basis, fewer ground water
systems use any of the various standard water treatments than do
Q
surface water systems. The outstanding exception is disinfection,
Systems are defined as "ground" or "surface" depending upon which is the
source for over 50 percent of their water.
-------
V-16
a procedure used by roughly half the systems in both categories.
The next three treatments most frequently mentioned by ground water
systems were filtration (15 percent), corrosion control (14 per-
cent) and iron removal (14 percent). The three treatments other
than disinfection which were mentioned most often by surface
systems were flouride adjustment (51 percent), taste, and odor
control (46 percent) and filtration (29 percent).
In addition to the percentages, the actual number of
systems reporting each treatment is also listed in the table
below. While ground water systems outnumber surface water
systems for seven of the fifteen treatments, there are many
more ground than surface systems in the sample.
Table V-9
PERCENT OF SYSTEMS USING STANDARD
TREATKEMS BY PR! WRY WATER SOURCE-- 1975
Surface Systems Ground
Systems
t Systems 4 Systems # Systens t Systems
Treatment Type Responding llsinq Treatment Respondinq Usinq Treatment
Disinfection 52i (225)
Coagulation 24% (225)
Sedimentation 23% (225)
Filtration 29% (225)
Prechlorination 38% (225)
Flouride Adj. 51% (224)
Corrosion 18% (224)
Control
Taste & Odor 46% (223)
Aeration 17% (223)
Lime Soda 212 (223)
Softening
Iron Removal 18% (222)
Annnoniation 16% (222)
Activated lot (222)
Alumina
Ion Exchange 2* (222)
Other 3% (220)
(117)
(53)
(52)
(66)
(39)
(115)
(41)
(102)
(39)
(47)
(39)
(36)
(22)
(4)
53%
5%
8%
15%
9%
11%
14%
3%
10%
6%
14S
n
It
y.
(10) 21
(627)
(625)
(624)
(523)
(623)
(623)
(622)
(622)
(622)
(622)
(622)
(622)
(622)
(622)
(620)
(333)
(34)
(48)
(94)
(59)
(67)
(85)
(17)
(65)
(35)
(83)
(9)
(8)
(19)
(13)
*Systerr,s which use primarily water from ground sources.
"Almost 3 times as many ground systems responded
si'^vey; ground systems represented 64 percent of
surface systems accounted for 23 percent.
to the treatment questions in the
the total sampled systems, and
4Almost three times as many ground systems responded to the treatment ques-
tions in the survey; ground systems represented 64 percent of the total
sampled systems, and surface systems accounted for 23 percent.
-------
V-17
However, the table below presents the average daily
volume of water produced by source for all systems which re-
ported their production from any combination of the three
sources. It illustrates that, in most size categories, sur-
face water production, for those systems which reported it,
exceeds ground or purchased production from systems which
reported production from those two sources.
Total Production
(mean)
Total Surface Pro-
duction (mean)
(# obs.)
Total Ground Pro-
duction (mean)
(# obs.)
Total Purchased
Production (mean)
(# obs.)
Table V-10
AVERAGE DAILY VOLUI1E OF WATER PRODUCED BY SOURCE*
1975
(millions of gallons per day)
Population Category
25- 100- 500- 1,000- 2,500- 5,000- 10,000- 100.000-
99 499 999 2,499 4,999 9,999 99,999 999,999 >1 million
.006
.008
(2)
.006
(48)
.003
(4)
.025 .075 .200 .480 .921 5.049 48.003 496.660
.021 .094 .191 .400 .687 4.823
(8) (14) (15) (17) (11) (32)
.026 .067 .198 .478 .980 3.498
(98) (58) (71) (34) (29) (50)
.021 .064 .148 .341 .544 3.114
(22) (10) (16) (10) (5) (24)
45.616
(127)
371.042
(11)
23.033 174.311
(89) (2)
20.450**
(54)
2.588
(3)
*Table includes all water produced from any source. That is, some systems produce water
from more than one source; 1r. order to provide an accurate profile of volume by source,
one system may appear in more than one set of observations. Therefore, the total number of
observations (surface + ground + purchased) may exceed the number of systems in each size
category. The systems included are the 730 in Table V-l (average daily production).
**There are several systems in this size category which purchase a substantial portion of
their water. The three largest are Boston (100 percent), San Diego (90 percent), and
San Francisco (85 percent).
Most systems use ground water and only a small
portion of systems serving under 10,000 use or reported
-------
V-18
surface production. Nevertheless, the greater volume of sur-
face water produced (including purchased water from surface
sources) and the greater number and proportion of surface sys-
tems providing various treatments, substantiates the hypothesis
that considerably more surface water currently receives treat-
ments other than disinfection.
-------
CHAPTER SIX
FINANCIAL CHARACTERISTICS:
REVENUES & RATES
The preceding discussions have established the op-
erating framework for the chapters on financial characteristics
which follow. The survey responses to questions on revenues,
operating expenses, balance sheet items and sources of finan-
cing were wide-ranging. The variations suggested substantial
differences in the financial practices of community water sys-
tems across the country. At the same time, water remains
generally an inexpensive commodity relative to other essential
goods and services. General economic conditions, changing
regulations and new operating practices, however, may have
an effect on costs, which would necessitate more revenues and
changes in water rates. This first chapter on financial char-
acteristics will cover the current profile of revenues and
customer rates as indicated by the survey results.
Revenues and rates provide an excellent overall ba-
sis for comparison of water system economics among various sys-
tem sizes, ownership types, and primary water sources. The
revenue category serves that purpose well because it combines
in a single value each system's overall operating costs and an-
nualized capital costs.
As this and the later chapters will show, the two
major factors in determining a water system's economics are:
1) its size, because the data reveal a clear pattern of econ-
omies of scale; and 2) local conditions, which show up in the
survey data in the form of wide variations in the costs and
-------
VI-2
revenues of otherwise similar water systems. Stated differ-
ently, the major conclusions drawn from the survey responses
on revenues and rate indicate:
a pattern of declining mean and median rev-
enue rates with increasing system size,
ranging from approximately 80 cents per
thousand gallons produced for the smallest
systems down to 27 cents for the largest
wide variation among systems, even of the
same size, ownership, and water source,
with some systems not charging at all for
water, and others charging over $2 per
thousand gallons produced.
This chapter discusses three types of water system
revenues: first, reported revenues from water operations (in-
cluding sales, hook-ups, and connection fees); second, budget
appropriations from municipalities for the public systems; and
third, the implied revenues from other sources indicated by
expense rates in excess of revenues from water sales. These
three types of revenues are presented below, followed by a
section on water system billing rates to customers.
REVENUES FROM WATER OPERATIONS
The survey questionnaire requested annual data ou
total revenues from water operations. The last phrase was
underlined in the questionnaire to discourage responses which
included joint water and sewer revenues or other non-water
income such as income from real estate. The form further clar-
ified the question with the parenthetical phrase "including
sales, hook-ups, connection fees" and a list of customer cate-
gories to indicate that the responses desired should include
all forms of water-related revenues from all customer classes.
Most systems appear to have understood and answered the ques-
tion as intended.
-------
VI-3
The mean annual revenue levels listed in the table
below emphasize once again the wide range of system sizes in
the sample—from average revenues of $2,200 to $50 million
per year. The median revenue levels are listed as well, and
are generally slightly lower than the means for two reasons:
1) there are a few systems in each category with unsusually
high revenues, which affects the mean but not the median; and
2) the overall pattern, of small systems generally outnumbering
large ones also applies within most of the individual size
categories. The most noteworthy difference between mean and
median revenue level is undoubtedly at the smallest system
size, serving 25 to 100 people, where mean revenues are $2,200
per year and the median level is only $1,100.
Table VI-1
REPORTED ANNUAL REVENUES
FOR SYSTEMS WHICH CHARGE FOR WATER
1975
(thousands of dollars)
Population Category
Mean Revenues
Standard
Deviation
Median
(I obs.)
t Which
Do Not Charge
25-
99
2.2
1.2
1.1
(50)
59*
100-
499
7.3
6.0
6.6
(134)
28*
500-
999
20.1
14.8
16.0
(88)
2*
1,000- 2.500- 5,000-
2,499 4,999 9,999
40.8
24.1-
35.6
(108)
3%
88.6 151.1
43.4 60.9
86.3 156.0
(61) (41)
2%
10,000- 100,000-
99,999 999,999 >lm11Hon
798.8 6,510.9 50,551.8
851.2 5,363.5 35,780.0
542.9 4,647.6 30.344.5
(83) (192) (10)
-
Both the mean and median have been calculated based on systems which do
charge directly for water.
-------
VI-4
A significant difference among system sizes is the
percent of systems which do not charge directly for their water
at all. As the table in the previous page indicates, the two
smallest categories each have a sizeable percentage of systems
of this type: 59 percent of the systems serving 25 to 100
people and 28 percent of those serving 100 to 500 people. Those
systems appear to fund their water system costs indirectly,
either by including their costs in the overall charges for ser-
vices, as in the case of trailer parks and nursing homes, or
by funding the systems directly from the town's budget.
Finally, one must note the wide degree of variation
evident in the survey responses within each category as indi-
cated by the large standard deviations relative to the means.
As a result, the mean and median figures should be considered
as representing the arithmetic "average" and the "typical"
systems, respectively, of each size, with wide ranges of in-
dividual variations around them. The standard deviations are
large in part just because the categories are broad—each one
includes systems at one extreme which are two to ten times the
size of systems at the other extreme. In addition, as will be
evident in the next section, there are still variations even
after adjustments are made for different production levels,
ownerships, and water sources. Those apparently reflect local
conditions which are not fully explained by the responses on
the survey questionnaire.
To illustrate the degree of variation in the revenue
responses, consider the fifth of the nine categories, that
serving 2,500 to 5,000 people. With an average revenue level
of $88,600 per year, the sixty-one responses tabiilated yielded
a standard deviation of $43,400 per year. The statistical im-
plication is that two-thirds of the systems would be expected
to report revenues in the broad range of $45,200 to $132,000
(i.e., plus or minus $43,400), and one-third would still be
expected to be outside of that range. In fact, of the sixty-
-------
VI-5
one systems in that category which reported revenues, 44 were
within that range (72 percent), 8 were below it, and 9 were
above it.
REVENUES BY OWNERSHIP TYPE
There appear to be no significant differences be-
tween publicly- and privately-owned systems in the levels of
revenues collected. As the table below shows, the public
and private systems which charge for water reported very sim-
ilar annual revenue levels. In fact, the mean revenue levels
are virtually identical for the four smallest categories, serv-
ing up to 2,500 people. For several of the remaining cells,
the sample of private systems is too small to make conclusive
statements. There is one category, however, (the 100,000 to
1 million population size) for which there are adequate samples
of both ownerships and a significant difference in average rev-
enue levels—$9 million per year for private systems and $6
million for public systems.
Table VI-2
PUBLIC VS. PRIVATE SYSTEM REVENUE LEVELS
MEAN ANNUAL REVENUES
1975
(thousands of dollars)
Population Category
25- 100- 500- 1,000-2,500-5,000- 10,000-100,000-
99 499 999 2,499 4,999 9,999 99,999 999,999 >1 million
Public Systems:
Annual Revenues*($) 2.1 7.2 19.7 40.8 83.4 147.8 775.4 6,016.4 53,803.0
% Not Charging 27% 4% OX 1% 2%
(#obs.) (11) (79) (74) (97) (53) (38) (69) (162) (9)
P_rivate Systems:
Annual Revenues*($) 2.2 7.6 22.3 40.8 119.0 200.0 914.3 9,180.0 21.300.0
% Not Charging 62% 44* 13* - - - -
(*obs.) (Ill) (116) (16) (14) (9) (3) (14) (30) (1)
*For systems which charge for water
-------
VI-6
The only significant revenue difference between small
public and private systems is that more public'systems charge
for .their water. The figures in the table above show that ap-
proximately half of the private systems serving fewer than 500
people do not charge directly for water. The public systems,
on the other hand, reported only one-fourth of the systems
serving 25-100 people and 4 percent of those serving 100-500
people do not charge directly for water.
REVENUES BY PRIMARY SOURCE OF WATER
Variations in costs, and therefore in revenues, were
also expected to be related to the source of water used, with
surface water systems exhibiting somewhat higher cost and rev-
enue levels than ground water systems at the same production
levels. The survey results, as shown in the table below, seem
to bear that out at the larger systems sizes, about 10,000
people per system, but not necessarily for the smaller sizes.
Additionally, systems which rely upon purchased water
for the majority of their water appear to have slightly higher
revenue levels than either the surface or ground systems for
sizes below 10,000 people. For the larger sizes, purchased
water systems seem to fall about mid-way between the revenue
levels of the surface and ground systems. The next chapter
will show that the direct operating and maintenance expenses for
purchased water systems are much higher than for surface and
ground systems. The fact that the revenue differences are less
marked is presumably due to two other factors: 1) all systems
of a given size, regardless of source of water, should have the
same levels of distribution, administrative, and other system
costs; and 2) the purchased water systems ought to have lower
fixed investment and capital costs than other systems because
they do not produce their own water and in some cases do not
treat it either.
-------
VI-7
Table VI-3
KAN ANNUAL REVENUES
IV PRIMARY SOURCE OF WATER*
1975
(thousands of dollars)
Population Category
Surface
(1 obs.)
Ground
(1 obs.)
Purchased
(1 obs.)
*For systems
25-
99
1.4
(2)
2.1
(43)
3.0
(5)
which
100-
499
6.4
(9)
7.2
(108)
7.5
W)
charge
500-
999
20.9
(17)
19.1
(59)
23.7
1,000-
2,499
44.0
(19)
37.8
(73)
50.8
(12) (16)
for water
2.500- 5,000-
4,999 9.909
94.0
(15)
90.0
(36)
75.6
(10)
132.3
(11)
156.4
(26)
173.5
(4)
10,000- 100,000-
99,999 999,999 >1 million
1,152.0
(25)
645.5
(44)
649.9
(14)
7,301.8 52,836.4
(114) (9)
4,987.0 3C ,000.0
(54) (1)
6,182.9
(24)
REVENUE RATES PER THOUSAND GALLONS PRODUCED
The calculations were also performed on the basis
of revenues per thousand gallons of water produced, in an ef-
fort to eliminate differences which simply reflected variations
in population served, number of commercial and industrial
customers, types of commercial connections served, and the
presence or absence of agricultural and wholesale connections.
The results of those tabulations are presented in the table
below. These rates, it must be pointed out, are not the rates
charged to customers which must be based upon deliveries in-
stead of production and which generally vary by customer class.
Those figures will be presented later in this chapter.
To eliminate distortion of the ratios by erroneous inputs in either pro-
duction or revenues data, the tabulations were performed only for systems
with revenues greater than zero and revenues per thousand gallons pro-
duced of $2.50 or less. That upper limit eliminated 34 of 615 ques-
tionnaires .
-------
VI-8
REVENUE RATES
(cents per
Mean
Standard
Deviation
Median
(1 obs.)
25-
99
65.5
47.7
47.9
(23)
*For systems with
thousand gallons
100-
499
85.6
55.8
81.1
(89)
revenues
less than
Table VI-4
PER THOUSAND GALLONS PRODUCED*
1975
thousand gallons produced)
Population Category
500- 1,000- 2,500- 5,000- 10,000-
999 2,499 4,999 9,999 99,999
80.5 72.3
46.8 46.8
68.4 63.2
(72)
and
$2.
(88)
production
50
71.3 54.1 50.8
53.7 28.9 24.6
52.9 48.1 46.2
(55) (40) (80)
greater than zero, and
100,000-
999,999 >1 million
43.4 32.2
21.0 11.9
38.6 26.1
(189) (9)
revenues per
A pattern emerges from these results which indicates
economies of scale in the industry. Except for the very small
(below 500 people) and very large systems (over 1 million), the
revenue levels are generally in the 40 to 70 cent level range,
with declining mean and median rates almost perfectly a function
of system size. That pattern is clearly depicted in the graph
on the following page.
The revenue levels appear to peak in the second size
category, 100 to 500 people, at approximately 80 to 85 cents
per thousand gallons produced. From there the revenues trend
downward to a low of about 32 cents in the largest category
(over 1 million people). The steepness of the decline in rev-
enue levels depends upon whether one focuses on mean rates or
medians (the means are higher), but both show the same overall
pattern.
-------
VI-9
Figure VI-1
REVENUES PER THOUSAND GALLONS PRODUCED, ALL CUSTOMERS
(FOR SYSTEMS WHICH DO BILL FOR WATER)
RESIDENT
POPULATION
SERVED
25-
99
100-
499
500-
999
1,000-
2,499
2,500-
4,999
5,000-
9,999
10,000-
99,999
100,000-
999,999
1 MILLION &
ABOVE
J65.5
,•:••:;;: 43.4
85.6
1.1
J80.5
J72.3
J71.3
KEY:
MEAN
MEDIAN
I I I I I I I I I I
10 20 30 40 50 60 70 80 90 100
REVENUES IN CENTS PER THOUSAND GALLONS PRODUCED, 1975
-------
VI-10
An exception to the pattern of declining rates with
increasing system size is indicated in the smallest category,
where revenue rates are actually lower than for the next larger
size category. The reason appears from the expense data in
the next chapter to be the result of donated services or un-
attributed costs for the systems serving only 25 to 100 people,
and to some degree to the difference in treatment levels for
the various system sizes.
As with total revenues, the standard deviation in-
dicates a great deal of variation in revenue rates among in-
dividual systems in each category. Consider again the 2,500
to 5,000 population category (one of the narrowest categories,
with the maximum population size only twice that of the mini-
mum). The frequency of specific revenue levels in that cate-
gory is plotted below (Figure VI-2) for fifty-five obser-
vations in the survey (five did not report production and
one was above $2.50 per thousand gallons). From the plot
one can readily understand why the standard deviation is so
large for most of the sample tabulations—the range of
responses is so wide, and skewed to the left • that the means
and medians are weak indications of central tendency.
-------
VI-11
-
zS
-------
VI-12
REVENUE RATES BY OWNERSHIP TYPE
There are no significant differences between pub-
licly- and privately-owned systems in total revenue levels;
but revenue rates per thousand gallons are lower for public
systems. As the table below illustrates, these rates are
lower for public systems in all size categories.
The same general pattern of economies of scale
(with the exception of the smallest size category) appears
for both public and private systems. The only exception to
this pattern is the increase in revenue rates between the
third and fifth size categories for private systems. This
interruption of the pattern may be caused by the more limited
number of observations for some categories of privately-owned
systems.
Table VI-5
REVENUE RATES BY OWNERSHIP TYPE
PER THOUSAND GALLONS PRODUCED*
1975
(cents per thousand gallons)
Population
Public Systems
Mean
Median
Standard Deviation
(1 obs.)
Private Systems
Mean
Median
Standard Deviation
(* obs.)
25-
99
50.5
34;2
48.0
(5)
69.7
56.5
48.2
(18)
*For systems with revenues
less than $2.50.
100-
499
80.6
74.1
51.9
(59)
95.6
88.9
62.3
500-
999
78.9
63.1
48.5
(62)
91.1
96.2
35.4
(30) (10)
and production
1,000-
2,499
69.4
62.8
42.4
(79)
97.8
71.5
74.0
(9)
greater
2,500-
4,999
66.6
48.3
52.2
(47)
99.3
78.9
57.8
(8)
than 0
Category
5,000
9,999
53.3
48.4
26.0
(37)
63.0
37.2
63.7
(3)
, and
- 10,000-
99,999
48.8
44.9
24.2
(68)
62.5
68.1
24.3
100,000-
999,999 >
40.0
36.7
19.2
(159)
62.5
62.9
21.3
(12) (30)
revenues per thousand
Im1ll1on
30.0
26.6
9.1
(8)
49.6
49.6
-
(1)
gallons
-------
VI-13
CUSTOMER RATES—PER THOUSAND GALLONS DELIVERED
The survey included two methods of determining av-
erage or typical customer rates. Systems were not asked to
report their specific rate structures, however, because each
utilizes a different combination of block rates, flat rates,
customer use classifications, and metering periods.
The two methods presented here are: 1) a tabula-
tion of residential rates implied by the responses to a ques-
tion on a typical family's bill for a given level of usage;
and 2) a calculation of average rates for each customer class
obtained by dividing revenues from that class by water deliv-
eries to it. Each of these methods is presented below.
REPORTED RESIDENTIAL RATES
Systems provided the annual cost of water to a typ-
ical family in response to the following question: "Based on
your present rate structure, what would a typical residential
o
customer pay per year for 100,000 gallons"? That level of
usage is approximately 90 gallons per capita per day for a
family of three.
The results of the responses to that question are
presented in the table below. One observes from the table
that the reported rates are generally higher than rates which
can be computed from the revenue levels as presented earlier.
One reason for the difference is simply as different denomin-
ators: the numbers below are cents per thousand gallons
2
An alternative form was also available on the questionnaire for systems
to report cost per 100 ,—ubia feet.
-------
VI-14
delivered, while the earlier numbers were based upon thousand
gallons produced, which are higher. The second, and more sig-
nificant reason, however, is that the earlier numbers were for
alj. water production of a system, while these refer only to
residential customers. The implication that residential cus-
tomers generally pay a higher rate than other users will be
borne out in the next section.
Table VI-6
REPORTED RESIDENTIAL RATES
BASED ON FAMILY USAGE OF 100.000 GALLONS PER YEAR*
1975
(cents per thousand gallons of deliveries)**
Population Category
Mean
Standard
Deviation
Median
(1 obs.)
•Equivalent
25-
99
73.5
51.1
60.0
(51)
100-
499
89.0
51.0
75.0
(148)
500- 1,000-
999 2.499
78.5
50.0
69.0
(82)
to approximately 90
85.2
•46.8
76.0
2.500- 5,000- 10.
4.999 9.999 99,
93.6
65.3
83.0
79.2
44.4
69.5
71
37
64
000-
999
7
3
0
(97) (58) (40) (79)
gallons per capita per day for a
**5ame numbers also represent dollars per
(I.e., 100 thousand gallons x cents per
year per family at
thousand gallons).
this
100,000-
999,999 >1 million
65.2
31.4
60.0
(188)
family of
level
53
18
52
.6
.0
.0
(10)
three.
The mean rates derived from this question range be-
tween 53.6 cents and 93.6 cents per thousand gallons delivered
(also $53.6 to $93.6 per year for 100,000 gallons). The lowest
rates are those for the largest two size categories. All the
other sizes have mean rates of over 70 cents. The median rates
are somewhat lower and even more consistent across size cate-
gories, ranging only from 52 to 83 cents. Again, the standard
deviation indicates that individual system rates vary widely.
-------
VI-15
COMPUTED RATES BY CUSTOMER CLASS
The second approach to determining average customer
rates was to divide the revenues reported from each customer
class by the water provided to that class. The questionnaire
requested such data for four specific customer groups: resi-
dential, commercial and industrial, wholesale, and other.
The "other" category was further identified on the form as
including "agricultural connections, municipal connections--
towns, hospitals, etc.".
Approximately half of the systems which reported
total revenues and total deliveries also reported revenues
and deliveries for the residential customer class (331 vs.
646). Fewer responded on the other classes, with the tabu-
lation below based upon: 256 responses for commercial and
industrial; 92 for wholesale; and 149 for other. The sta-
tistical results are summarized in the table below. The re-
sults differ somewhat from those reported in the previous
section because: 1) a different number of systems responded
to the two questions; 2) there is a great deal of variation
among systems as has been amply pointed out; and 3) the level
of 100,000 gallons per year turns out to be higher than the
average family usage.
The general pattern which emerges from computing
the rates by customer category can be summarized as follows:
The largest systems have lower rates for
each customer class than do all other sys-
tem size categories.
-------
VI-16
Residential customers generally have the
highest rates of all .customer classes; in
only one size category (2,500-5,000) is
there another class which pays more, and
there the commercial and industrial cus-
tomers have a rate which is higher by
only one cent per thousand gallons.
Municipal'and institutional customers in
the "other" class appear to pay more than
commercial and industrial customers in five
out of eight categories.
Finally, wholesale customers pay the lowest
average rate in each system size category.
The table below presents the computed rates per
thousand gallons for each of the customer classes and size
categories.
Table VI-7
COMPUTED RATES PER 1,000 GALLONS DELIVERED*
(cents per thousand gallons)
Population Category
Residential
Commercial/
Industrial
Wholesale
Other
Average for
All Sales
Residential
Commercial/
Industrial
Wholesale
Other
Average for
All Sales
*Computed from
25- 100-
99 499
67.2 95.4
73.8
72.6
76.5
73.2 89.0
68.2 79.4
44.2
100.0
75.0
68.2 31.5
revenues and
500-
999
89.9
68.4
-
79.9
80.3
79.2
57.4
-
66.7
1,000- 2,500- 5,000-
2,499 4,999 9,999
--MFAN RATES
68.9 86.8 66.8
64.9 87.8 57.5
82.5 53.6
69.2 74.0 41.5
72.0 73.1 63.5
MFD TAN RATFS
59.0 81.5 45.0
56.7 73.0 40.0
80.6 35.6
62.8 31.5 22.9
64.0 65.9 59.2 51.1
deliveries reported by customer
10,000-
99,999
62.3
53.8
39.3
44.7
55.1
53.9
47.0
20.2
35.2
49.3
class
100,000-
999,999
63.1
40.4
31.0
65.9
47.3
57.8
35.7
29.3
46.6
43.2
> 1 million
44.9
22.2
20.5
35 V2
28.3
38.1
21.1
22.7
35.3
25.7
-------
VI-17
BUDGET APPROPRIATIONS
Publicly-owned water systems are usually owned and
operated as one of the municipal services of a city or town,
and their bookkeeping and revenue collections are in some
cases quite separate and in other cases very integrated with
that of the city or town. Budget appropriations from the
municipality's general fund, therefore, can represent two
very different types of transactions depending upon the nature
of that financial relationship. In some cities and towns
the municipality receives the revenues from water sales and
transfers money in the form of a budget appropriation to
cover the system's expenses. In the other cities, the water
system itself receives the revenues from water sales, and
either no budget appropriation is received or a small one
exists to supplement direct revenues. These cases have been
defined for tabulation purposes as: 1) those systems in
which the budget appropriation is equal to or greater than
reported revenues from water sales; and 2) those in which
the budget appropriation is less than the reported revenues
from water sales.
The first category, with appropriations equal to
water sales or greater, represents 10 percent or less of the
public water systems in each size category as shown in the
table below. Only 29 systems are in this category, out of
460 publicly-owned water systems which responded to this
question.
The other category, with smaller budget appropria-
tions, includes from 10 to 20 percent of the number of public
systems in each size category except the smallest (where the
number of public systems is too small a sample to be conclusive)
-------
VI-18
Appropriation
Greater Than
Water Sales
% of Public
Systems
Mean Annual
Level ($)
(if obs.)
Appropriation
Less Than
Water Sales
* of Public
Systems
Mean Annual
Level ($)
(* obs.)
1
Table VI -8
BUDGET APPROPRIATIONS RECEIVED BY PUBLICLY-OWNED WATER SYSTEMS
1975
(thousands of dollars)
Population Category
25- 100- 500- 1,000- 2,500- 5,000- 10,000- 100,000-
99 499 999 2,499 4,999 9,999 99,999 999,999 >lml1l1on
0% 8% 8% 3% 9% 10% 6% 6% 0%
10.7 18.2 82.8 91.3 269.2 554.1 4,742.9
(5) (4) (2) (4) (3) (3) (8)
0% 1B% 21* 195! 13% 10* 20* 10* 13*
4.0 5.8 17.7 27.4 130.1 455.7 1,513.4 20,036.9
(11) (ID (12) (6) (3) (10) (15) (1)
For these systems, the mean budget appropriations level is
significant relative to the revenues from water sales—rang-
ing from approximately 25 to 50 percent of the mean revenues
figure across the various size categories. The individual
systems differ markedly, with many relying heavily on budget
appropriations for income (some as high as 80 arid 90 percent
of water sales), and an equal number reporting appropriations
at 30 percent or less. In fact, one out of eight systems
reported a figure below 10 percent and one out of fourteen
was between 90 and 100 percent.
-------
CHAPTER SEVEN
FINANCIAL CHARACTERISTICS:
OPERATING EXPENSES, INTEREST & TAXES
Probably the three most important financial statis-
tics for water systems are: 1) revenues; 2) debt outstanding;
and 3) total operating expenses. This chapter presents the
survey results on the third, operating expenses of water sys-
tems. It also includes the profit and loss (or surplus and
deficit) data reported by systems.
This chapter is organized into three sections:
first, results on the operating expense categories which in-
clude O&M, taxes, and depreciation; second, data on interest
expenses; and third, the results on profits or operating sur-
plus.
TOTAL OPERATING EXPENSES
Total operating expenses as used in this report
include both fixed and variable costs of operation. These
expenses include a system's labor, fuel, electricity, chem-
icals, and other direct costs of operation. Usually a de-
preciation or amortization charge is also included, espe-.
cially for privately-owned systems, as are taxes or payments
in lieu of taxes. In fact, for most systems, about the
only items not included in total operating expenses are in-
terest charges and profits.
In order to obtain as consistent responses as possible, this section of
the questionnaire asked for both the total operating expense and the ex-
pense in each of several individual categories. In addition, this section
differed for the public and private questionnaires, because of differences
in tax liabilities and depreciation accounting.
-------
VII-2
It is obvious that, with this definition, operating
expenses account for the lion's share of a system's revenues,
in many cases as high as 85 to 90 percent of the total. Ac-
cordingly, it should be no surprise that the patterns exhibited
by the operating expense data parallel those already described
for revenues.
The total operating expense data is displayed in the
table below. Some 696 of the 984 respondents provided usable
o
production and operating expense data. The data reveal a pat-
tern of economies of scale, although as will be seen later, the
economies only show up clearly for systems serving over 2,500
people. The smaller systems below that size exhibited mean op-
erating expense rates of approximately 65-80 cents per thousand
gallons of water produced. At larger sizes, the mean expense
rate drops steadily to approximately 50 cents per thousand gal-
lons for systems serving 2,500 to 10,000 people, 40 cents in
the 10,000 to 100,000 population range, and 24 to 30 cents above
that.
The median rates for total operating expenses do not
vary as widely across system sizes as do the mean rates. The
medians are in the 50 to 60 cent range for the four smallest
size categories (up to 5,000 people), and then drop steadily
to a rate of 18.5 cents per thousand gallons for the largest
size. The same conclusion of economies of scale is evident but
the curve is not quite as steeply declining.
9
Nineteen other systems provided such data but either misinterpreted the
survey questions or reported such deviant information that their inclusion
distorts the averages for "typical" systems. One example is an Indian
village in the Southwest which would add over $1 to the average expense
rate of the systems serving' 25-100 people, because it spends $200 per year
with a total production of only 3,000 gallons of water (a cost per thou-
sand gallons of $66!) Accordingly, all systems reporting expense rates
per thousand gallons in excess of $3 were excluded from this tabulation.
-------
VII-3
Table VII-1
TOTAL OPERATING EXPENSES*
1975
(cents per thousand gallons produced)
Population Category
Mean Total
Opera ting Expense
Standard
Deviation
Median
(I obs.)
25-
99
100-
499
77.8 64.8
72.1
53.3
(48)
*For systems with total
operating expenses less
58.2
50.6
(119)
ooerating
than $3.
500-
999
75.8
56.5
62.6
1,000- 2,500-
2,499 4,999
62.4
47.3
55.2
57.5
41.2
45.0
5,000-
9,999
52.6
39.3
36.9
10,000-
99,999
39
24
35
.9
.1
.8
(68) (88) (55) (40) (80)
expenses and production greater than
00 per thousand gallons produced.
100,000-
999,999 >
31.
19.
28.
9
4
2
(189)
zero and
Iminion
23.5
9.9
18.5
(9)
The variations in total operating expenses for in-
dividual systems are substantial. As with revenues, the stan-
dard deviation relative to the mean is greatest for the small
system sizes, where it is as high as 90 percent of the mean,
which indicates a very wide range of responses. The standard
deviation declines steadily for larger system sizes, to only
40 percent of the mean rate for systems serving populations
of over 1 million. So, not only are operating expense rates
higher, but they also range most broadly for the small sys-
tems.
The total annual expenses, rather than the expense
rates, for the systems are also significant in two respects:
first, the annual levels provide a different perspective of
the operations of the systems; and second, the wide variations
among systems of similar sizes are also evident there. One
clear implication of the figures below is that the typical
-------
VII-4
system serving fewer than 1,000 people does not have any full-
time employees. In those size categories the median annual
operating costs total less than $15,000 per system. Above
that size the operating costs rise substantially as plants
adopt more formal treatment practices and also require full-
time staff in the production and treatment functions. For
systems serving over 5,000 people, the average annual oper-
ating expenses exceed $100,000.
Table VII-2
ANNUAL TOTAL OPERATING EXPENSE LEVELS*
1975
(thousand dollars per year)
Population Category
25- 100- 500- 1,000- 2,500- 5,000- 10,000- 100,000-
99 499 999 2,499 4,999 9,999 99,999 999,999 >1 mil lion
Mean Expenses 2.0 5.5 18.2 36.2 76.2 152.3 622.5 4,889.3 31,248.0
Standard
Deviation
Median
(# obs.)
4.5 5.9 16.0 25.0 45.4 171.7
0.9 4.2 13.8 29.3 75.0 120.0
(48) (119) (68) (88) (55) (40)
565.3 4,297.9 22,434.1
416.4 3,361.2 20,044.0
(80) (189) (9)
*For systems'With total operating expenses greater than zero.
The median values for most size categories are very
similar to the mean values, with the exception of two ex-
treme categories. For the very smallest size, serving 25 to
100 people, the median is only $900 per year of total operating
expense, while the average is $2,000. The obvious implication
is that there are a few systems with relatively high expense
levels which raises the average. The New York City system,.
-------
VII-5
for example, has that effect on the average for the over 1
million category because it is so much larger than the other
systems in that category.
As the standard deviations show, each size category
has a wide range of expense levels. Much of that is to be ex-,
pected, however, simply because the categories represent wide
ranges of system sizes and production levels. The variations
in water treatment practices and local conditions serve to
further expand the range of expense levels.
OPERATING EXPENSES BY PRIMARY
SOURCE OF WATER
The graph on the following page shows clearly the
pattern of economies of scale referred to above. The total
operating costs are generally in the 70 cent to $1 per thou-
sand gallon range for the smallest systems and then trend
downward consistently as system size increases.
Expectations at the beginning of the project were
that surface systems would generally indicate higher operating
costs than ground water systems. However, this is not the
case in three of the nine size categories. Most notably, for
systems serving between 100,000 and 1 million people, the mean
operating expense (in cents per thousand gallons) for ground
o
water systems was 10 percent higher than for surface systems.
Some size categories which illustrate lower operating costs
for ground systems had sample sizes which were too small to
be conclusive: of the 26 averages in the table on page VIII-7,
four are based on samples of fewer than five systems and four
others are based on the samples of five to ten systems.
These ground systems have a lower average daily production than
surface systems in the same category; therefore, the ground systems
do not seem to obtain the same economies of scale.
-------
VII-6
Figure VII-1
TOTAL OPERATING EXPENSES BY PRIHARY SOURCE OF WATER
(MEAN VALUES)
RESIDENT
POPULATION
SERVED
25-
99
100-
199
500-
999
1,000-
2,499
2,500-
'1,099
5,000-
9,999
10,000-
99,999
100,000-
999,999
1 MILLION "
ABOVE
120
197
173
193
|76
61
61
151
KEY:
PURCHASED
.:k..:....] SURFACE
GROUND
I I I I 1 I A I II I I I
$ 10 20 30 40 50 60 70 80 90 100 110 120
CENTS PER 1000 GALLONS PRODUCED*
C97S DOLLARS)
'BASED ON AVERAGE DAILY PRODUCTION LEVELS
-------
VII-7
In general, the comparative rates for surface and
ground water systems show: a) no definitive pattern for sys-
tems serving fewer than 1,000 people (based upon relatively
small samples of surface systems); b) costs for surface water
systems 10 to 30 percent higher than for ground water systems
in the 1,000 to 10,000 population range; and c) virtually iden-
tical total operating expense rates for both types of larger
systems. The rates are shown in the following table.
Table VII-3
OPERATING EXPENSE RATES--
BY PRIMARY SOURCE OF WATER*
1975
(cents per thousand gallons produced)
Population Category
Surface
(* obs.)
Ground
(» obs.)
Purchased
(* obs.)
"Mean values
greater than
produced.
25-
99
47.9
(1)
76.1
(42)
120.2
(4)
100-
499
86.4
(6)
68.4
(74)
97.0
(20)
500-
999
70 .'1
(13)
81.8
(48)
77.5
(8)
1,000- 2,500- 5,000- 30,000-
2,499 4,999 9,959 9'J,999
66.1
(14)
60.3
(63)
92.5
(12)
63.7
(15)
48.9
(31)
76.2
(9)
61.1
(11)
47.4
(25)
61.1
(4)
for systems which reported total operate-
zero and operating expenses less than $3
38.8
(25)
37.1
(42)
50.6
100,000-
9^3,999 >1 million
30.5 24.7
(113)
(8)
33.7 14.1
(53)
34.8
(1)
-
(13) (23)
j expenses and production
.00 per thousand gallons
The patterp for purchased water system costs is much
clearer: they are higher than either of the other sources in
almost every instance except for populations of 100,000 to 1
million. At that level purchased water appears to be almost
as economical as ground water and about 14 percent more ex-
pensive than surface water. For the seven smaller sizes,
based upon samples of only 4 to 20 systems in each category,
the purchased water system costs ranged from approximately the
same as surface or ground water costs for two sizes, to 12 to
50 percent higher for the other five sizes.
-------
VII-8
OPERATING EXPENSES BY OWNERSHIP
The sample deta appear to indicate somewhat higher
cost rates for privately-owned water systems than for public
ones, although the distribution of systems is such that large
samples of both types were only obtained in two size categories.
As the following figures show, those two sizes are for populations
of 100 to 500 and 100,000 to 1 million. In those two cases the
privately-owned systems reported mean cost rates which -were 22
percent and 47 percent, respectively, higher than the rates for
public systems. The data in the other size categories generally
reinforces the conclusion that privately-owned systems have
slightly higher total expense rates than publicly-owned sys-
tems, although the revenue data in the previous chapter indi-
cates almost no difference by ownership in average annual rev-
enues in the smaller system size categories.
The difference in cost rates below, as shown later in
the detailed breakdown of operating expenses, is the result of
three primary factors: 1) the absence of tax payments for pub-
lic systems; 2) the absence of depreciation charges for most
public systems; and 3) the availability in small communities
of public employees or volunteers whose services for a public
water system are either billed generally to the town or donated.
-------
VII-9
Table VI I -4
OPERATING EXPENSE RATES
FOR PUBLIC VS. PRIVATE SYSTEMS*
1975
(cents per thousand gallons produced)
Population
Public:
Operating
Expense Rate
(# obs.)
Private:
Operating
Expense Rate
(# obs.)
25-
99
82.0
(7)
78.8
(40)
*Mean values for systems
than zero and operating
100-
499
67.3
(66)
82.4
500-
999
70.0
(58)
127.1
(54) (11)
which reported
expenses less
1,000-
2,499
62.3
(78)
88.5
2,500-
4,999
56.7
(47)
61.5
Category
5,000-
9,929
52.6
(37)
51.9
10,000-
99,999
39.0
(68)
44.7
100,000-
999,999
30.0
(159)
44.2
(11) (8) (8) (12) (30)
total operating expenses and production
than $3.00 per thousand gallons produced
> Imillion
22.0
(8)
35.7
(1)
greater
OPERATING EXPENSE DETAIL
The operating expenses were broken down on the ques-
tionnaire into specific categories such as operating and main-
tenance expenses, taxes, and payments in lieu of taxes. The
breakdown differed for publicly-owned and privately-owned sys-
tems, because the former generally pay no taxes, and as a rule,
record no depreciation expense. There were six detailed items
requested on the questionnaire for private systems and three
for public.
The accuracy of the responses on the detailed operating
expense questions is generally good—over two-thirds of the ques-
tionnaires which reported total operating expenses also contained
responses on the detailed questions, and the sum of the line
item averages is quite close to the mean computed for total
-------
VII-10
operating expenses. As pointed out in the discussion below,
the pattern of responses on the "other operating costs" ques-
tion suggests that there may have been some variation in
interpretation of that question, with some systems reporting
administrative and miscellaneous expenses under that heading
and other systems simply including all their expenses under
the broad, first category of "operating and maintenance."
Accordingly, these two categories are probably most accurate
when combined.
The results for both public and private systems show
the major expense category to be direct operating and mainten-
ance expenses, which generally accounts for 60 to 70 percent
of the total operating expenses of the system. Because of the
different questionnaire formats for public arid private water
systems, the results for the two types are presented separately
below.
PUBLICLY-OWNED SYSTEMS
The reported cost detail for publicly-owned systems
is broken into three cost categories: operating and mainten-
ance expenses (O&M); other operating costs; and payments in
lieu of taxes. The following table presents the results of the
responses to these questions for each of the nine system size
categories. The data is presented entirely in terms of cost
rates, in cents per thousand gallons of water produced, to
facilitate comparisons across size categories and between
public and private systems.
At the bottom of the table', for reference, the mean
total operating expense rate from Table VII-4 has also been
included for reference. The detailed categories sum to a
slightly different total because there is so much variation
among systems and not all systems provided detailed data.
-------
VII-11
The sum is within 12 percent of the mean total operating ex-
pense rate for all of the sizes, and within 5 percent for four
sizes. There appears to be no bias in the differences, for
there is neither a pattern by size nor by direction of the
variations—for four sizes the sum exceeds the mean total rate
while it falls short for five sizes.
The individual line item results are discussed
separately for each cost category below.
Table VII-5
OPERATING EXPENSE DETAIL*
PUBLICLY-OWNED SYSTEMS
1975
(cents per thousand gallons produced)
Population Category
OHM
(* obs.)
Other Operating
Costs
(t obs.)
Payments in Lieu
of Taxes
(# obs.)
Total Operating
Expense
Vs.
Reported
Total Expense**
25-
99
92.0
(6)
0.0
(0)
0.0
(5)
92.0
(82.0)
*Mean values for systems
zero and less than $3.00
"See Table VIM.
100-
499
61.1
(45)
8.3
(46)
3.4
(50)
72.8
500-
999
47. £
(39)
13.9
(34)
4.4
(36)
65.9
1,000- 2,500- 5.00C-
2,499 4,999 9,999
45.2
(55)
14.3
(49)
0.4
(48)
59,9
(67.3) (70.0) (62.3)
which reported total
per thousand gallons
43.8 33.8
(27) (25)
14.8 14.7
(24) (23)
1.1 1.3
(28) (25)
59.7 49.8
10.0CO-
93,999
25.3
(54)
8.0
(51)
1.1
(45)
34.4
(56.7) (52.6) (39.0)
operating expenses equal
produced.
ICO, 000-
SS9.99S
22.3
(143)
6.0
(137)
0.8
(136)
29.1
> 1 mil lion
19.7
(6)
4.0
(4)
0.1
(5)
23.8
(30.0) (22.0)
to or greater than
Operating and Maintenance (O&M)
O&M costs include the direct costs of producing
water and maintaining the water system. This category in-
cludes costs such as labor, fuel, electricity, chemicals,
and repairs. There was some variety in the interpretations
-------
VII-12
of these detailed cost categories. For example, some systems
may have included administrative costs such as bookkeeping and
billing in their O&M costs, while other systems reported that
cost as "other operating costs." For that reason, the data
may best be used when combined with the "other operating costs"
data as suggested earlier.
The mean rates for O&M shown -in the preceding table
indicate very clear economies of scale for larger water sys-
tems. The systems serving fewer than 5,000 people reported
O&M rates twice as high (over 40 cents per thousand gallons)
as systems serving over 1 million people. The smallest two
sizes reported O&M costs approximately three and four times
as high as for the largest systems (92 and 61 cents, respec-
tively, versus 20 cents per thousand gallons).
O&M costs account for most of the total operating
costs reported by public systems, ranging from 60 to 100 per-
cent for various sizes. In part that is due to the accounting
practices of publicly-owned systems, which tend to write off
expenses directly and not to depreciate assets. However, the
importance of direct O&M expenses would not change appreciably
even if those accounting practices changed, as will be seen
later in examining the private system data.
Other Operating Costs
This category was listed on the questionnaire di-
rectly under the O&M category, but was not defined. It was
intended to pick up other expenses remaining after reporting
interest and taxes. It was used by various respondents (as
revealed in marginal notes on questionnaires and contact with
systems) to indicate depreciation expense for some public
systems which do record that expense, administrative and ac-
counting expenses, and miscellaneous expenses. Almost as
many systems responded to this question as to the O&M question.
-------
VII-13
One difference, however, was that the response to this question
was zero (that is, no such costs) for a significant number of
systems. As a result, one way of using the data would be to
combine it with the O&M responses to obtain a total of all
operating costs except payments in lieu of taxes.
These other operating costs were reported highest
for systems in the range serving 500 to 10,000 people—ap-
proximately 14 cents per thousand gallons, or 20 to 30 per-
cent of total operating expenses. To the extent that this
reflects administrative and accounting costs, it may indicate
one diseconomy of scale: that very small systems benefit from
donated or shared services for water systems, while slightly
larger systems must hire personnel to perform the same func-
tions. At larger system sizes the personnel may be supported
by a much larger volume of production, so such cost rates de-
cline to 6 cents per thousand gallons for systems serving
100,000 to 1 million people and to 4 cents for systems serving
over 1 million.
Payments in Lieu of Taxes
Publicly-owned water systems are generally extensions
of municipal government and not required to pay local, state, or
federal taxes. Often, however, payments are made in lieu of
taxes, usually to the local government, to take the place of
property taxes which would be collected if the water systems
were privately-owned. Furthermore, the amount paid by those
systems which make such payments is approximately the same as
the amount of local taxes paid by private systems.
The figures in Table VII-5 represent the average
amount of payments made in lieu of taxes for all publicly-
owned systems, including those which do not make such pay-
ments. On that overall average basis, the amount is very
-------
VII-14
small, ranging from zero to 4.4 cents per thousand gallons,
and is below 1.3 cents for six of the nine size categories.
Interestingly, the highest rates are for small systems, ser-
ving 100 to 1,000 people.
The data are also presented below in terms of the
percentage of reporting systems which do make payments in lieu
of taxes, and what that average amount is. The percentage of
publicly-owned systems which make such payments is zero for
the smallest category; it is around 10 percent of the systems
serving 100 to 2,500 people, and climbs gradually up to 40
percent of the systems serving 100,000 and more people.
The average amount paid by the systems which make
payments in lieu of taxes is quite high for the smaller sys-
tems—28 and 53 cents per thousand gallons, based on small sam-
ples of only six systems serving 100-500 people in the first
case and three systems serving 500-1,000 people in the second.
At larger system sizes the amount paid drops to approximately
6 cents per thousand gallons and then gradually down to under
half a cent for systems serving over 1 million people.
TAX
Size
(population served)
25-99
100-499
500-999
1,000-2,499
2,500-4,999
5,000-9,999
10,000-99,999
100,000-999,999
1 mill ion and over
Table VII-6
EXPENSE FOR PUBLIC
FOR SYSTEMS WHICH DO
Percent Making
Payments in Lieu
of Taxes
C%
IYI,
8
-------
VII-15
PRIVATELY-OWNED SYSTEMS
More cost categories were used for the breakdown of
operating expenses for privately-owned systems than for public
systems in order to identify depreciation and federal, state,
and local tax charges. In all, six cost items were requested
on the questionnaire.
The survey results in this area are presented in the
table below, in a format similar to that used above for public
systems data. The table presents cost rates in cents per thou-
sand gallons of water produced, and includes the mean overall
operating expense row at the bottom from Table VII-4. Again, the
detailed categories do not sum exactly to the overall figure
due to the variation in response rates on the different ques-
tions. The sum of the detailed costs is within 12 percent of
the mean total operating expense rate for all but one size
category.
Table VI1-7
OPERATING EXPENSE DETAIL*
PRIVATELY-OWNED SYSTEMS
1975
(cents per thousand gallons produced)
Population Category
0!,M
(* obs.)
Depreciation
(f obs.)
Federal Taxes
{* obs.)
State Taxes
(f obs.)
Local Taxes
(# obs.)
Other
Operating Costs
(* obs.)
Total Operating
Expense
Vs.
25-
99
54.7
(29)
22.0
(14)
0.0
(23)
1.5
(23)
0.6
(23)
6.7
(15)
es.s
Reported Total
Operating Expense** (78.8)
"Mean rates for
zero and less
**See Table VII-
100-
499
49.7
(29)
18.1
(25)
1.5
(26)
0.8
(26)
3.2
(29)
5.9
(20)
79.2
500-
999
75.4
(7)
27.7
(7)
4.0
(6)
3.5
(6)
5.8
(7)
21.9
(4)
138.3
(82.4H127.1)
systems which reported
than $3.00 cer thousand
4.
1,000-
2,499
47.3
(6)
9.5
(3)
0.4
(3)
0.0
(13)
1.6
(3)
29.9
(5)
88.7
2,500-
4,999
38.0
(6)
5.4
(6)
0.0
(4)
0.8
(4)
4.1
(5)
1.2
(4)
49.5
5,000
9.999
29.3
(3) -
8.1
(3)
3.1
(3)
1.2
(3)
8.6
(3)
2.1
(2)
52.4
10,030
99.999
31.7
(10)
5.9
(10)
4.8
(9)
2.1
(9)
5.3
(8)
0.4
(9)
50.2
(83.5) (41.5) (51.9) (44.7)
total ooeratfng expenses equal
gallons produced.
100, OCO
999,999
27.6
(29)
4.3
(29)
2.2
(26)
0.9
(23)
3.2
(27)
0.6
(20)
38.8
> 1 mill ion
18.1
(1)
4.5
(1)
6.7
(1)
0.5
(1)
5.8
(1)
0.0
(1)
35.6
(44.2) (35.7)
to or greater than
-------
VII-16
The data in the table are discussed separately below
for each detailed cost category.
Operating and Maintenance (O&M)
As with the public systems, O&M costs for private
systems consist of the direct costs of running a water sys-
tem: labor costs, fuel, electricity, chemicals, and repairs.
Administrative and billing costs may occasionally have been in-
cluded in this category, so the costs may be most accurate when
combined, with the "other" operating costs.
These O&M cost rates reveal the operating economies
of scale which exist in privately-owned water systems. As
with public systems, the very large systems serving over
100,000 people reported costs of around 20 cents per thou-
sand gallons, while systems below 5,000 people reported costs
of 40 cents and above.
It appears from these results and from the public
system data presented earlier that O&M costs tend to peak at
about 60 cents per thousand gallons even for small systems,
with occasional individual system costs running up as high as
$1.50 and more only in. unusual situations. The only instances
in which mean O&M rates exceed 61.1 cents for either ownership
are two cases with small samples, one with seven systems and
another with six.
Depreciation
Depreciation is an annual amortization of plant and
equipment, and is intended to approximate the rate at which the
useful life of such assets is used. Most private systems res-
ponded to the depreciation question. For the two smallest
-------
VII-17
size categories, half of the systems responding entered zero
as their charge; otherwise, most systems reported a non-zero
cost. The mean depreciation rate for all systems, including
those with zero, is listed in Table VII-7.
The depreciation charge per thousand gallons is
highest for the small system sizes, serving 25 to 1,000 people,
reflecting the economies of scale in plant and equipment in the
water utility industry. For those small system sizes the
rate is 18 to 27 cents per thousand gallons, while it is less
than 10 cents for all larger size categories. The deprecia-
tion cost curve flattens out for the largest sizes at 4 to 5
cents per thousand gallons.
The depreciation expense rate shown for systems
serving 2,500 to 5,000 people may be low by a few cents per
thousand gallons. That is indicated by the pattern of ex-
penses for the other sizes and the fact that the sum of the
detailed costs for this size category is significantly lower
than the mean overall operating expense rate at the bottom of
the table.
Taxes—Federal, State, and Local
Investor-owned water systems are subject to federal
and state income taxes, like other business corporations. Many
of the smaller systems, however, reported no income and pay no
taxes. Those systems apparently operate at (or below) a break-
even level, presumably charging just enough to cover expenses
and provide a service, in an area where the stockholders are
also the customers of the'water system.
Local taxes, which are generally property taxes, are
paid by a much larger share of the private systems than of the
publicly-owned systems, though still not by all of them.
-------
VII-18
The average tax payments, including systems which
do and those which do not pay such taxes, are presented in
Table VII-7 above. Those figures show federal taxes ranging from
zero to 4.8 cents per thousand gallons, with five sizes av-
eraging less than 2 cents and four averaging more. State
taxes are close to the same level, ranging from zero to 3.5
cents per thousand gallons, with seven sizes averaging below
2 cents and only two above that. Local taxes, however, are
the highest tax cost, at 0.5 to 8.6 cents per thousand gal-
lons, with six sizes above the 2 cent level.
The data are also presented below for the systems
which reported non-zero tax payments. The data are based upon
relatively small samples, of 20 to 25 observations for the size
category 100,000 to 1 million people, and usually only four to
nine observations in the other sizes. Nevertheless, the general
patterns are obvious: proportionately more systems pay taxes
in the larger sizes, and in all sizes the systems pay more in
local taxes than in federal or state taxes.
Table VII-8
TAX EXPENSE FOR PRIVATE SYSTEMS, 1975
FOR SYSTEMS WHICH DO PAY TAXES
Federal Taxes
.Size
(population served)
25-99
100-499
500-999
1,000-2,499
2,500-4,999
5,000-9,999
10,000-99,999
100,000-999,999
1 mill ion and over
*
Percent of reporting
%*
0%
19%
67%
33%
0%
67%
89%
85%
100%
systems
4/1,000
gals.
7. at
6.0
0.6
-
4.7
5.4
2.6
0.6
which do
State
%*
17%
15%
67%
0%
50%
67%
100%
87%
Taxes
4/1,000
gals.
3.64
5.2
5.3
-
1.6
1.8
2.1
1.0
100% 0.5
pay such taxes
Local
%*
9%
41%
57%
33%
60%
33%
88%
93%
100%
Taxes
4/1,000
gals.
6.94
7.7
10.2
4.8
6.8
25.8
5.6
3.5
0.5
-------
VII-19
Other Operating Costs
This category generally includes administrative and
accounting costs and miscellaneous expenses of water systems.
There is not a c.lear definition of this category on the ques-
tionnaire, so, as mentioned earlier, the costs should be viewed
in a general context and may best be used in combination with
operating and maintenance costs.
The pattern of other operating costs for private
systems is similar to that for public systems, with the high-
est cost rates reported not for the smallest systems but
for systems serving over 500 people. For the smallest sys-
tems, both public and private systems probably use donated
or shared services for bookkeeping and other administrative
tasks. In fact, it may be recalled that a significant number
of the smaller private systems do not even bill for water.
At system sizes above 500 people, however, the administrative
workload becomes great enough that it results in a formal
cost to the water system.
The other operating cost rate averaged less than 6
cents per thousand gallons for all but two size categories.
For those two sizes, systems serving 500 to 1,000 and 1,000
to 2,500 people, it averaged 22 to 30 cents per thousand gal-
lons based on samples of only 4 and 5 observations respec-
tively.
INTEREST EXPENSE—ALL SYSTEMS
Since water systems are relatively capital intensive,
interest expenses constitute a significant expense for them.
In fact, as the following figures indicate, interest costs
generally range from five to ten cents per thousand gallons,
-------
VII-20
or about 20 percent of total revenues. Even the capital in-
tensive electric utility industry generally only has interest
costs of approximately 10 percent of total revenues.
The following table lists the average interest ex-
penses on the basis of costs per thousand gallons of water
produced (for comparison across size categories and for ref-
erence to the data on other cost categories). The interest
expense rates for all systems, that is both public and private,
are highest for the systems serving 100 to 500 people (22.8
cents per thousand gallons), and then decline for larger sys-
tem sizes. They are in the ten cent range for systems serving
500 to 10,000 people, and take another step down to the five
cent range for very large systems serving over 100/000 people.
The lowest average interest expense rate is that
shown for the very small systems serving 25 to 100 people.
The average rate shown, however, reflects the fact that most
of these small systems pay no interest at all. The overall
mean shown is actually the average of 31 systems which pay
no interest and 4 systems which pay an average of 20.2 cents
per thousand gallons of water produced. As the next chapter
will show, the majority of these small systems have no debt
outstanding.
Table VII-9
!?;T£R£ST EXPE^
(cents
SE--A
per thousand
a SYSIE
gallons
Population
25-
99
All Systems 2.3
(* obs.) (35)
Public 0.0
(t obs.) (6)
Private 2.3
(» obs.) (29)
•Mean values for systems
and production greater
100-
<99
22.3
(96)
24.9
(59)
500- 1
999 2
11.7
(31)
12. C
(47)
,OCO-
,«9
10.0
(53)
7.8
(53;
2,5:0-
4,993
10.7
K7)
0.3
(10)
MS, 1975*
produced]
Category
5,000- 10,000-
9,999 99,999
9.3
(31)
10.5
(29)
7.3
(64)
6.0
(5O
100,000-
999,999
5.6
(172)
5.2
(147)
19.4 10.2 29.6 1C. 9 0.1 11.2 3.1
(37) (7) (6) (7) (2) (10) (25)
which reported interest expense equal to or greater
than zero.
> 1 million
5.1
(9)
4.9
(0
6.7
U)
than zero
-------
VII-21
A comparison of interest expense rates for the pub-
lic and private systems does not reveal a significant differ-
ence between the ownership types except at the largest system
sizes, over 10,000 people. At smaller sizes than that the differ-
ences are random, with public systems sometimes higher and
sometimes lower, and based upon relatively small samples in
one or the other ownership category. For the categories of
10,000 people and above the data seems to point to higher
interest expense rates for privately-owned systems than for
public ones. That difference due to ownership is approxi-
mately 2 to 3 cents per thousand gallons for the two largest
size categories and presumably stems from the ability of the
public systems to secure lower interest rates by offering
tax-exempt municipal bonds.
Embedded interest rates have also been computed
from the annual interest expenses and the long-term debt
balances reported on each questionnaire. The results of that
computation for all questionnaires which contained both res-
ponses are shown in the following table.
Both the mean and median embedded interest rates
are very constant across all system size categories, with
only one significant deviation which is a drop of about one-
half a percentage point for the systems serving over 1 mil-
lion people. With that exception at 4.6 percent, the mean
rates range between 5.1 and 6.2 percent. The median rates
are slightly lower, reflecting higher interest rates on recent
debt issues. They range from 4.8 to 5.4 percent for all but
the largest category, which showed a median rate of 4.4 per-
cent .
On the basis of ownership, the embedded interest
rate is consistently lower for publicly-owned systems in all
-------
VII-22
size categories. It should again be noted from the table
below that the number of observations for privately-owned
systems is quite small in most size categories. For pub-
licly-owned systems serving populations of 5,000 to over 1
million, the interest rate declines steadily from 6 to 4.4
percent of long-term debt. Smaller systems indicate rates
between zero (no debt) to 5.5 percent.
Table VII-10
EMBEDDED INTEREST RATES*
1975
(percent)
Population Category
All Systems
Mean
Median
(# obs.)
Public Systems
Mean
(# obs.)
Private Systems
Mean
(# obs.)
25-
99
5.8
4.9
(6)
.
-
5.8
100-
499
5.1
4.8
(33)
4.5
(22)
6.4
500- 1,000-
999 2,499
5.4
5.0
(28)
5.5
(26)
4.5
(6) (11) (2)
*Computed as interest expense divided by
and long-term debt greater than zero and
percent.
6.2
5.0
(40)
6.0
(36)
7.3
i
2,500- 5,000- 10,000- 100,000-
4,999 9,999 99,999 999,999 >1 million
5.7
5.2
(26)
5.4
(21)
6.9
5.5
5.4
(17)
5.2
(16)
10.2
(4) (5) (1)
long-term debt for
embedded interest
5.8
4.9
(33)
5.3
(23)
8.5
(5)
systems with
rate between
5.4
4.8
(132)
5.0
(108)
7.0
(24)
interest
3.0 and
4.6
4.4
(7)
4.4
(6)
5.7
(1)
expense
20.0
-------
VII-23
SURPLUS OR DEFICIT AND PROFIT OR Loss
Water systems were asked to report their profit
positions in 1974-1975; the response was expected to be the
difference between the revenues and expenses discussed earlier.
However, an examination of the reported responses compared to
computed profit or losses indicated that a number of factors
produced responses that do not simply reflect the difference
between revenues and expenses. These factors are discussed
below because they have a bearing on the interpretation of the
tables which follow.
Apparent from the responses is the fact that public
and privates systems have slightly different concepts of "profit"
and "loss." The differences are the result of public and private
systems' treatment of debt service costs and depreciation.
Private systems use an accrual form of income accounting. That
is, they subtract depreciation and interest expenses but not
principal repayment of debt. Publicly-owned systems, on the
other hand, generally use a budgeting approach related to cash
outlays for items other than capital. While there is no depre-
ciation account, interest and principal repayment are subtracted.
These different accounting methods offset each other
to a degree. However, principal repayment is generally lower
than depreciation. Consequently, private systems, with slightly
higher operatng expenses may need to set their rates slightly
above public systems in order to maintain the same apparent
level of profit or surplus.
The function of .profits also play a part in rates.
For private systems, above the smallest category, profits are
an essential requirement for staying in business. Publicly-
owned systems need to be self-sustaining in the long-run, but
-------
VII-24
in the short run, their surplus or deficit position may be
more closely tied to the annual municipal budget and related
political considerations. Consequently, a single year's sur-
plus or deficit may not be indicative of a public systems'
actual revenues and expenses.
The tables which follow reflect the level of profit/
loss or surplus/deficit which are reported of the water systems
financial statements. In those cases where a computed result
would be different from the reported number, the contributing
factors described above. In addition, particularly for smaller
systems, the difference is also due to the fact that there may
been other income or extraordinary expenses not included in the
categories on the quest.i onnaires. Therefore, these systems in-
cluded their profit/loss or surplus/deficit figures without
all the income (generally public systems) or expenses (private
systems) necessary to recreate the reported figure.
REPORTED RESULTS
The distribution of systems reporting surpluses and
deficits is shown in the following table. It is interesting to
note that the percentage of public systems reporting a surplus
is consistently in the 70 to 80 percent range for almost all
system sizes. A small number of the other 20 to 30 percent, may
simply have delayed a rate increase too long or experienced an
unusual increase in expenditures (1975 was, by the way, a year
of significant increases in electricity and fuel costs). Most
of the 20 to 30 percent reporting a deficit, however, may
have planned for it. Many large public systems, in particular,
have indicated a political reluctance to increase rates every
year, so they compensate by increasing them more steeply every
few years, and operating at a surplus for two or three years
and then at an offsetting deficit for a year or two.
-------
VII-25
Table VII-11
SURPLUS OR DEFICIT-1975
(number of systems reporting)
Population Category
Public Systems
Surplus
Deficit
% with Surplus
Private Systems
Profit
Loss
% with Profit
25-
99
4
1
80%
9
7
56%
100-
499
43
11
80%
26
12
68%
500-
999
33
13
72%
5
3
63%
1,000-
2,499
48
18
73%
4
3
57%
2,500- 5,000-
4,999 9,999
30 23
12 7
71% 77%
7 2
-
100% 100%
10,000- 100,000-
99,ii99 999,999
42 130
16 26
72% 83%
8 26
-
100% 100%
> 1 mi 11 ion
3
2
60%
1
-
100%
The private systems, in contrast, reported no defi-
cits for systems serving over 2,500 people. Presumably, they
do not have the same flexibility—or political pressures—to
use surplus and deficit operations in order to increase rates
less frequently. At the smaller sizes, over half of the pri-
vate systems reported deficits, although the sample size is
very small.
Reported surpluses and deficits for public and pri-
vate systems are shown in the following table in cents per
thousand gallons. Public surpluses generally declined as system
size increased and ranged from over 50 cents per thousand gal-
lons in the smallest size to 3 cents in the largest size, with
six sizes having surpluses of less than 16 cents. The median
rates for public systems did not vary nearly as widely across
system sizes as did the mean rates; the medians ranged from
19.4 cents to 4.6 cents. Public deficits exhibited similar
characteristics, generally declining with larger systems and
having less widely dispersed median values.
-------
VII-26
Private system profits ranged from over 90 cents per
thousand gallons in the smallest size to less than 2 cents;
five systems had profits greater than 19 cents per thousand
gallons; however, the sample size was small with the median
number of observations being only five. The range of median
rate for the private systems was equally large a.nd for the most
part the values of the medians closely followed those of the
means. Private system deficits were sizable although these
deficits only existed in systems serving fewer than 2,500 people,
T.ible VII-12
REPORTED SURPLUS OR DEFICIT--1975*
(cents per thousand qallons produced)
Population
PUBLIC SYSTEMS
With Surplu^
Mean
Median
(# obs.)
uith Deficit
Mean
Median
(it obs.)
PRIVATE SYSTEMS
With Profit
Mean
Median
(» obs.)
With Loss
Mean
Median
(# ODS.)
25-
99
51.4
10.2
(4)
-
(0)
93.2
93.7
(4)
61.5
34.2
(5)
100-
499
46. C
19.4
(36)
20.6
15.9
(10)
37.6
30.3
(17)
23.8
19.2
(9)
500- 1
999 2
25.6
17.3
(31)
70.8
19.9
(11)
19.9
10.1
(5)
78.0
90.3
(3)
,000-
,499
14.3
7.4
(41)
15.8
12.6
(17)
55.7
55.7
(?)
7.4
8.3
(3)
2,500- 5
4,999 9
10.0
8.5
(27)
10.3
4.9
(12)
19.3
11.5
(6)
_
-
(0)
*For systems reporting surplus or deficit and production
or deficit not greater than $5.00 per thousand gallons
Category
,000- 10,000-
,999 99,999
15.9
10.6
(23)
62.6
4.4
(7)
1.6
1.6
(2)
_
-
(0)
greater
produced
12.3
7.3
(41)
7.6
5.8
(16)
9.7
4.3
(7)
_
-
(0)
than
100,000-
999,999
7.S
5.1
(130)
2.5
1.1
(24)
8.6
6.9
(26)
_
-
(0)
zero and
>1 million
3.4
4.6
(3)
0.2
0.2
(2)
I
1
7.8
7.8
(1)
„
-
(0)
surplus
-------
CHAPTER EIGHT
FINANCIAL CHARACTERISTICS:
BALANCE SHEET ACCOUNTS AND CAPITAL EXPENDITURES
This chapter focuses upon the survey data related to
the assets and liabilities of water systems. The long-term
financial position is discussed in terms of capital investments
and sources of financing as opposed to the annual costs and
revenues reported in the two previous chapters. This chapter
also includes data on the systems' reported capital expenditures
over the 1970-1975 period, including the amount, purpose, and
financing of those capital projects.
Water systems are among the most capital intensive
operations in the country. The reported figures show that
approximately $10 of assets are required to generate one dollar
of annual revenues. In other terms, the average water system
investment to serve a family of three ranges from approximately
$200 for the largest systems up to $1,600 for a small system
serving only 100 to 500 people. This chapter presents the
details of that capital profile in three sections below:
assets; capital and liabilities; and capital expenditures,
1970-1975.
ASSETS
The survey questionnaire requested information on
seven categories of assets; the categories were primarily
focused on long-term assets in the form of production and
treatment facilities and the water distribution system.
-------
VIII-2
The same information was requested from both public and private
systems with the expectation that plant costs might differ as
a function of size and terrain of service area, population
density, and water source, but not significantly by ownership.
The asset questions began with a line for total
assets, followed by six lines for the detail within that total.
The first four of those detailed lines were all under the
heading "plant and equipment" and were: production-treatment
plant(s); distribution systems; all other plant and equipment;
and the total accumulated depreciation or sinking fund for
replacement (if any). The other two detailed lines were:
current assets; and "other assets not included in the above
categories."
Most systems responded to the first question: 596
questionnaires yielded total assets data which appeared accurate.
Fewer systems responded on the detailed questions, and fewer
still completed the full breakdown of assets into the six
detailed categories. Only 286 questionnaires were completed
to that extent.
There were also at least two problems of interpreta-
tion. One which was easily detected and corrected was that some
systems entered the present amount of their total assets under
"current assets" rather than showing only their cash, receivables,
and other short-term assets. The other problem was one of in-
consistency among responses to the total assets question which
was not as easy to perceive. The total assets question requested
data on the original cost of each water system's assets in order
to obtain consistent accounting among publicly- and privately-
owned systems (i.e., not original value in some cases and
value net of depreciation in other cases). It appears that
-------
VIII-3
most systems correctly understood that to mean either their
original system cost plus additions and other assets, or their
present total assets excluding depreciation, if any. Some
number of systems, however, provided only their present total
assets, net of whatever depreciation they carry, and some
others entered only the total value of their plant and equipment.
The misinterpretations were corrected to the extent
that they were evident and could be adjusted from the data
provided. Unfortunately, these misinterpretations were not
always evident or detectable since approximately half of the
questionnaires which reported total assets did not provide a
breakdown of the asset sub-categories. However, evaluation of
the detailed breakdown of assets where it was provide showed
them to be much more accurate and reliable. Accordingly, two
decisions were made: first to present the reported total assets
data in a single table, for reference, and secondly, to rely on
a buildup of the individual categories for the analysis and
comparisons which are presented in the remainder of the chapter.
The results for reported total assets are shown in
the table below. The mean asset levels range from only $17,000
for the smallest systems to $423 million for the largest ones.
The median levels are somewhat lower, ranging from only $10,000
to $373 million. The large size of the standard deviations rela-
tive to the means is again an indication of a wide variation in
individual system responses. For example, within the range of
responses which appear to be accurate, the smallest system
category included total asset values as low as $1,000 and as
high as $50,000.1
The tabulations on assets were based upon responses for systems reporting
total assets to average daily production ratios of from $0.25 to $20.00,
in order to exclude obvious data errors. Even within that range there
may still be errors and differences in interpretation of the question.
-------
VIII-4
Table VIII-1
REPORTED TOTAL ASSETS-- 1975*
(thousands of dollars)
Population Category
Mean
Standard
25-
99
17
Deviation 16
Median
(# obs.)
*Based on
between
10
(40)
svstems repot
$0.25 and $20
100-
499
98
98
70
(100)
'ting a
00.'
500-
999
212
204
141
(55)
ratio
1,000-
2,499
398
332
307
(75)
of total
2,500- 5
4,999 9
1,200
1,183
787
(46)
assets
,000
,999
1
1
1
10
99
,615
,417
,184
(30)
to daily
,000 100
,999 999
8,291
9,420
5,742
,000
,999 >
63,763
62,499
43,530
(63) (178)
production of
Imil
423,
242,
373,
lion
065
582
046
(9)
One additional point regarding reported total
assets is the diflerence between publicly- and privately-
owned systems. Publicly-owned systems reported higher total
assets than privately-owned systems in all but two size
categories. However, the sample size is quite small in many
categories and no statistically valid conclusions can be
drawn.
TOTAL ASSETS:
COMPUTED
In view of the issues discussed above, tabulations
were performed for each of the six individual asset questions and
then summed to arrive at computed estimates of total assets.
The computed total assets were tabulated on the basis of
dollars invested per gallon of average day production. This
tabulation permits assets to be related to system scale and
also to examine economies of scale.
The results for total assets are presented graphically
in Fieure VII-1 on the next page. The pattern shown in the
-------
RESIDENT
POPULATION
SERVED
VIII-5
Figure VIII-1
TOTAL ASSETS OF COMMUNITY WATER SYSTEMS
(MEAN AND MEDIAN VALUES)
25-
99
100-
199
500-
999
1,000-
2,199
2,500-
1,999
5,000-
9,000
10,000-
99,999
100,000-
999,999
1 MILLION 8
ABOVE
•:::..;••-;•-.••• ; ' • " • jij.gi
^^^^^^^/^^^^/^^ 3 , 37
.../., ... IB. si
<^^^^^^^^^ 3 . 92
: , ,; : |3-38
W#//?//W/M/A\&
13.50
'W/f//^////^^
: 11.63
y/////////^/////////////A 7.11
13.03
w///////////y//\\.^
^^^jl.OO KEV:
[ } MEAN
ll 3Q ^^ MEDIAN
'/////////AA\ — —
11.02
^%^1.30
. i . 1 i i i 1 , , i 1 , , i 1 , , , 1 i , , 1 , , , 1
$1.00 2.00 3.00 1.00 5.00 6.00 7.00
DOLLARS INVESTED PER GALLON PER DAY OF PRODUCTION*
"BASED ON AVERAGE DAILY PRODUCTION LEVEL AND FOR SYSTEMS
REPORTING TOTAL ASSETS TO DAILY PRODUCTION RATIOS BETWEEN
JO.25 AND $20.00.
-------
VIII-6
figure clearly indicates that economies of scale exist in total
asset requirements for water systems. Whether one focuses on
the mean values or the medians, the pattern is the same: (1)
that the asset requirements per gallon of average daily produc-
tion are highest for the systems serving under 500 people;
(2) that those requirements drop approximately in half for
the systems serving 500 to 10,000 people; and (3) that they
drop in half again for the systems serving over 10,000 people.
Also, as evidenced in other data reported earlier, the highest
figures are not those for the smallest size category, but are
those for the second size category, serving 100 to 500 people.
The mean values shown for total assets are consis-
tently higher than the median values, reflecting the existence
of a few systems at much higher than average asset rates in
each size category. The mean rates begin at almost $5 per
gallon of average daily production for systems serving 25 to
100 people and increase to over $6 for the next size category.
The mean rates then decline to $3 to $4 for systems serving
up to 10,000 people and drop to $1 to $2 for larger systems.
In contrast, the medians begin at $3 to $4 for the two smallest
system sizes, then decline to $1 to $2 for systems serving
up to 10,000 people, and finally drop to $.80 to $1.00 for larger
systems.
Overall, the levels of total assets are substantial.
Based on the $3 or more per gallon of average day production
in the size categories up to 10,000 people, a 1 MOD water
system would, on average, represent more than a $3 million
investment in plant, .equipment, distribution system, and
other assets. The lower median values are still above $3 per
gallon of average daily production for the first two system
sizes (up to 500 people), and above $1.50 for the next four.
Based on median values, the typical 1 MOD water system
represents a total investment of approximately $1.5 million
in all system assets.
-------
VIII-7
INDIVIDUAL ASSET ACCOUNTS: MEAN VALUES
The survey results for the six individual asset
accounts are presented in terms of dollars per gallon of average
day production. As illustrated in Table VII1-2, the general
pattern of economies of scale observed in total assets can
be seen in virtually every individual asset account.
These individual accounts are clearly dominated by
the net fixed investments in plant and" equipment (gross plant
less depreciation). This category accounts for 80 percent of
total assets for small systems and 70 percent for the largest
systems. The remaining assets, for systems serving fewer than
5,000 people, are primarily composed of current assets. For
larger systems "other" assets is the second major category.
The difference in the relative importance of current versus
"other" assets may be economies of scale in working capital
on the one hand, and an in increasing amount of investment in
building and equipment for administrative and organizational
needs as systems increase in size on the other.
-------
VIII-8
Table VIH-2
MEAN VALUES OF ASSETS--1975*
Dollars ter Gallon of Average Daily Produc
Population
Gross Plant
Production/
Treatment
Distribution
Other
Total Gross Plant
Accumulated
Depreciation
Current Assets
Other Assets
Total Assets
(rf obs.)*"
*Based on systems
25-
30
1.99
1.94
£ 0
4.91
(1.03)
.84
.09
4.81
(11)
reportinq
;co-
499
1.75
2.99
1.14
5.88
(.58)
1.16
.33
6.P4
(26)
s:
9-;
i.
2.
(.
.
1
sj .
(1
0-
J
76
73
31
65
55
61
'5
38
8)
totjl assets
**Ilunber of observations differs for
ohsei'vations used
in computing any
each
of
i.o:
2,4;
T
A . U
.e
;.
*
1
6
H
2.9!
(.38)
.79
1
3.6
U
O
0
/
to only
1 ine
the Z q
2,500-
4,3=9
.7".
2.79
.69
4.22
(.37)
.55
.23
4.63
(17)
tion
Category
5,cc:-
9,939
.65
1.73
.2o
2.71
(.41)
.28
.-IS
3.03
(15)
0,-oduction be
i ten: listed is t
ross olant
10,000-
9i,5J3
.36
1.15
.22
1.73
(.38)
.33
.09
1.77
(3"0
t'veen 30.
-.t lowest
100,000-
999,999
.32
.81
.17
1.30
(.27)
.20
.15
1.39
(126)
25 and $20
number of
> 1 r^llicn
.23
.61
.19
1.03
(-3!)
.05
.25
1.02
(C)
.00.
line Hers.
The plant and equipment assets are reported in four
line items: (1) production-treatment plant(s) which includes
the assets invested in obtaining water, in delivering it to
the treatment plant, and in the treatment facility itself;
(2) distribution system assets which include finished water
storage, pumping, and the distribution system from the 'treat-
ment plant to customers; (3) other assets; and (4) total
accumulated depreciation on all fixed assets.
The relative sizes of the first three of these line
items are shown in a separate table below. These line items
which make up gross plant investment exhibit a very consistent
relationship to one another across all system sizes. The major
line item for all sizes is distribution system assets, which
-------
VIII-9
GROSS
Table VIJI-3
PLANT ASSETS BY CATEGORY--1975
Population
Production-
Treatment Plant
Distribution System
Other
Total Gross Plant
25-
99
40%
40%
20%
100%
100-
499
30%
51%
19%
100%
500-
999
27%
62%
11%
100%
1,000-
2,499
24%
57%
19%
100%
2,500-
4,999
18%
66%
16%
100%
Category
5,000-
9,999
24%
66%
10%
100%
10,000-
99,999
21%
66%
13%
100%
100,000-
999,999 '
25%
62%
13%
100%
.trim.
22%
59%
19%
100%
generally represents 50 to 66 percent of total gross plant
assets. The production-treatment plants account for approxi-
mately 20 to 30 percent of gross plant assets. The smallest
category is other assets which makes up 10 to 20 percent of
total gross plant assets. The only deviation from this pattern
in the sample is in the smallest system size category, for
which product ion-treatment plant assets and distribution
system assets were reported to be almost equal at 40 percent
of gross plant assets each.
INDIVIDUAL ASSET ACCOUNTS: MEDIAN VALUES
The table of median values below shows the same
patterns for the "typical" water system- in each size category
as the mean values do for the statistically "average" system.
As noted earlier, the mean values in every category are higher
than the medians because of the wide range and skewness of
the responses.
-------
VIII-10
Table VIII-4
KFDIAN VALUES OF ASSETS— 1975
Dollars per Gallon of Daily Production
Pooulotlor.
Gross Plant
Prediction/
Treatment
Distribution
Other
Total Gross Plant
Accumulated
Deprt;iation
Current Assets
Other Assets
Total Assets
(»• obs.)**
25-
99
1.23
1.59
.73
S3. 60
(1.12!
.80
.09
$3.37
100-
199
.91
2.35
.42
3.68
(.33)
.43
.14
3.92
500-
999
.56
1.17
.22
1.95
(.37)
.23
.03
1.95
1,000-
2,459
.28
.89
.14
1.31
(.20)
.27
.10
1.48
2,500-
4,999
.46
1.6-
.12
2.22
(.20)
.23
.11
2.27
Catec
5
5
j
1
(
1
ory
,COO- 10.
.999 99.
.39
.03
.17
.64
.30)
.09
.08
.51
1.
(.
1.
cco-
093
23
81
09
13
32)
15
34
00
100,000-
999,599
.25
.72
.06
1.03
(.25)
.08
.05
.91
(11) (26) (18) (30) (17) (16) (3<) (126)
*Based on systems reportiny total assets to daily production between SO. 25 :nd $20
**Nu~ber of observations differs for each line item; listed is the lovicst nu.iier of
observations usad in computing any of the 3 gross plant line items.
i
> 1 million
.20
.62
• 15
.97
(.27)
.04
.05
.80
(8)
00.
Since distribution assets generally represent over
tialf of total gross plant assets, one further observation is
worth noting since it does not follow the general "theme in the
financial profile of economies of scale. If the distribution
systems is viewed in terms of investment per customer connection,
that amount increases steadily as systems get larger. As the
data below illustrates, both the mean and median values demon-
strate the same pattern, the former ranging from $285 to $549
per connection from smallest to largest system nize, and the
latter ranging from $241 to $498. Presumably, since the
number of connections increases as systems get larger, the
complexity of designing and constructing a distribution system
with multiple users (e.g. high rise buildings) at each con-
nection is greater and therefore costlier.
The increasing amount of distribution assets per
connection as systems become larger may be due to the charac-
teristics of the service areas served by larger systems.
-------
VIII-11
The cost of underground work in heavily developed areas and
the equipment required may have an effect. Other factors may
include customer mix and density of system service. These
characteristics have been discussed in earlier chapters and
clearly show the more varied customer mix and greater density
of users per connection which occur as systems fall into
larger size categories.
Table VIII-5
DISTRIBUTION SYSTEM ASSETS PER CONNECTION— 1975
(dollars per connection)
Population Category
Mean
Standard Deviation
Median
(« obs.)
25-
99
$285
210
241
(26)
100-
499
371
240
331
(50)
500-
999
342
254
252
(27)
1.000-
2,499
316
181
286
(44)
2,500-
4,999
470
252
390
(13)
5,000-
9,999
470
236
430
(20)
10,000-
99,999
482
219
424
(42)
100,000-
999,999
502
192
489
(133)
>1 million
549
222
498
(8)
CAPITAL AND LIABILITIES
One important objective of the survey was to deter-
mine the capital structure of water systems. This section pre-
sents the results of questions on capital and current liabilities
accounts. A complementary set of questions was also included
on the specific financing of capital expenditures over the last
five years; these are discussed later in the chapter.
All water systems have capital and liabilities ac-
counts, at least in theory. By the definitions of double-
entry accounting, the sources of the funds to finance con-
struction and operations should be recorded on each system's
-------
VIII-12
balance sheet--long term debt reflects loans, for example,
over five years in term; paid-in capital identifies shareholder
investment and annexation fees; equity includes accumulated
earnings; current liabilities represents short-term debt,
construction advances, and accounts payable.
However, while these accounts all exist in theory,
not all water systems—especially the public ones--keep their
books that way. In particular, many systems apparently have
not fully accounted for the original capital which financed
the construction of the system. Accordingly, data presented
here on the capital accounts include a category for implied
other capital which is the amount required to bring the total
into balance with the total assets presented earlier. This
implied other capital is an estimate of the amount of capital
which has gone unreported (at least on the water system books).
The amount of unreported capital for small private systems is
probably a mixture of equity and long-term debt since the
water system cost may have been included in the total finan-
cing of the housing development or mobile home park. For the
larger systems, the unreported capital is probably mostly
equity, representing the original assessments, contributions
and earning received over the years.
Most of the discussion of capital items is presented
separately for public and private systems. On average, at
least, both have approximately equal total amounts of capital
(because both have very similar total asset levels), but their
accounting structure is slightly different. Both have long-
term debt, current liabilities, and other capital accounts.
But only the private systems report paid-in capital (share-
holder investment) and retained earnings. The "equity" for
public systems is in the form of contributions, annexation
charges, accumulated earnings, and capital assessments and are
included in other capital.
-------
VIII-13
LONG-TERM DEBT
One major capital account which is common to both
public and private water systems is long-term debt. The ini-
tial costs of drilling wells, building reservoirs, and laying
pipe in the ground has been high enough and their useful
physical lives have been long enough (often in excess of
fifty years) that long-term borrowing has been a very accept-
able method of water system financing for decades.
The systems serving over 500 generally reported
that they do have long-term debt obligations: approximately
two-thirds of the systems serving 500 to 5,000 people, and
between 82 and 100 percent for all the larger categories.
The mean amount of long-term debt reported ranged between
one-third and one-half of the mean total asset values for
each of these categories. For example, the mean for systems
which reported long-term debt and serve 1,000 to 2,500
people was $164,000 at the time of the survey, which is just
over 40 percent of the mean total assets of $398,000 reported
for the category and presented earlier in the chapter.
The median values for long-term debt are slightly
lower than the mean values for each size category, and re-
flect the same general relationship to total assets: one-
third to one-half of the median asset values.
f
Fewer of the small systems have long-term debt—only
18 percent (7 out of 40) systems serving under 100 people,
and 46 percent (48 out of 105 systems) of those in the 100-
500 category. The reason for that is the small systems may be
less able to borrow money, even though they are generally newer
and eould be expected to have a higher frequency of long-term
-------
VIII-14
debt. Small systems which have long-term debt appear to be
more reliant upon it for total financing than are the larger
systems. Systems in the second size category, 100 - 500
population, showed both mean and median levels of long-term
debt equal to two-thirds of total assets: a mean level
of $62,000 of debt versus $98,000 of total assets, and a
median level of $49,000 versus $70,000.
The tabulated values for the systems in the smallest
size category, serving 25 to 100 people, appear to be as high
or higher than the mean assets reported earlier. That is
because the systems in this size which do have debt tend
to be larger than the average system in the category. For
the systems which do have long-term debt in this size category,
the average relationship of long-term debt to total assets
is 61 percent, and the median is 57 percent.
ALL
Table VIII-6
LONG-TERM DE3T
SYSTEMS WHICH HAVE DEBT--1975
Population Category
25-
99
Percent with
Long-Term Debt 1851
Total Arrount Rt>oorted*
(1,000)
Kean $20
Standard Deviation 15
Ke*an 18
(lobs.) (11)
Amount Per Gallon of
Avq. Daily Proaucticn
M
Mean $2.62
Standard Deviation 2.66
Median 1.78
(1 obs.) (0)
* Total Amount based on
of averaga daily prod
production ratios of
100-
499
461
62
62
49
(65)
500-
959
654
114
118
96
(47)
1.000-
2,499
691
164
170
111
(57)
2. £00-
4,999
70S
320
356
206
(39)
$2.84 $1.63 $1.22 $1.37
2.32 1.76 1.41 1.79
1.97 1.46 .63 .47
(46) (39) (51) (34)
all systems reporting long-term debt
uctlon based on systems also reporting
less than $10.
5,000-
9,999
85%
790
1,110
529
(28)
10.000-
99,999
C2i
2,507
2,627
1,814
(56)
$1.16 .60
l.£9 .64
.65 .44
(28) (55)
greater than zero
their production
100,000-
959,995
9
-------
VIII-15
The upper portion of tables VIII-6 through VIII-12
summarizes the discussion on the level of long-term debt for
all size categories.
The lower portion of the table on long-term debt
presents the amounts on a comparable basis across sizes,
namely dollars per gallon of average daily production. The
pattern, reflects the same economies of scale as in total
assets. The values, for water systems which have long-term
debt, range downward from over $2.60 per gallon per day of
average production for the smallest systems to $0.49 for
the largest ones. The standard deviation again points out
the wide degree of variability in the individual system
responses.
PUBLICLY-OWNED SYSTEMS
The questionnaire for public systems requested
three categories of capital and liabilities, in the following
order: 1) long-term debt; 2) other capital items; and 3)
current liabilities. The largest response, 469 systems, was
obtained on the long-term debt question. Apparently, it was
clear and readily answered from water system records. The
other questions received fewer responses: 350 for other
capital, and 251 for current liabilities (out of 622 public
systems in the final sample).
The results of these questions are shown in the
table below on the comparable basis of dollars of capital
and liabilities per gallon of average daily production. The
values shown are the mean values for all responses, including
the systems which reported zero for long-term debt or other
3
capital items. The total row shown on Table VII1-7 has been
3
Separate statistics for systems with and without long-term debt eon be
easily computed from the data in the table: long-term debt for systems
which have it is the overall mean divided by the percent of systems with
long-term debt; current liabilities aan be assumed identical for both types;
and "other" capital is the remaining difference to equal total assets.
-------
VIII-16
taken from assets data in Tables VIII-2 and 4, on the assumption
that total liabilities equal total assets. The "impled other"
capital row represents the difference between reported assets
and reported capital and liabilities.
Table VIII-7
PUBLIC SYSTEMS
CAPITAL i LIABILITIES-1975*
(Dollars per Gallon of Average Daily Production)
Population Category
Percent with Long-
Term Debt
Long-Tern Debt
Other Capital
Current Liabilities
Implied Other*
Total*
Long-Terr Debt
Other Capital
Current Liabilities
Implied Other*
Total"
(I)'"
*Each row based on
"Total set equal to
difference between
25-
99
05!
.00
.00
.20
4.51
4.81
.00
.00
.30
3.07
3.37
systems
Total
100-
499
61%
1.70
.12
1.35
3.66
6.84
.65
.00
.34
2.53
3.9?
(58)
500-
999
67%
1.00
.65
.58
1.15
3.33
.31
.00
.08
j_._5S
1 95
(52)
reporting dollars
Assets figures
the reported capita'
***(io. ot systems responding
on long-term
1,000-
2, ',99
71%
I^E
.75
.24
.44
2.07
3.50
.26
.00
.07
UJL
1.48
(65)
to average
earlier in this
and
debt;
liabilities
2.500-
4.999
CBi
Pfl VALUCS-
.88
.49
.19
3.07
5,000-
9.999
87%
1.05
.07
.20
1.71
4.63 3.03
EDIAfl VALUES
.25 .57
.CO
.06
-L^-fi
2.27
(43)
.00
.05
_.J9
1.51
(31)
10,000-
S9.9S9
(!6%
.52
.30
.16
.79
1.77
.30
.01
.03
-•L5.
1.00
(56)
100,000-
999.999 >
90%
.45
.40
.10
.44
3.39
.31
.14
.03
•<3
.91
(145)
1 nil1, ion
100%
.50
.41
.03
.08
1.02
.38
.44
.03
(-05?
.S3
(«
daily production rati-os of zero to $10.
chapter,
and total
and "implied other"
assets.
capital is
the
other accounts had slightly fewer responses.
Since the total listed above has been taken from the
total assets figures, it exhibits the same declining structure
with increasing system size. In addition, the individual
capital accounts also follow that pattern. Long-term debt for
all public systems, for example, averages just under $2 per
gallon of average daily production for small systems serving
100 to 500 people, declines to approximately $1 for systems
serving 5,000 to 10,000 people, and further drops to 50 cents
for the largest systems. The mean values for current liabili-
ties display a similar pattern, peaking at the second size
category ($1.36) and declining steadily to the largest si-zes
($.10 and $.03).
-------
VIII-17
In relative terras, the larger systems rely more
heavily upon long-term debt for system financing than do the
smaller systems. Even though the smaller systems average
higher debt-to-production ratios, they have a lower percentage
of their total capital and liabilities in long-term debt than
the large systems do. That is clearest in the median values
above, which show long-term debt as 17 percent or less of the
total for systems serving 100 to 2,500 people, increasing to
30 to 37 percent for systems serving 2,500 to 1 million people,
and 47 percent for systems of over 1 million population. The
pattern for mean values is less clear, partly because the means
represent an average of all the systems, with and without debt.
The means show long-term debt to be approximately 20 to 33
percent of total capital and liabilities for all but the
smallest and largest categories (zero and 50 percent, respectively)
The figures for other capital perhaps should be
viewed in conjunction with the implied other capital account,
which is inferred from the assets data to represent contribu-
tions and paid-in capital which have simply gone unreported.
Together these accounts represent one-third to two-thirds
of the total capital and liabilities of publicly-owned water
systems of all sizes except the smallest, for which they
represent over 90 percent.
The median values shown in the lower half of Table
VIII-7 indicate that the "typical" water system in each
category actually has an even higher proportion of its total
capital and liabilities in the form of such unreported items
(the implied other capital account). In fact, over half of
the systems in each category below 10,000 population simply
do not carry the original assessments and other local initial
"equity" investment on their books; those systems all reported
zero as their balance of "equity" in the form of other capital.
-------
VIII-18
The relatively high levels of current liabilities for the two
smallest system sizes probably reflects some short-term borrow-
ing and credit used in lieu of the long-term debt used by the
larger systems.
PRIVATELY-OWNED SYSTEMS
The survey questionnaire for private systems re-
quested four items of capital and liabilities data, in the
following order: 1) long-term debt (over five years); 2) paid-
in capital (common stock, paid-in surplus, preferred stock);
3) retained earnings, and 4) current liabilities. The responses
for these items are reported on a common basis of dollars per
gallon of average daily production in the table below. An
account for implied other capital is included as it was for
public systems to show the difference between total assets
(total from Table VIII-2) and reported capital and liabilities.
As with the table on public systems, the values below are the
averages of all responses, including the systems which reported
4
zero for long-term debt, paid-in capital, or retained earnings.
(Dollars
Table VIII-8
PRIVATE SYSTEMS
CAPITAL S LIABILITIES— 1975
per Gallon of Average Daily Production)
Population Category
Percent with lous-
ier™ Debt
Long-Term Debt
Paid-Jn Capital
Retained Earnings
Current Liabilities
Implied Other*
Total*
Long-Tern Oobt
Paid-in Capital
Retained larninqs
Current liabilities
Implied Ot'ier*
Total**
(1)***
*Each row based on
"Total set equal to
difference between
25-
99
212
.49
.00
.42
.49
3.41
4.81
.00
.00
.00
.50
2.87
3.37
(32)
systems
103-
49S
262
.72
.32
.43
1.51
3.86
6.84
.00
.00
.00
.19
3.73
3.92
(«)
500-
999
562
1.30
1.21
.19
.40
.28
3.38
.82
.00
.11
.18
.84
1.95
(9)
reporting dollars
' 1.0C3-
2,499
2,500-
4,599
5,000-
9,?99
S6X 832
1.48 1.41
.49
.01
.77
.75
.13
.61
.05
2.43
.13
.03
.01
1.80
3.50 4.63 3.03
.53 .39
.03 .00 .13
.00
.17
.75
1.48
(9)
to average
Total Assets figures earlier in this
the reported capital and
***No. of systems responding
on long-term
debt
liabilities
.04
.05
1.79
2.27
(6)
.09
.01
1.28
l.bl
(?)
dlily production
chapter.
and total
10.000-
99,999
642
.33
.24
.32
.05
JJ3
1.77
.26
.23
.17
.04
.30
1.00
(11)
100.000-
999,559 >
100Z
.45
.40
.17
.15
ili
1.39
.43
.27
.10
.10
.01
.91
(24)
I "11 U on
1002
.43
.28
.07
.03
"
.81
.43
.28
.07
.03
-
.81-
(1)
ratios of zero to $10.
and "implied other
assets
; other accounts had slightly
' capital is
the
fewer responses.
See footnote, page VIII-14.
-------
VIII-19
Unfortunately, very few of the private systems were
able to provide a breakdown of their capital accounts. Six
of the nine size categories included in the table above
present results based on 11 or fewer responses. The sample
is statistically adequate only for systems serving fewer than
500 people and for those serving 100,000 to 1 million people.
The absence of a reported value for long-term debt for systems
in the 5,000 to 10,000 range certainly reflects the small
sample (2 systems) systems, not the fact that systems of this
size have no long-term debt.
The overall pattern of capital and other liabilities
is quite similar for both private and public systems. Both
rely on long-term debt for approximately one-third or less of
their total financial base, with the private systems marginally
lower than the public ones in most categories. Current lia-
bilities display exactly the same pattern across size categories
regardless of ownership—it peaks in the second size category,
at about $1.50 per gallon of average daily production, drops
to 40 to 50 cents in the next size, and then declines to less
than 10 cents for the very large systems.
The paid-in capital and retained earnings accounts,
taken together, are the parallel of the other capital account
for public systems. The fact that the sum of paid-in capital
and retained earnings is somewhat higher than the correspond-
ing public system account may merely reflect more accurate
bookkeeping, since the total of those accounts and the implied
other capital is generally one-third to two-thirds of total
assets, just as it was for public systems.
Perhaps the only real capital structure difference
evident in this sample between public and private systems which
one can infer from the data in these tables is that the small
public systems more frequently rely on debt to provide capital
-------
VIII-20
financing than the private systems do. That is clearly indi-
cated in the 100 to 500 population range, where samples of 59
public and 46 private systems yield percentages with long-
term debt of 61 percent and 26 percent, respectively. The in-
ference is supported by slightly lower percentages for private
systems in the next two larger categories as well, and by a
lower reliance on short-term credit (current liabilities) by
private systems in the 100 to 500 population bracket.
CAPITAL EXPENDITURES (1970-1975)
Survey participants were asked to list major capital
expenditures made since 1970. They were asked to specify
these expenditures by purpose (e.g. production, treatment,
distribution, storage, and miscellaneous) as well as by year
and source of financing (e.g. bonds, revenue, bonds and
special debt, Federal loans, new equity issues, operating
surplus or other internal sources). The three major purposes
of these questions were to determine: a) The overall level
of capital expenditures; b) the major purposes of expenditures;
and c) the most frequent sources of financing.
Over the six-year period, 1970-1975, total expenditures
for all the survey participants reporting was approximately
$1.9 billion dollars. As shown in Table VIII-9, the
average expenditure per system over the period ranged from
Table VIII-9
TOTAL CAPITAL EXPENDITURES TOR
SIX-YEAR PERIOD 1970-1975
Total Capital Expenditures
1970-1975
Number of Systems Reporting
Average Capital Expenditure
per system (1970-1975)
Median
(thousands
25- 100- 500-
99 459 999
84.9 1.523.5 1,023.0 4
42 83 35
2.02 18.4 29.2
1.3 5.3 12.8
of dollars)
Population Category
1,000- 2,500- 5.0CO- 10,003- 1CC.C3S-
2,499 4,999 9.999 99,999 959,999 >1 million
,860.9 7,187.6 10,333.9 61,373.9 1,415,183.8 40S, 945.1
54 29 21 56 161 8
90.0 247.8 492.3 1,096.0 9,018.0 51,113.5
31.3 92.0 294.0 672.4 5,464.6 23.S:!3.1
-------
VIII-21
$2,020 for the smallest systems to $51 million.in the largest
size category. The median amounts were lower than the means
for all but one size category.
The largest share of total expenditures by systems
in every size category was that reported for distribution
system improvements and extensions. As shown in Table VI11-10,
that accounted for at least 45 percent for all but one system
size. The other categories of capital expenditures varied in
relative significance from one system size to another, apparently
reflecting the periodic nature at such expenditures and the
randomness of the sample. For three size categories treatment
expenditures were the second highest in two cases. Expenditures
listed for the storage and miscellaneous categories were under
15 percent for most system sizes with a few exceptions.
However, the sample sizes were too small in many cases to draw
further conclusions. Table VIII-10 illustrates the distri-
bution of systems which reported major capital expenditures
by purpose and share of the total spent over the six-year period.
Table vm-iu
CAPITAL EXPENDITURES BY PURPOSE*
(six-year period 1970-1975)
Population Category
Percent^ of Total Capital
ExpenJitutes (1970-1975TFor:
Distribution
Treatment
Production
Storage
Miscellaneous
TOTAL
Number of Systems** with Capital
Expenditures'^ 1970- 1975T For:
Di slribution
Treatment
Production
Storage
Miscellaneous
25-
99
88.1*
0.1*
4.9*
5.7*
1.2*
100*
31
2
4
7
7
'Excludes single expenditures reported
100-
499
36.9*
12.9%
38.4*
3.7%
8.2*
100*
41
6
20
4
18
500-
999
36.8*
2.1*
6.8%
44.1%
10.1%
100*
20
3
6
3
9
1,000-
2,499
72 . 9*
3.2*
7.5*
5.0*
11.41
100*
29
5
9
5
12
2,500- 5,000
4,999 9,999
64.9*
21.7*
10.3*
1.4*
1.7%
100*
15
6
4
3
4
50.6%
18.3*
15.7*
8.3*
7.1*
100*
13
3
7
1
4
10,000
99,000
67. c,%
5.5*
4.6*
6.7*
15.8*
100*
34
8
15
7
16
100,000
999,999 y\ million
24.2% 45.0%
10.3* 24.5*
45.3* 30.5*
1.7X
3.1%
100* 100*
108 2
54 4
35 2
23
42
for multiple purposes.
**A single system may be counted more than once
purpose.
if it
reported
capital expenc1
tures
for more than one
-------
VIII-22
While a significant share of total capital expendi-
tures were devoted to one purpose, the source of funds for
such expenditures as well as for other purposes was quite
varied across size categories. However, some patterns were
discernable. General obligation bonds were consistently the
source for a fifth or more of the financing for all but the
smallest size categories over the period. They provided as
much as 59 percent of the $1.4 million spent by systems serving
100,000 to 1 million people. Federal loans were an important
source for systems serving under 5,000 people, with the notable
4
exception of the smallest category. Federal assistance
amounted to approximately 42 percent of the 14.7 million
dollars spent by these smaller systems.
Operating surpluses and other internal sources pro-
vided a fifth to a third of the capital funds for all size
categories except those serving 1,000 to 5,000 people and
accounted for almost 90 percent of the smallest systems
(25 to 100) sources of funds. Overall, of the total capital
expenditures level of $1.9 billion dollars, 27 percent or
$508 million dollars came from operating surpluses and other
internal sources. External sources, then, accounted for
73 percent of total financing.
Table VI11-11 shows the financing sources reported
in each of the system size categories as well as the number
of systems which reported each source of financing.
See footnote, page VIII-12.
-------
VIII-23
Table VIII-11
SOURCES OF FINANCING CAPITAL EXPENDITURES
FOR SYSTEMS REPORTING SPECIFIC SOURCES*
(six-year period 1970-1975)
Population Category
Percentage of Capital
Expenditures Financed Through
Bonds
Revenue Bonds and
Special Debt
Federal Loans
New Equity Issues
Operating Surplus plus
Other Internal Sources
TOTAL
Number of Systems
Financing Through:
Bonds
Revenue Bonds and
Special Debt
Federal Loans
New Equity Issues
Operating Surplus plus
Other Internal Sources
*Based upon systems reporting
a single expenditure.
25-
99
8.11
.
0.7%
2.6%
88.61
100. OS
3
.
1
2
35
sources
100- 500-
499 999
39.6% 39.8%
18.4s
13.51 16.8%
5.3% 17.9",
23.2* 25. 5%
100. 02 100.0%
9 7
1
7 4
7 4
1,000-
2.499
32. 8i
5. OS
38.31
5. OS
18.9%
100.0',
13
2
11
6
42 19 2£
of financing; excludes
2.500-
4.999
29.8%
6.5%
54.4%
3.31
6.0!
100.0?
•
7
2
5
4
5.000- 10,
9.999 99.
28.0% 39
12.7% 6
14.3% 6
o.:; 7
44. 9S 40
100.0? 100
5
2
3
1
10 9
multiple financing
000- 100,
999 999,
.21 58
.22 14
.9% 0
.5J 1
.2% 24
.Of. 100
15
3
5
5
1?
sources
000-
999 >lmillion
.9%
.4%
.6%
.3%
.8%
.0%
70
19
5
3
57
reportec
22.9%
37.5%
-
9.6%
30.0%
100.0%
3
2
-
1
2
for
1
If these major capital expenses are examined on an
annual basis, most size categories had no single year in which
a significant portion of their investments were made. Only
two size categories, those serving 25 to 100 and 500 to 1,000
had investments in a given year greater than a third of their
total expenses. Generally, 1970 appeared to have lower ex-
penditure levels than other years. However, the sample size
was quite small. Table VIII-12 summarizes the percentage of
total capital expenditures made by year from 1970 through 1975,
-------
VIII-24
ANNUAL
25-
99
Percentage of Total 1970-1975
Cap rtaJ_Ex£end i tures Spen t_i n :
1970
1971
1972
1973
1974
1975
TOTAL
Number of Systems** with
Capita] Expenditures in:
1970
1971
1972
1973
1974
1975
* Excludes single expenditures
1
10
41
£
28
10
100
.2%
.5i
. 2%
.5*
.64
.0*
.y
2
5
7
12
17
Table VIII-12
CAPITAL EXPENDITURES BY YEAR*
(1970-1975)
Population Category
100-
999
12
12
28
5
25
15
100
.8i
2*
5*
.7%
.2%
.6%
.0"
14
7
lb
11
27
15 18
reported for
** A single system may be counted more
500-
999
7.91
5.32
5.72
13. 9?
38.0?,
29. 2%
100.0''
4
6
5
11
13
16
multiple
1,000-
2,499
2.7%
4.3*
18.7.'
22.9%
24.25,
27.2:',
100.0*
8
10
19
23
21
13
purpose
than once 1t reported
2,500-
4,999
12. 93!
15.4?
15.45:
11. OX
17.6%
27.7'%
100.02
4
7
7
10
13
7
s.
5,000-
9,999
8.43!
21.8%
8.52
10. esc
29. 9%
21.1%
100.0%
3
4
4
5
10
5
expenditures in
10,000- 100,000-
99,999 999,999 "
2.0?:
16.8'i
16. Oi
27.3%
22. n
14. 4S
ion. 02
e
21
25
26
28
14
more than
27.7%
9.9%
14.7%
20.2%
15. 2%
12.3%
100. X
39
56
65
85
75
33
one year
1 million
9.4'i
21.92
19.3;'
21.8".
is. or.
9.6%
100.0%
I
3
3
5
3
3
-------
APPENDIX
-------
QUESTIONNAIRE FOR PUBLICLY-OWNED
WATER SYSTEMS
-------
PUBLIC QUESTIONNAIRE
WATER SYSTEM OPERATING, TREATMENT, OMB #158-375020
AND FINANCIAL INFORMATION FORM Approval txpires 10/77
INTRODUCTION: For multiple choice questions, please "X" the box of the appropriate category.
For other questions, please enter the data (gallons, dollars, etc.) in the epaoee provided. If
you do not have exact data available, please record your beet estimate for the item in question.
SECTION I, GENERAL INFORMATION
The EPA Inventory contains the following information about your water delivery
system. If this information is incorrect, please cross it out and write In the
correct information above each incorrect item.
NAME OF RESPONDENT
TITLE
NAME OF SYSTEM
STREET ADDRESS
CITY,STATE,ZIP
YEAR SYSTEM
TELEPHONE NUMBER BEGAN OPERATING
1. Which of the following categories best describes the ownership structure of
your system?
Owned by local government (municipal, state, district, authority,etc.)
Owned by federal government
Privately owned (investor-owned or owned by other non-government
organization)
2. Total permanent residential population served directly by your system
(excluding transient users and population served indirectly through
wholesales):
3, How much additional residential population, if any, does your system serve
on a seasonal basis (that is, population served only 2-3 months during the year)?
4. Plrase record the number of active service connections you have in each of the
following service categories:
PLEASE INDICATE THE NO. OF ACTIVE SERVICE
SERVICE CATEGORY CONNECTIONS YOUR SYSTEM HAS IN THIS CATEGORY
TOTAL CONNECTIONS
Residential connections
Commercial/Industrial connections.
Wholesale connections (i.e., customers who
redistribute your water to other users)....
Other (e.g., agricultural connections,
municipal/institutional connections—
towns, hospitals, etc.)
NOTE: If your system serves fewer than 25 permanent residents and has less than 15
total active service connections, you need not complete the rest of the information
below.However, please return this questionnaire form to us with the information you
have provided above.
TEMPLE. I3A.UKER & SLOANli, INC.
DECISION RESEARCH CORPORATION
-------
SECTION II,
1,
OPERATING DATA
2.
4.
5.
Please indicate the amount of water (in gallons) your system obtained in 1974
from each of the following sources (please indicate "NONE" if your system does
not use any particular source).
TOTAL GALLONS SUPPLIED TO
SOURCES YOUR SYSTEM IN 1974
TOTAL WATER SUPPLIED TO YOUR SYSTEM
FROM ALL SOURCES
Surface water
Ground water
Purchased water .'....
If you purchased water in 1974 from outside sources, how much of this water was.
Surface water? % Ground water? %
Do you plan to use any new sources of water
By 1980: D D 1981-1985: O Q
Yes No Yes No
IF YES, please indicate:
1. Type
1986-1990:
D
Yes
D
No
Maximuir
Daily Use
(ground, surface, purchased)
(MGD)
I—1 to replace
*—' existing sources
I—I in addition to
'•—' existing sources
2. Type
(ground, surface, purchased)
Maximum
Daily Use
(MGD
I—I to replace
'—' existing sources
I—i in addition to
I—'existing sources
In 1974, excluding purchased water, what was the maximum number of gallons your
system produced in any one day (that is, your maximum day production?
gallons produced in maximum day
What is the maximum daily treatment capacity of your system--that is, the total
gallons per day your system is designed to treat?
gallons per day
A-2
6. Please indicate the total amount of water you delivered (including purchased
water, if any) to each of the following types of customers in 1974.
NOTE: Please include unmetered deliveries, if any, in your estimat".
SERVICE CATEGORY
TOTAL GALLONS DELIVERED BY
YOUR SYSTEM
TOTAL GALLONS DELIVERED IN 1974
Residential connections _
Commercial/Industrial connections _
Wholesale connections (i.e., customers
who redistribute your water to other
users)
Other (e.g., agricultural connections,
municipal/institutional connections--
towns, hospitals, etc. )
-------
SECTION III, TREATMENTS
1. For each of the following types of treatment, please indicate approximately how
much of the water you distribute is treated by your system (i.e., do not count
treatments by other systems from whom you purchase water).
% OF YOUR DISTRIBUTION WHICH RECEIVES THIS
TREATMENT BY YOUR WATER SYSTEM:
TREATMENT TYPE
Disinfection (chlorination.etc
Coagulation
Sedimentation
Filtration
Prechlorination
Fluoride Adjustment
Corrosion control (Ph control)
Taste and odor (activated
carbon)
Aeration
Lime soda softening
Iron Removal
Ammoniation
Activated Alumina
Ion exchange softening
Other (please describe)
2. Approximately what percentage
treatment of any type by your
D1- Ali water is treated
Lj2. No water is treated
None 1-33%
.) 1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
of the
D
D
D
D
D
D
D
D
D
o
D
D
D
D
D
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
total water you
system?
(CHECK
D3.
D4.
34-66% 67-39%
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
4.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
distribute receives
APPROPRIATE
1-33% is
34-67%
is
not
BOX)
treated
All
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
no
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
not treated
A-3
LJ 5. 68-99% is not treated
3. Please describe any new treatment facilities which your system has added
since 1970?
TOTAL COST TO BUILD CAPACITY OF FACILITY
TYPE OF TREATMENT YEAR BEGAN TREATMENT FACILITY OR ADDITION
PROVIDED OPERATION OR ADDITION (gallons per day)
4. Please describe any new treatment facilities or additions to existing treatment
facilities which your system has definitely scheduled to begin operation before
1980?
TYPE OF TREATMENT TO YEAR SCHEDULED TO DESIGN CAPACITY OF FACILITY
BE PROVIDED BEGIN OPERATION OR ADDITION (gallons per day)
-------
A-4
SECTION IV, FINANCIAL INFORMATION
NOTE! PLEASE COMPLETE THE FOLLOWING INFORMATION FOR 1974 TO THE BEST OF YOUR ABILITY
Please note that the financial information needed is applicable only to water
operations'. If your water system is consolidated with a larger entity (for
example, municipal budget, combined water-sewer operation, subsidiary of multi-
system company, etc.) please try to provide your best estimate of financial in-
information which is applicable to your local water system only. If your water
system has an annual report or other financial statement, it would be extremely
helpful if you could forward a copy to us with this form.
1. The following information is based on financial data for:
FROM: Month Year THROUGH: Month Year
2. Please indicate your total revenues from water operations from each of the follow-
ing service categories (include sales, hook-ups, connection fees).
TOTAL ANNUAL REVENUES
SERVICE CATEGORY FROM WATER OPERATIONS
TOTAL WATER REVENUES
Residential connections
Commercial/Industrial connections.
Wholesale connections (i.e., customers
who redistribute your water to other
users)
Other (e.g., agricultural connections,
municipal/institutional connections--
towns, hospitals, etc.)
Please indicate budget appropriation
from general fund, if any
Based on your present rate structure, what would a typical residential customer
pay:
Per year for 100,000 gal: $
OR Per 100 cubic feet: c
Is your water system required by law to obtain approval from a state regulatory
•igency or authority prior to raising its rates?
Dl. Yes D2.
No
6. Are customers billed for water jointly with sewer charges or other municipal
services?
Q 1. Yes LJ2. No
-------
A-5
7. Please indicate the total operating expenses (excluding interest) of your water
system,for 1974 and, to the best of your ability, the division of your total
operating expenses among the categories listed.
TOTAL OPERATING EXPENSES OF WATER SYSTEM
(excluding interest)
Operating and Maintenance.
Other Operating Costs
Payments in lieu of taxes
(if any):
Please indicate 1974 debt service:
Interest expense:
Repayment of principal:
If you have a sinking fu.id for replacement of plant
equipment, please indicate amount paid into it in 1974:
10. What was the operating surplus/operating deficit
of your system in 1974?
SECTION V, BALANCE SHEET DATA
As in the previous section, please provide the following information about your
local water system in 1974.
1. Please indicate the total assets of your water system, and to the best of
your ability, the division of your total assets among the categories listed:
TOTAL ASSETS OF WATER SYSTEM (original cost)
Categories of Assets:
Plant and equipment (original cost)
Production-treatment plant(s)
Distribution system
All other plant and equipment
Total accumulated depreciation or
sinking fund for replacement (if any)_
Current Assets
Other Assets not included in the
above categories
Please summarize the liability, capital, and other balance sheet categories
listed below.
Long-term debt (over 5 years)
Other Capital Items (annexation
charges, and other items not
covered by the above categories)....
Current liabilities
3. Please describe your major capital expenditures since 1970 (please specify
production, treatment and/or distribution).
AMOUNT OF
AMOUNT OF PURPOSE OF HOW WAS THE FEDERAL ASSISTANCE,
DATE EXPENDITURE EXPENDITURE EXPENDITURE FINANCED IF ANY
4. Which of the following categories most closely describes the financial
information available for your water system.
Ljl. Data abo%& is based primarily on estimates
LJ2. Data above is b,it,'>,i primarily on financial records
applicable to the water operations of this system
-------
QUESTIONNAIRE FOR INVESTOR-OWNED
WATER SYSTEMS
-------
PRIVATE QUESTIONNAIRE
A-6
WATER SYSTEM OPERATING, TREATMENT, ^ ,158_S75020
AND FINANCIAL INFORMATION FORM Approval Expires 10/77
INTRODUCTION: For multiple choice questions, please "X" the box of the appropriate category.
For other questions, please enter the data (gallons, dollars, eta.) in the spaces provided. If
yon do not have exact data available, please record your beet estimate for the item in question.
SECTION I. GENERAL INFORMATION
The EPA Inventory contains the following information about your water delivery
system. If this information is incorrect, please cross it out and write in the
correct information above each incorrect item.
NAME OF RESPONDENT^
TITLE
NAME OF SYSTEM
STREET ADDRESS
CITY.STATE.ZIP
YEAR SYSTEM
TELEPHONE NUMBER BEGAN OPERATING
1, Which of the following categories best describes the ownership structure of
your system?
HI. Owned by local government (municipal, state, district, authority,etc.)
2. Owned by federal government
(]3. Privately owned (investor-owned or owned by other non-government
organization)
2. Total permanent residential population served directly by your system
(excluding transient users and population served indirectly through
wholesales):
3. How much additional residential population, if any, does your system serve
on a seasonal basis (that is, population served only 2-3 months during the year)?
4. Please record the number of active service connections you have in each of the
following service categories:
PLEASE INDICATE THE NO. OF ACTIVE SERVICE
SERVICE CATEGORY CONNECTIONS YOUR SYSTEM HAS IN THIS CATEGORY
TOTAL CONNECTIONS
Residential connections
Commercial/Industrial connections.
Wholesale connections (i.e., customers who
redistribute your water to other users)....
Other (e.g., agricultural connectipns,
municipal/institutional connections—
towns, hospitals, etc.)
NOTE: If your system serves fewer than 25 permanent residents and has less than 15
total active service connections, you need not complete the rest of the information
below. However, please return this questionnaire form to us with the information you
have provided above.
TEMPLE. DARKER & SLOANIi, INC.
DECISION RESEARCH CORPORATION
-------
SECTION II. OPERATING DATA
1. Please indicate the amount of water (in gallons) your system obtained in 1974
from each of the following sources (please indicate "NONE" if your system does
not use any particular source).
TOTAL GALLONS SUPPLIED TO
SOURCES YOUR SYSTEM IN 1974
TOTAL WATER SUPPLIED TO YOUR SYSTEM
FROM ALL SOURCES
A-7
2.
4.
5.
Surface water...
Ground water .. .
Purchased water
If you purchased water in 1974 from outside sources, how much of this water was...
Surface water? % Ground water? %
By 1980: D
Yes
Do you plan to use any new sources of water . . .
D 1981-1985: Q Q 1986-1990:
No Yes No
IF YES, please indicate:
1. Type
(ground, surface, purchased) (MGD)
D
Yes
Maximum
Daily Use
D
No
r"l to replace
*—' existing sources
r—l in addition to
I—' existing sources
2. Type_
(ground, surface, purchased)
Maximum
Daily Use_
(MGD)
I—I to replace
'—' existing sources
r—| in addition to
LJexisting sources
In 1974, excluding purchased water, what was the maximum number of gallons your
system produced in any one day (that is, your maximum day production?
gallons produced in maximum day
What is the maximum daily treatment capacity of your system—that is, the total
gallons per day your system is designed to treat?
gallons per day
6. Please indicate the total amount of water you delivered (including purchased
water, if any) to each of the following types of customers in 1974.
NOTE: Please include unmetered deliveries, if any, in your estimate.
SERVICE CATEGORY
TOTAL GALLONS DELIVERED BY
YOUR SYSTEM
TOTAL GALLONS DELIVERED IN 1974
Residential connections _
Commercial/Industrial connections _
Wholesale connections (i.e., customers
who redistribute your water to other
users)
Other (e.g., agricultural connections,
municipal/institutional connections—
towns, hospitals, etc.)
-------
SECTION III,
1.
TREATMENTS
A-8
2.
For each of the following types of treatment, please indicate approximately how
treatments by other systems from whom you purchase water).
% OF YOUR DISTRIBUTION WHICH RECEIVES
TREATMENT BY YOUR WATER SYSTEM: .
TREATMENT TYPE
Disinfection (chlorination.etc
Coagulation
Sedimentation
Filtration
Prechlorination
Fluoride Adjustment
Corrosion control (Ph control)
Taste and odor (activated
carbon)
Aeration
Lime soda softening
Iron Removal
Ammoniatlon
Activated Alumina
Ion exchange softening
Other (please describe)
Approximately what percentage
treatment of any type by your
(~ll. All water is treated
D2. No water is treated
Nona
.) I-
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
1.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
1-33%
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
2.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
34-66%
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
3.D
67-99%
4. D
4
4
4
4
4
4
4
4
4
4
4
4
4
4
of the total water you distribute
system? (CHECK APPROPRIATE BOX)
D 3.
D4.
Ds.
1-33% is
34-67%
68-99%
is
is
not
not
not
.D
. D
. D
. D
. D
. D
. D
. D
. D
. D
. D
. D
. D
. D
receives
THIS
All
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
5.
D
D
D
D
D
D
D
D
D
D
D
D
D
D
5.D
no
treated
treated
treated
3. Please 4escri.be any new treatment facilities which your system has added
since 1970?
TYPE OF TREATMENT
PROVIDED
YEAR BEGAN
OPERATION
TOTAL COST TO BUILD
TREATMENT FACILITY
OR ADDITION
CAPACITY OF FACILITY
OR ADDITION
(gallons per day)
4. Please describe any new treatment facilities or additions to existing treatment
facilities which your system has definitely scheduled to begin operation be_fore
1980?
TYPE OF TREATMENT TO
BE PROVIDED
YEAR SCHEDULED TO
BEGIN OPERATION
DESIGN CAPACITY OF FACILITY
OR ADDITION (gallons per day)
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SECTION IV. FINANCIAL INFORMATION A-9
NOTE: PLEASE COMPLETE THE FOLLOWING INFORMATION FOR 1974 TO THE BEST OF YOUR ABILITY
Please note that the financial information needed is applicable only to water
operations. If your water system is consolidated with a larger entity (for
example, municipal budget, combined water-sewer operation, subsidiary of multi-
system company, etc.) please try to provide your best estimate of financial in-
information which is applicable to your local water system only. If your water
system has an annual report or other financial statement, it would be extremely
helpful if you could forward a copy to us with this form.
1. The following information is based on financial data for:
FROM: Month Year THROUGH: Month Year
Please indicate your total revenues trom water operations from each of the follow-
ing service categories (include sales']hook-ups,connection fees).
TOTAL ANNUAL REVENUES
SERVICE CATEGORY FROM WATER OPERATIONS
TOTAL WATER REVENUES
Residential connections
Commercial/Industrial connections.
Wholesale connections (i.e., customers
who redistribute your water to other
users)
Other (e.g., agricultural connections,
municipal/institutional connections—
towns, hospitals, etc.)
3. Based on your present rate structure, what would a typical residential customer
pay:
Per year for 100,000 gal: $
OR Per 100 cubic feet:
4. Is your water system required by law to obtain approval from a state regulatory
agency or authority prior to raising its rates?
Ql. Yes Da. No
5- Are customers billed for water jointly with sewer charges or other municipal
services? __
[J 1. Yes L_J 2. No
6. Please indicate the total operating expenses (excluding interest) of your water
system for 1974 and, to the best of your ability, the division of your total
operating expenses among the categories listed.
TOTAL OPERATING EXPENSES OF WATER SYSTEM
(EXLUDING INTEREST) .__
Operating and Maintenance
Depreciation ana amortization
of plant and equipment
Federal taxes
State taxes
Local taxes
Other operating costs
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A-10
7. Please indicate the total debt service: ———————
Interest expense
Repayment of principal:.
8. What was the net profit or loss of your
system in 1974 (or most recent 12-month
period)?
9- Please indicate the amount of dividends paid
to stockholders, if any.
SECTION V, BALANCE SHEET DATA
As in the previous section, please provide the following information about your
local water system at the close of your most recent accounting period. A copy
of your most recent financial statement, if available, would be extremely helpful.
1. Please indicate the total assets of your water system, and to the best of
your ability, the division of your total assets among the categories listed:
TOTAL ASSETS OF WATER SYSTEM
(ORIGINAL COST)
Categories of Assets:
Plant and equipment (original cost)
Production-treatment plant(s) .
Distribution system
All other plant and equipment .
Total accumulated depreciation.
Current Assets:
Other Assets not included in the
above categories
2. Please summarize the liability, capital, and other balance sheet categories
listed below.
Long-term Debt(over 5 years)
Paid-in capital (common stock,
paid-in surplus, preferred stock) ...
Retained earnings (accumulated
surplus)
Current liabilities
3. Please describe your major capital expenditures since 1970.
AMOUNT OF
_,_ AMOUNT OF PURPOSE OF HOW WAS THE FEDERAL ASSISTANCE
DATE EXPENDITURE EXPENDITURE EXPENDITURE FINANCED IF ANY
4. Which of the following categories most closely describes the financial
information available for your water system.
LJl. Data above is based p' .rily on estimates
LJ2. Data above is based primarily on financial records
applicable to the water operations of this system
-------
A-ll
CODING PROCEDURES
The procedures and conventions followed in transfer-
ring data from questionnaires to coding forms are described
briefly below. The section and question numbers refer to
the questionnaires.
SECTION I - GENERAL INFORMATION
Q #1: Was checked to make sure that no federally-owned
systems were included and that publicly-owned
systems had completed a yellow questionnaire and
privately-owned systems had completed a white
questionnaire.
Q #2: The number here was checked against the number of
connections in Question 4. Quite frequently the
answers to these two questions were the same.
In these cases the respondent "was called back.
If the respondent could not estimate total per-
manent residential population, the residential
connections in Question 4 were multiplied by 3.17
(the average household size according to the 1970
U.S. Census).
Q #3: Was coded "zero" if left blank.
Q #4: Blank lines were coded "zero" if the rest of the
categories added up to the total. If not, blank
lines were left blank.
SECTION II - OPERATING DATA
Q #1; If left blank, the system was recontacted to deter-
mine water source. For those few systems that
could not be recontacted, this question was left
blank.
Q #4: Figures were checked against Question 6 since some
systems recorded daily deliveries on Question 6
rather than deliveries for the entire year.
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A-12
Q #5: Figures were checked against Section III and
purchased water figures were used to help distinguish
between treatment performed by the supplying
wholesale system rather than by the system completing
the questionnaire.
Q #6: Total gallons delivered were checked against total
gallons supplied. Any substantial discrepancy
which could not be explained by "loss" resulted in
recontacting the respondent for clarification.
SECTION III - TREATMENT
Q #1: Most respondents left treatment types blank rather
than checking the "none" category if they did not
use that type of treatment. Therefore, unless the
entire question was left blank, blanks were recorded
as "none." If Question 1 was completely blank,
Question 2 was checked and, if they answered "no
water is treated," all sections of Question 1 were
recorded as "none:" If they did treat their water
and had not answered Question 1, the respondent
was recontacted to determine the type of treatment.
All treatments named under "other" were summarized
by type and included where appropriate in one of
the fourteen existing categories or coded as "other."
Q #2: Was checked for consistency with Question 1.
Q #3 & 4: All treatments not listed on Question 1 were
summarized and included in one of the fourteen
categories as appropriate, or coded as "other."
A "multiple treatments" code was added to account
for several treatments combined on one line.
Capital expenditures for additions to the system
which were clearly not for treatment were excluded
from Question 4. Expenditures for non-treatment
additions on Question 3 were transferred to Section
V - Question 3 if they were not already included there,
SECTION IV - FINANCIAL INFORMATION
A number of systems included a financial statement
rather than completing Sections IV and/or V. Those question-
-------
A-13
naires were forwarded to TBS where financial information was
-transferred to the questionnaire and returned to DRC for
coding.
Q #1: If the time period was less than or greater than
twelve months, the questionnaire was forwarded to
TBS where adjustments were made in the appropriate
figures and returned to DRC for coding. For
example, an 18-month fiscal year would result in
multiplying operating expenses and revenues by 2/3.
Q #4: When rate schedules were provided, TBS determined
the typical yearly rate for 100,000 gallons and
returned the questionnaire to DRC for coding.
Q #8: Figures here were checked against Section V -
Question 2 since many systems recorded their entire
debt service on Question 8, line 1. When this
occurred, Question 8, line 1, was changed to
reflect the total of Question 8, lines 2 and 3.
Q #10: Figures here were assumed to be surpluses unless
otherwise indicated by parentheses, minus sign,
underlining "deficit," or crossing out "surplus."
SECTION V - BALANCE SHEET DATA
Q #1: Current assets were checked against total assets.
If the two were identical, the current assets line
was left blank.
Q #2: Current liabilities were checked against long-term
debt. If the two were identical, the current
liabilities line was left blank.
Q #3: Responses were coded as production, treatment,
distribution, miscellaneous, and multiple. All
responses not clearly fitting into one of these
groups were summarized and given to TBS for final
resolution and coding instructions. If more than
four entries were made, responses were combined by:
1) method of financing; 2) purpose of expenditure;
and/or 3) year, depending on the breakdown provided
by the system.
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A-14
All questions left blank and not clarified by
calling back the respondent were left blank on the coding
form unless the answers could clearly be deduced from other
responses or written comments.
Seventy-four questionnaires which were returned
were not included in the final data base for the following
reasons:
2 - refused to provide any information
7 - were not community water systems
2 - were federally-owned
2 - had seasonal population only
36 - had less than 25 permanent residents
6 - were no longer in operation
11 - did not provide enough data to include
them and could not be recontacted
3 - were unable to complete the form
5 - had miscellaneous other problems
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A-15
ADDITIONAL SOURCES OF INFORMATION
ON WATER SYSTEM FINANCES
American Water Works Association, Operating Data For Water
Utilities 1965. 1970. an AWWA Statistical Report, 1971.
Kelt, A. and D.L. Chambers, "An Updated Hartford Metropolitan
District Water Rate Survey," Journal American Water Works
Association (August 1976).
Luthin, John C., "Rate Making Practices of State Regulatory
Commission," Journal American Water Works Association
(September 1976).
Moberg, Walter J., Jr., The Cost of Supporting Rural Water
Systems—Projections and Policies. Commission on Rural
Water. Chicago, Illinois: Information Clearinghouse 1976.
National Association of Water Companies. "Financial Summary
For Investor-Owned Water Utilities 1973, 1974." Prepared
under NAWC Economic Research Program.
U.S. Environmental Protection Agency. Unpublished Case
Studies on Cost of Water Supply. Prepared under contract
to Water Supply Research Division, Cincinnati, Ohio
(1975-1976).
Wright, John D. and Don R. Hassal, "Trends in Water
Financing," The American City, (December 1971 and January
1972), Parts Two and Three of a ten-part series on Modern
Water Rates. Part One (November 1971) and Parts Four-
Ten (February - September 1972) may also be of interest.
-------
INDEX
AGE
—of water systems IV, 1-3
ANNUAL
—operating expenses VII, 3-5
—revenues VI, 2-3
—capital expenditures VIII, 24
—rate of system formation IV, 2
ASSETS
^—total: mean, median II, 15-16; VII, 1-11
—gross plant by category VIII, 1-8
—distribution VIII, 10-11
BALANCE SHEET
—typical systems II, 13-14
BUDGET APPROPRIATIONS
—publicly-owned systems VI, 17-18
CAPITAL EXPENDITURES
—total (1970-1975) VIII, -20
—by purpose VIII, 21
—annual VIII, 22
—sources of financing VIII, 23
CONNECTIONS
—residential IV, 7-8
—non-residential IV, 8-10
DELIVERIES
—definition V, 2
—to residential customers V, 8-9; VI, 14
—to non-residential customers V, 10-11
DEFICITS VII, 23-26
DISTRIBUTION
—assets VIII, 10-11
—capital expenditures VIII, 21
EMBEDDED INTEREST RATES VII. 21-22
ENVIRONMENTAL PROTECTION AGENCY
—inventory III, 3-5
—water supply research I, 1-2
-------
GROUND WATER
—definition IV, 11
—percent of systems IV, 12
—systems which supplement IV, 13
—system using standard treatments V, 15-16
—daily production of V, 17
—annual revenues of VI, 6-7
—operating expenses for VII, 5-7
INCOME (also see Revenues)
—statement for typical systems II, 12
INTEREST EXPENSE
—all systems VII, 19-21
—embedded VII, 21-22
INTERIM PRIMARY DRINKING WATER REGULATIONS I, 2
INVENTORY II, 3; III, 3-5
LONG-TERM DEBT VIII, 13-20
METHODOLOGY
—selecting sample I, 3-4; III, 1-5
—questionnaires III, 5-8; Appendix
—data coding III, 9-11
—data processing III, 11-13
MAP-EPA REGIONS 1-6
NATIONAL ESTIMATES
—operating characteristics II, 3-7
— financial profile II, 8-9
OPERATING
—expenses, total II, 15; VII, 2-4
—expenses, detail VII, 9-19
—characteristics, national estimates II, 3-7
—characteristics, sample II, 11; V
OWNERSHIP (also see Public and Private)
--definition III, 3; IV, 3
POPULATION
—size categories I, 3-6; II, 1-4; IV, 3-4
—average residential II, 5-6
—seasonal IV, 6
-------
PRIVATELY-OWNED SYSTEMS
—definition IV, 3
—percent by size and region II, 5-6; IV, 3
—revenue levels VI, 5-6
—revenue rates VI, 11
—operating expense levels VII, 8-9, 15-19
—operating expense rates VII, 8-9
—operating expense, by category VII, 9-19
—tax expense VII, 17-18
—profit or loss VII, 23-25
—capital and liabilities VIII, 18-20
PRODUCTION
—definition V, 1-3
—average daily II, 5-7; V, 2-5
—per capita V, 4-5
—ratio of maximum to average daily V, 5-7
—ratio of deliveries to V, 7-8
—by source of water II, 7; V, 17
PUBLICLY-OWNED SYSTEMS
—definition III-2, IV, 3
—percent by size and region II, 5-6; IV, 3-5
—revenue levels VI, 5-6
—revenue rates VI, 11
—budget appropriations VI, 17-18
—operating expenses, by category VII, 10-14
—tax expense VII, 12-14
—surplus or deficit VII, 23-25
—capital and liabilities VIII, 15-18
PURCHASED WATER
—definition II, 5
—percent of systems II, 5-6; IV, 12
—systems which supplement IV, 13
—systems using standard treatments V, 14
—daily production of V, 17
—operating expenses for VII, 5-7
QUESTIONNAIRES III, 6-7; Appendix
RATES (charges)
—reported, residential II, 14-15; VI, 13-14
—computed VI, 15-16
—systems not charging for water VI, 3-4
-------
REGIONS
—in sample, definition I, 4-6; III, 3
—systems by ownership IV, 3-4
—average population served I, 4-5; IV, 4-5
—distribution of systems by water source IV, 12
REVENUES
—annual VI, 2-5
--by ownership type VI, 5-6; VI, 11-12
—by primary source VI, 6-7
—rates per thousand gallons VI, 7-11
—by customer class VI, 15-16
—budget appropriations VI, 17-18
SAFE DRINKING WATER ACT I, 1-2; III, 1-2; V, 12
SURFACE WATER
—definition IV, 11
—percent of systems IV, 12
—systems which supplement IV, 13
—systems using standard treatments V, 15-16
—daily production of V, 17
—operating expenses for VII, 5-7
SOURCES OF FINANCING
— internal III, 9; VIII, 22-23
—external II, 9; VIII, 22-23
SURPLUS VII, 23-25
SURVEY SAMPLE
—distribution by size and region I, 3-6
—from EPA inventory I, 3-5
—systems contacted III, 7-9, 10
—final data base III, 5, 11-13
TAX EXPENSE
—for public systems VII, 13-14
—for private systems VII, 15, 17-18
TREATMENT(S)
—percent of systems using standard V, 14-15
—used by water source V, 15-18
—percent of systems which treat all water V, 12-14
TYPICAL SYSTEM
—definition II, 10
—selected characteristics for II, 10-11
—income statement II, 12
—balance sheet II, 13-14
» u.s. wviifflMWT PRIOTISO OFFICS : 1977 o- 720-117/2015
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