United States
Environmental Protection
Agency
Office of
Drinking Water (WH-550)
Washington, DC 20460
EPA 570/9-83-008
June 1983
Regionalization
Options for Small
Water Systems
-------
REGIONALIZATION OPTIONS FOR SMALL WATER SYSTEMS
Prepared by:
SMC Martin Inc.
900 West Valley Forge Road
P. 0. Box 859
Valley Forge, Pennsylvania 19482
Prepared for:
U.S. Environmental Protection Agency
Office of Drinking Water
Chester Pauls, Project Officer
401 M Street, SW
Washington, DC 20460
Contract No. 68-01-6285
June 1983
-------
TABLE OF CONTENTS
Page
I. INTRODUCTION 1-1
II. UNIQUE PROBLEMS FACING SMALL WATER SYSTEMS II-l
III. REGIONALIZATION—DEFINITION AND OPTIONS III-l
Definition III-l
Nonstructural Options III-2
Structural Options III-7
Summary 111-13
IV- ANALYSIS AND SELECTION OF A REGIONALIZATION OPTION IV-1
Legal Authority IV-2
Costs IV-3
Policy/Political Constraints IV-4
Assessment of Service Delivery Resources IV-5
V. IMPLEMENTATION V-l
APPENDIX A Case Histories
APPENDIX B References and Other Sources of Information
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LIST OF TABLES
Table Page
1 Regionalizetion Options III-3
2 Advantages and Disadvantages of Informal Agreements 1II-4
3 Advantages and Disadvantages of Basic
Service Contracts III-5
4 Advantages and Disadvantages of Joint
Service Agreements III-7
5 Advantages and Disadvantages of Regional
Council of Local Elected Officials III-8
6 Advantages and Disadvantages of Association/Non-
Profit Water Supply Corporation 111-10
7 Advantages and Disadvantages of Local Special-
Purpose Districts III-ll
8 Advantages and Disadvantages of Annexation III-13
9 Advantages and Disadvantages of the Areawide
Special District/Authority 111-14
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LIST OF FIGURES
Figure Page
1 Suggested Sequence of Events for Regionalization
Implementation V-4
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I. INTRODUCTION
Small water system owners and
operators, faced with situations
that adversely affect their
ability to provide an adequate
and safe supply of drinking
water, often overlook "regionali-
zation" as a remedy for their
problems. Regionalization, as
discussed in this document,
involves the cooperation of
system owners and, perhaps, the
consolidation of financial re-
sources, physical plants, and/or
personnel.
The main benefit of regionaliza-
tion is that it pools individual
resources of two or more water
systems to obtain services or
facilities that one or both
systems may not have been capable
of obtaining by themselves.
Thus, two adjacent towns may
decide to share the services of
one full-time water quality
engineer. Or, if they need new
treatment plants, but individually
cannot afford them, they may be
able to implement the regionali-
zation concept and build one
shared facility.
When proposed, the regionaliza-
tion concept is often viewed
solely as a means to create a
larger entity that will consume
independent water systems, re-
sulting in a loss of local policy
control. However, even more than
the traditional and often negative
perception of physical takeover,
regionalization remedies can
include a wide range of options
that provide positive benefits to
the participating systems.
This document is designed for
individuals likely to be involved
in regionalization of water
supply entities: (1) decision-
makers, including water supply
professionals, elected officials,
state and local governmental
representatives, and affected
consumers and (2) technical and
planning personnel responsible
for implementing the decision to
regionalize.
This document describes many
forms of regionalization and
analyzes the associated benefits;
costs; and financial, legal,
organizational, and political
aspects. Case histories illustrate
the concepts and kinds of region-
alization options available.
This document also provides a
methodology to help communities
evaluate and tailor options for
their particular situations.
The range of alternatives presented
here implies that each community
has different water supply needs
and must find solutions to fit
its own needs. The proper size
for a local or areawide utility
is best determined by analyses of
resources, terrain, distances,
costs, capacities, operational,
political, and institutional
considerations, and environmental
impacts.
Even in those situations where
large systems are deemed most
appropriate, such systems cannot
be created quickly; they must
evolve. Many of the choices
offered here can be used success-
fully either as a final solution
to a local problem or as part of
an evolutionary process leading
to a new water supply entity.
1-1
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To facilitate the presentation of
this information, this document
is divided into five (5) sections,
plus appendices, as follows:
Section Subject Guide
I Introduction - This
section introduces the
concept of regionaliza-
tion and its broad
benefits, and briefly
outlines the content of
the document.
II Unique Problems Facing
Small Water Systems -
This section presents
background on the
status of small water
suppliers in this
country, outlines some
of the problems unique
to small systems and
outlines some regionali-
zation success stories.
Ill Regionalization -
Definition and Options -
This section defines
the term regionalization
as used in this document,
and describes in detail
regionalization options
available to small
water systems. Advan-
tages, disadvantages
and ficticious illustra-
tive examples are
presented.
IV Analysis and Selection
of a Regionalization
Option - This section
analyzes the options
described in the pre-
vious section and
outlines issues to be
considered by personnel
considering and evalu-
ating regionalization
options.
V Implementation - This
section presents a
suggested critical path
model outlining steps
in the implementation
of a regionalization
option.
Appendix The Appendix is divided
into two (2) subsec-
tions; one presents
three (3) case histories
of successful regionali-
zation efforts and the
second presents a list
of references.
Regionalization options, as
defined and described in Sec-
tion III, include both "nonstruc-
tural" and "structural" options.
Simply stated, nonstructural
regionalization involves the
formulation of working relation-
ships among autonomous local
water supply entities while
structural regionalization in-
volves the creation of new legal
entities that reduce or eliminate
the autonomy of local water
supply systems. The options
described in detail in this
document are the following:
Nonstructural Regionalization
Options
o Informal agreement
o Basic service contract
o Joint service contract
o Regional council of local
selected officials
Structural Regionalization Options
o Association/nonprofit water
supply corporation
o Local special district
o Annexation
o Areawide special
district/authority
1-2
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The ability to implement any
regionalization option is depen-
dent on many factors. Enabling
legislation must be in place at
the state level for local govern-
ments and water utilities to
enter into agreements, form
special districts or authorities.
If such legislation is not in
place, legislative action will be
required.
Also, to successfully implement a
regionalization option, it must
be advantageous (or, at least,
not disadvantageous) to all
parties involved and must provide
the following characteristics:
o economic efficiency - to
provide water supply service
at the lowest possible cost
o fiscal equity - to distribute
the cost of service equally
among customers served
o political accessibility - to
allow for high level citizen
participation in decision
making
o administrative effectiveness -
to deliver water in an
efficient and technically
proficient manner
Many questions must be addressed
in the process of implementing a
regionalization program. Some
are suggested in Section IV;
others may develop in the course
of specific regionalization
efforts.
In summary, regionalization
offers valid approaches to the
resolution of many problems faced
by small water supply systems.
Each situation is different,
however, and may be appropriately
addressed either by nonstructural
or structural options. The
choice of most appropriate options
should be in the hands of well-
informed water supply professionals
assisted by equally well-informed
political leaders and concerned
citizens. This document provides
the background information neces-
sary to initiate the process of
ensuring that these participants
are, in fact, well-informed.
Further, it provides a framework
that provides directon to the
search for, and implementation of,
appropriate regionalization
options.
1-3
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II. UNIQUE PROBLEMS FACING SMALL WATER SYSTEMS
"From 1961 through 1978, drinking
water caused 407 outbreaks of
disease or poisoning, resulting
in 101,243 recorded illnesses and
at least 22 deaths,"(1) according
to a recent General Accounting
Office (GAO) report. Indeed, the
apparent incidence of waterborne
diseases has increased since the
1950s, according to the same
report. During the period 1946-
1970, there were 53 outbreaks of
waterborne infectious disease due
to typhoid, but there were 297 out-
breaks attributed to other bac-
terial or viral agents and these
numbers probably represent only
the "tip of the iceberg," since
sporadic, random cases of gastro-
enteritis generally go
unreported.(2)
The GAO report referenced above
was issued as a review of national
progress toward the goals stated
in the Safe Drinking Water Act
of 1974. Based on this act, the
Environmental Protection Agency
(EPA) proposed National Interim
Primary Drinking Water Regula-
tions (NIPDWRs) in 1975 (effec-
tive January 1977) and later
promulgated Maximum Contaminant
Levels (MCLs) for various
substances.
The Environmental Protection
Agency estimates that there are
approximately 60,000 community
water systems in the country. Of
these, approximately 39,000 or
65 percent of the total can be
categorized as "very small"—
serving 25 to 500 people. An
additional 14,000 systems, or
23 percent of the total can be
categorized as "small"—serving
501 to 3,300 people.
The existing known problems with
the U.S. water supplies are
significant, especially in systems
classified as small and very
small. In 1980 alone, more than
900 small water supply systems
were persistent violators (in
violation more than 3 months
during the year) of the national
bacteriological MCLs, and another
1,560 systems were intermittent
violators (in violation 3 or less
months of the year). The potential
problems with systems in these
size categories are even larger.
Small water systems, approximately
90 percent of the systems in the
United States, suffer from the
following circumstances:
o Fixed capital and operation
and maintenance costs are
not spread over enough
customers to keep individual
customer costs at reasonable
rates.
o Small water systems have
limited revenues and assets;
these systems often find it
difficult to borrow funds
for improvements.
o The low number of customers
served tends to produce
insufficient revenues:
systems cannot offer salaries
to attract and retain skilled
managers and operators.
o Many small water systems are
located in rural or other
low density areas with low
population growth rates;
these systems have no predic-
table larger customer tax
base in the future to finance
capital improvements.
II-l
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o Customers served by small
water systems often have low
or fixed family incomes;
instituting necessary rate
increases is difficult.
Many small water systems operate
on a marginal basis, with little
financial and operational reserves
to ensure that reasonably high
quality water and service are con-
sistently provided. The result,
often, is a potentially hazardous
water supply for consumers and an
inability to meetState and Federal
drinking water standards.
Because of these circumstances,
small water systems are frequently
unable to generate sufficient
resources—financial, operational,
or managerial—to correct existing
deficiencies. In addition,
owner/operators are also unable
to respond effectively to unplanned
improvements or emergencies. But
owner/operators of small water
systems must consistently deliver
safe and dependable supplies of
drinking water, even though they
find it inherently difficult to
manage, operate, and maintain
their systems properly.
The difficult situation in which
many small water systems find
themselves is not necessarily a
hopeless one. Regionalization
offers an often overlooked approach
to problem solving. It is an
approach that can easily be
tailored to the specific needs of
the utilities involved, and one
that has met with success in many
parts of the country. Typical of
some of the success stories are
the following:
o Pinellas, Pasco and Hills-
borough Counties, Florida
where a regional authority
(West Coast Regional Water
Supply Authority) was created
to acquire and operate
existing local facilities
and plan new facilities on a
regional basis.(3)
o Dayton, Ohio where the
Cities of Dayton and Vandalia
and Montgomery County entered
into a three-way cooperative
agreement to expand and
upgrade water storage and
transmission facilities
without sacrificing local
ownership or administrative
control.(4)
o New Castle County, Delaware
where the City of Wilmington
has entered into water
supply agreements with the
City of Newark and two (2)
private water supply
companies.(5)
o Washington, where the state
via the Public Water System
Coordination Act of 1977,
has provided a mechanism for
water supply planning on a
statewide level and is
encouraging the consolidation
of water systems.
o Indiana County, Pennsylvania,
where a countywide authority
was created to upgrade and
maintain the quality of
water supplied to eleven (11)
small communities.(6)
o Cowlitz County, Washington,
where the County Department
of Public Works maintains
and operates six (6) small
water supply systems, five (5)
of which are owned by the
County and one (1) of which
is handled via a service
agreement.
This list could continue indefi-
nitely since many regionalization
11-2
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techniques are available and
practiced. The next chapter
discusses various regionalization
options in detail. The Appendix
includes detailed case histories
of regionalization efforts in the
States of Washington, Pennsyl-
vania and Texas. More information
concerning the other examples
cited herein can be obtained from
the referenced source material.
II
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III. REGIONALIZATION-- DEFINITION AND OPTIONS
Regionallzation of water supply
service has traditionally been
defined in two broad terms:
either the creation of an adminis-
trative organization (nonstruc-
tural) to operate and maintain
two or more water systems or a
physical interconnection of water
systems (structural). Most
recent definitions of regionaliza-
tion have highlighted this differ-
entiation. This document, however,
uses a modified definition to
highlight the ways in which
regionalization can occur.
DEFINITION
Regionalization is the adminis-
trative or physical combination
of two or more community water
systems for improved planning,
operation, and/or management.
Regionalization should be
viewed in the context of a
range of possible approaches,
from the actual physical inter-
connection of systems to an
adminstrative and management
arrangement to provide common
technical, operational, or
financial services for two or
more systems.
This definition is keyed very
closely to the numerous methods
local governments typically use
to adapt to the changing needs
and service demands within their
jurisdictions.
Nonstructural options are general-
ly administrative or managerial
arrangements that allow for the
continued identity and indepen-
dence of the participating water
systems. Nonstructural options
emphasize a change in "procedure";
hence, the organization and
policy control of the partici-
pating water systems and govern-
mental units remain essentially
intact and unaltered. These
options emphasize a change in
business practice rather than a
reorganization.
Procedural changes, however, can
have secondary effects that
result in organizational changes;
the specific nature of these
Impacts is not always predictable.
For example, a basic service
contract between two water systems
for the provision of emergency
repair service could lead to a
more permanent relationship in
which the provider system takes
over the complete operation and
maintenance function for the
recipient system.
In contrast, structural options
require the creation of a new
management or political entity to
operate and maintain the water
systems. Structural regionaliza-
tion options result in the reor-
ganization of the participating
entities regardless of their
previous ownership status. When
implemented, the affected systems
generally do not revert back to
their original ownership and
policy control status. Thus, the
structural options are regarded
as being more direct in their
impact on th^ existing water
supply owners than are the changes
resulting from the implementation
of the nonstructural options.
In practice, a regionalization
scheme does not have to embrace
any one specific option, but may
III-l
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involve a mixture of forms or an
evolution of forms that changes
over time from the more simple to
the more complex. The classes of
regionalization options are
summarized in Table 1. The
options are discussed here in the
context of their broad character-
istics, requirements and advantages
and disadvantages.
NONSTRUCTURAL OPTIONS
The nonstructural regionalization
options are those that do not
affect current ownership and
policy control of the water
supply system. The least rigid
option is the "informal agreement,"
consisting of a bartering or
trading of service or hardware,
as needed. More formal is the
"basic service contract," a legal
purchase (via contract) of discrete
services (e.g., laboratory time),
which are otherwise unavailable
to the purchaser. A "joint
service agreement" is a democratic
(equal partners) arrangement
wherein the partners agree to
jointly pursue mutual goals or
needs. They probably are not
"buying" anything from each
other. The regional council of
local elected officials may be a
Council of Governments-type
organization, working essentially
under an informal agreement, but
with the collected powers of
their respective governments
behind them. The group has no
legal enforceable arrangement,
but they could unite in purchas-
ing agreements for such basic
items as chemicals or hiring
personnel, or they could explore
the cost-effectiveness of design-
ing one new water treatment plant
to serve their political
jurisdictions.
Informal Agreement
Informal agreements have their
basis in a voluntary cooperative
decision between two or more
water supply entities or other
service entity equipped to provide
a needed function to share a
commonly needed component.
Informal agreements can span long
terms or can be used on an as-
needed basis, such as when water
is supplied from one system to
another on an emergency basis to
accommodate system breakdowns.
The provision of a water supply
activity or component can involve
payment in the form of money or
services or may be provided
without charge. Systems may
informally agree to:
o Share laboratory facilities
o Share storage facilities
o Share billing equipment
o Provide water on an emergency
basis
o Share operation and mainte-
nance (O&M) functions or
personnel
The general benefit of informal
agreements is best summarized in
a report prepared by the Illinois
State Department of Local Govern-
ment Affairs:
Informal agreements of this
type are far more prevalent
than written agreements because
of their ease of implementation.
In some cases, an informal
agreement provides an operational
basis, a "dry run," upon which
to work out details of a formal
agreement. The delays in
extended negotiations are
removed. As interlocal reliance
and dependence for service
expands, these informal agree-
ments assume a binding quality
since mutually relying entities
III-2
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TABLE 1
REGIONALIZATION OPTIONS
Nonstructural
o Informal agreement
o Basic service contract
Wholesale/retail water contract
Contract operation and maintenance (Circuit rider
agreement)
o Joint service contracts
Common facilities
o Regional council of local selected officials
Structural
o Association/nonprofit water supply corporation
o Local special district
o Annexation
o Areawide special district/authority
will not want to jeopardize
their supply of services.(7)
The main advantages and disadvan-
tages of an informal agreement
are summarized in Table 2.
An example of an informal agreement
is found in two communities close
to each other, one of which is
experiencing water supply capacity
difficulties and the other finding
it difficult to provide effective
police service. The communities
informally agree to exchange
these services—water for police
protection. The communities
agree that there is a mutual
exchange of services of common
value and that each party is
equally compensated; thus, no
exchange of money occurs.
Basic Service Contract
The simplest formal regionaliza-
tion option is the basic service
contract, which provides for the
delivery of some aspect (or
range) of water supply service.
This contract involves the crea-
tion of a legal document between
water systems or a water supply
services company to provide a
service to the other systems.
Under a basic service contract,
policymaking and financing usually
remain with the recipient of the
service, and the provider performs
agreed on service functions.
III-3
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TABLE 2
ADVANTAGES AND DISADVANTAGES OF
INFORMAL AGREEMENTS
Advantages
Easy to create or implement
Adjustable to duration of need
Forerunner of more binding
relationship
Easy to terminate
Disadvantages
Not legally enforceable
Easy to terminate
No formal continuity from
administrator to
administrator
Basic service contracts are the
most widely used method of re-
gional cooperation among local
governmental units, public enti-
ties, and private companies and
present a flexible, yet enforce-
able arrangement. Specific
functions may be contracted:
o Water purchase contracts—
wholesale and retail
o Contract Operations and
Maintenance (O&M)—emergency
and repair
o Water plant operation and
maintenance
o Distribution system
maintenance
o Billing and collection
The most common use of basic
water supply service contracts is
to provide water on a wholesale
or retail basis. These contracts
usually arise when raw water
source quality or quantity becomes,
or is determined to be, unaccept-
able, requiring either the con-
struction of a sophisticated
treatment system or the develop-
ment of a costly new water source.
These two factors alone (unaccept-
able water quality and quantity)
have probably given rise to the
creation of more water contracts
than any other factors.
These contracts can also make
available various types of spe-
cialized services to small water
systems that are unable to obtain
the necessary facilities or
qualified staff to provide the
services for themselves. Contract
provision of O&M and laboratory
services are finding increasing
use as water systems are attempting
to both upgrade the quality of
service to their customers and to
comply with Federal and State
regulatory requirements. Existing
water systems and water supply
service companies are both begin-
ning to offer these types of
services to small water systems.
Specific advantages and disadvan-
tages common to basic service
contracts are shown in Table 3.
Cowlitz County, WA, implemented
its satellite water system support
concept by entering into contracts
with a number of county organiza-
tions to operate and maintain
their water and sewerage systems.
As a part of the contract, the
county regularly sends qualified
water system operators to verify
the proper operation of the water
treatment and distribution systems;
these operators also provide
III-4
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TABLE 3
ADVANTAGES AND DISADVANTAGES OF
BASIC SERVICE CONTRACTS
Advantages
Easy to create
No restrictions on local
autonomy or policy control
No governmental reorganization
Adjustable to meet changing
service needs and demands
Realization of unit cost savings
via larger quantity purchases
(economies of scale)
Able to provide specialized
services not otherwise
available
No voter approval required
Disadvantages
Easy to terminate
Temporary solutions
(possibly)
Too expensive (sometimes)
regular and emergency maintenance
and repair services.
In Bell County, TX, the Certified
Water Service Company now contracts
with 14 water systems each of
which serves 100 to 800 customers.
Certified Water Service Company
provides O&M and water sampling
services, prepares water quality
monitoring reports, distributes
monthly bills, and collects
revenues.
Joint Service Agreement
Joint service agreements involve
the sharing or exchange of activi-
ties among two or more water
systems or other service entities.
A joint service agreement is
normally more complex than is a
basic service contract; thus, the
agreement places more restric-
tions on the participants.
Administrative decisions are
typically made by a joint govern-
ing body of representatives from
each participating system.
Joint service agreements establish
the participating systems as
partners in the provision of a
particular water supply activity;
parties to these agreements
generally have similar levels of
administrative and financial
authority and responsibility.
Planning, contracting, financing,
and/or operating costs to provide
the joint activity are shared by
the systems.
Joint service agreements can be
formed for the following purposes:
o Development of a water
source
o Ownership of system facili-
ties
Storage facilities
Laboratory
Maintenance facility
Vehicles
III-5
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o Purchasing
Chemicals
Parts
o Exchange or sharing of
service activities
Operations and
Maintenance
Billing and collections
Specific advantages and disadvan-
tages common to this option are
shown in Table 4.
Two communities could discover
that their existing wellfields
are becoming insufficient to
accommodate the water supply
demands created by recent popula-
tion growth. Their studies
indicate that ground water can no
longer be relied on for safe and
dependable supplies of drinking
water. A nearby river could
serve as a raw water source, but
neither community can afford to
design and construct the required
water plant. The communities
determine that, together, they
can afford to construct and
operate the plant, as well as the
transmission lines to each distri-
bution system.
The communities decide to enter
into a joint service agreement.
All responsibility for decisions
regarding the funding, operation,
and maintenance of the plant is
given to a two-member management
group composed of the communities'
town managers, who must vote
unanimously to determine policy
matters.
The cost of construction, opera-
tion, and maintenance of the
plant and transmission lines is
divided between the two communi-
ties, based on the percentage of
the capacity of the plant each
community will use. The communi-
ties will be credited for in-kind
contributions to the system,
including personnel, equipment,
and attorney time. In addition,
the communities reserve the right
to enter into purchase water
contracts with other users in the
area. The rights and privileges
of municipal employees will not
be altered by their assignments.
As a result of this agreement,
the communities will be able to
meet their water supply needs
well into the future; further-
more, the supply will be far more
dependable than were their well-
based systems.
Regional Council of Local Elected
Officials
Different from the other nonstruc-
tural regionalization options, a
regional council of local elected
officials provides a forum for
the identification of problems
common to a given area. The area
of concern is one which often
crosses jurisdictional boundaries.
Such a council encourages common
action to resolve problems so
that resources are committed more
efficiently, thus eliminating
regional duplication of effort.
Although no legal obligation
results from council resolutions,
participating members can agree
on mutual courses of action.
As an example, several adjacent
communities each own and operate
their own water supply systems.
None of the communities want to
give up autonomy in water supply,
but they realize that some degree
of joint planning will be neces-
sary, particularly to protect the
integrity of raw water sources.
The communities decide to form a
regional council of governments
and appoint elected members of
the community councils as represen-
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TABLE 4
ADVANTAGES AND DISADVANTAGES OF
JOINT SERVICE AGREEMENTS
Advantages
Easy to create
Realization of unit cost
savings via larger quantity
purchases (economy of scale)
Minimal disruption of existing
organizational and administra-
tive structures
More permanent than basic service
contracts
More uniform coordination and
administration of services
More efficient use of personnel,
equipment, and facilities
Able to provide specialized
services not otherwise
ava ilable
Elimination of duplication of
facilites
Increase in overall efficiency
of service
No voter approval required
Disadvantages
Impact on local autonomy
and policy control
More difficult to terminate
than basic service contracts
Benefits to outside jurisdic-
tions that do not compensate
participants
Sometimes difficult to distri-
bute costs equally
Difficult to compute and
equally distribute some
overhead costs
Difficult for participants
to provide service
themselves if the
agreement fails
tatives. The initial mandate of
the regional council is to review
the water supply situation and
report back to the member communi-
ties. None of the communities is
bound by the recommendations of
the regional council. Funding
for regional council activities
is provided by the member
communities.
Specific advantages and disadvan-
tages common to this option are
shown in Table 5.
STRUCTURAL OPTIONS
Structural regionalization options
as defined here require (1) crea-
tion of a new water supply entity
or (2) a shift in policy control
or function among existing enti-
ties. These adaptations thus
involve local provider, utility,
or governmental realignment or
reorganization. Such adaptation
is accomplished either by enlarg-
ing an existing unit or by creating
a new entity to accommodate a
locality's new or changing water
supply requirements.
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TABLE 5
ADVANTAGES AND DISADVANTAGES OF
REGIONAL COUNCIL OF LOCAL ELECTED OFFICIALS
Advantages
Easy to create
Provides centralized planning and
coordination
Provides forum for community and
individual input to decision-
making
No restrictions on local autonomy
or policy control
Disadvantages
Decisions not legally
enforceable
No power to raise funds
Relation to other governmental
units strictly advisory
The structural options generally
provide more permanent solutions
to an area's water supply problems
(although these arrangements do
require more effort by participants
to negotiate and to resolve legal
issues) than do the nonstructural
schemes. The new or larger
entities can seek a much greater
range of financing sources, often
critical to capital improvement
projects, and attract and support
a more talented management and
technical staff.
Association/Nonprofit Water
Supply Corporation
Associations or nonprofit water
supply corporations (hereafter
referred to only as associations)
are functionally equivalent in
their characteristics and func-
tions. Usually created under the
authority of a state charter,
these entities commonly exist in
unincorporated and largely rural
areas. Some, however, have grown
to occupy a sizable portion of a
county, either by extending
service into previously unserved
areas or by consolidation of
existing systems.
Associations (and nonprofit water
supply corporations) are the
simplest structural regionaliza-
tion option available. They are
relatively easy to create and
usually have little effect on
existing local government organi-
zation and service functions.
The representatives of the partici-
pating entities who wish to form
an association normally petition
the state for authority to operate.
As a part of the petition, the
participants designate a board of
directors, responsible for the
policy control of the association.
Decisionmaking responsibilities
rest with the board, which is
made up of at least one represen-
tative from each of the partici-
pating entities. For a very
small association, the directors
are selected from the users of
the proposed system.
Associations have been established
in a number of states to consoli-
date small water systems. Their
formation has generally been
III-8
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encouraged by their ease of
creation and by their eligibility
for federal financing, primarily
by Fanners Home Administration
grants and loans. This assistance
has been used both for water
system improvement and system
expansion.
Associations are essentially
nonprofit institutions; thus, any
and all profits from water supply
operations must be either applied
to existing short- or long-term
debt, redistributed proportionately
to the customers, or placed in a
sinking fund for system maintenance
and improvement.
Specific advantages and disadvan-
tages of associations are shown
in Table 6.
Ohio's Adams County Water Corpora-
tion is a nonprofit association
formed to join together relatively
weak water systems. Largely by
extension of service area and
consolidation of existing systems,
this association presently serves
2,000 customers in five communi-
ties. Four of the water systems
serving these communities have
been physically interconnected;
the fifth has retained its own
water treatment and distribution
system. Each connected community
has a member on the board of
directors, and rates for these
communities have been set at a
level that covers only annual
operation and maintenance of the
systems and repayment of existing
debt.
Local Special-Purpose District
Local special-purpose districts
are generally units of local
government that provide a specific
service to a defined geographic
(service) area. These districts
are differentiated from areawide
special districts (discussed
later in this section) primarily
on the basis of scale (a singular
or few versus many communities),
number of services provided (one
versus a range) and impact on
local government (minimal versus
substantial).
Local special-purpose districts
frequently offer the only mechanism
that will provide a badly needed
service (water of acceptable
quality and quantity) in a given
area. Local governments can be
restricted by debt limitations
and tax base limitations (Proposi-
tion 13; TRIM, etc.); in addition,
governments are also restricted
by their own political boundaries.
However, a local special-purpose
district can establish boundaries
to surround the geographic territory
needing service and will have its
own financing mechanisms (bond
market, special assessments,
etc). Also, a local district,
formed from a group of even
smaller water providers, can
often afford to employ more
technical, highly skilled personnel
than could the previous water
providers individually.
Unfortunately, some of the advan-
tages of these districts can, in
real life, create impediments to
their implementation. Supporters
and organizers must, therefore,
take into consideration and
accommodate local pride and
individual personalities in the
communities t~ be served. Trans-
fer of the wate.r supply function
to a new operator (the special
district) may antagonize current
owners and their customers, even
though the latter will have a
representative on the new group's
board of directors. They may
III-9
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TABLE 6
ADVANTAGES AND DISADVANTAGES OF
ASSOCIATION/NONPROFIT WATER SUPPLY CORPORATION
Advantages
Easy to create
Authorized to acquire water
sources and construct and
operate a water distribution
system
Power of eminent domain
Authorized to issue bonds secured
by assets and revenues
Not-for-profit operation
Authorized to seek Federal
financing
Disadvantages
No power to tax
Not authorized to issue
general obligation bonds
Limited powers in relation
to other governmental
units
well not control the new board as
they did the old system. And
local pride may also surface as
districts that cross political
boundaries are formed. In addi-
tion, benefits of the new system
may accrue in the long term while
capital costs may accrue in the
short term. This may cause
concern and objections among
customers facing immediate special
assessments who perhaps cannot
visualize (or totally understand)
the future gains to be achieved.
Local districts are usually
created by local governments,
which receive their authority
from enabling state statutes.
Normally, the creation of such a
district begins with taxpaying
residents petitioning for its
establishment. After a hearing
by the appropriate state or local
governmental agency, the request
is approved or denied. If approved,
confirmational elections are held
to determine voter support.
After voter approval, directors
are either appointed by local
government officials or elected
by the citizens to govern the
district. Once the boundaries
are set, the specific service is
restricted by those boundaries,
and revenues to support the
service can come only from the
users within that boundary.
It is difficult to characterize
the specific legal requirements,
organization, and powers of local
districts because these entities
are probably the most varied and
least studied forms of local
government entities. Nonetheless,
the most common characteristics
of local districts are that they
possess only the powers they need
to provide a specific service
within their defined boundaries.
They are semi-autonomous in
respect to the parent government.
Specific advantages and disadvan-
tages of local special-purpose
districts are shown in Table 7.
111-10
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TABLE 7
ADVANTAGES AND DISADVANTAGES OF
LOCAL SPECIAL-PURPOSE DISTRICTS
Advantages
Often provides the only method
to provide a badly needed
service
Power of eminent domain
Authorized to levy special
assessments
Can match service areas with
service needs
More efficient than local
government
Greater financial flexibility
than local government
Less restrictive than local
government on cooperative
agreements
Convenient and inexpensive way
to provide service in rural
areas
Disadvantages
General obligation bonds
not backed by full faith
and credit of parent
government
Restricted to revenue bonds,
which can be repaid only
by user revenues
Powers limited directly to
those required to provide
service
Quasi-governmental entity
Susceptible to public
opposition because of
its permanence
Annexation
Annexation occurs as a water
system extends its service area
to include neighboring territory.
This extension can be a change in
the boundaries of a water supply
service area established by law
(water districts, authorities,
etc.) or of corporate limits
(incorporated communities). In
the instance of private water
systems and nonprofit water
supply corporations that do not
have recognized boundaries,
extension of water service does
not involve legal annexation of a
geographic area.
Annexation procedures vary with
the governmental character of the
municipality and state involved.
A municipal water system will
ordinarily expand to serve the
area annexed by the municipality.
Also, a municipality can generally
annex territory already served by
an existing private water system
or nonprofit water supply corpora-
tion; the municipality then has
the option to invoke the power of
eminent domain to acquire the
system. A municipality annexing
territory must generally provide
a level of service comparable to
that received by other areas
already served by the municipality.
If the quality of service is
inferior, the voters in the
annexed area may petition for
disannexation.
III-ll
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Specific advantages and disadvan-
tages of annexation are shown in
Table 8.
As an example, an unincorporated
area adjacent to an incorporated
town lacks the reliable public
water service enjoyed by the town
citizens. Conversely, the munici-
pal water department has deter-
mined that, in order to remain
solvent, it must either, substan-
tially increase rates or find new
customers. In meetings with
community leaders and concerned
citizens, town representatives
present the concept of annexation
as a means of extending public
water supply into the unincorpo-
rated area. (Other municipal
services, such as police protec-
tion, would also be extended.)
After sufficient interest is
generated, the question is voted
on by referendum and passed. The
town water department makes an
initial investment by extending
mains and distribution lines into
the new section of town. The
increased service population can
now more easily absorb the costs
of capital improvements and
operating expenses.
Areawide Special District/Authority
The areawide special district/au-
thority is distinguished from the
local special districts by size
of area affected, the larger
range of services provided (e.g.,
water and sewerage), and a higher
degree of autonomy. In certain
instances, a distinction can also
be made between an areawide
special district and authority,
primarily on the basis of taxing
power. The nature of water
supply, however, results in
revenues being generated by user
fees, which tends to blend the
characteristics of these entities.
Similar to the local special-
purpose district, the areawide
special district is considered to
be a unit of government with one
or more designated functions.
The procedure for creating author-
ities varies across the country,
but the most common situation is
for states to pass enabling
legislation authorizing county
and municipal governments to
create them. However, in some
states, authorities can be created
only by special acts of the state
legislature.
Authorities are highly autonomous
units although they generally
cannot rely on taxation or the
backing of local government for
financial support. They must
enter the revenue bonding market
on their own and maintain an
independent bond rating. This
autonomy, however, presents an
actual advantage in that the
authority is exempt from state-
imposed debt ceilings. Also,
authorities can initiate projects
on a more timely and cost-
effective basis than can govern-
mental units. Authorities are
not subject to public referendums
(which must await an election) or
bond issues; authorities can
enter the bond market on their
own.
Authorities, of course, have
their critics. In 1977, nearly
40 percent of the authorities and
areawide special districts were
administered by appointed officials;
the potential, therefore, exists
for those running the authority
to be unaccessible and unaccount-
able to their customers. Also,
the financing of authority projects
has caused difficulty in some
communities. Being somewhat
outside of government, authorities
may not be permitted to take
111-12
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TABLE 8
ADVANTAGES AND DISADVANTAGES OF ANNEXATION
Advantages
Immediate increase in service
area population
Makes use of infrastructure of
existing water supply entity
Provision of service to areas
outside original jurisdictional
boundaries
Annexed area acquires same rights
and obligations as rest of
service area
Realization of economies of scale
Power of eminent domain
Applicable to municipal services in
addition to water supply
Disadvantages
Not easy to implement
Susceptable to public
opposition from those not
wishing to be annexed
Voter approval may be required
Can be politically motivated
Not applicable to noncontiguous
areas
Capital expense required to
service new customers
advantage of centralized adminis-
trative services and purchasing,
nor are they subject to govern-
mental audit services. Local
government purchasing procedures
can be more cost-effective than
those of an authority; therefore,
an authority's projects may cost
more than those of a governmental
entity. And last, as an autonomous
entity, the authority is interested
(and generally knows about) only
its own projects. Its directors
are not involved in the govern-
mental budgetary process and are
unaware of the financial priori-
ties being set for the jurisdic-
tions involved.
In summary, authorities are a
highly feasible means for financ-
ing and providing service although
they frequently assume the respons-
ibility of other local governments.
Authorities appear to be an
essential element of local govern-
ment, but their principal diffi-
culty is their inability to
create the necessary policy and
budgetary relationships with
overlapping general local
government(s).
Advantages and disadvantages are
summarized in Table 9.
SUMMARY
The regionalization options
presented in this section have
progressed in order of generally
increasing complexity. As the
complexity of the agreement or
entity increases, so does its
ability to solve a water supply
problem increase; however, imple-
mentation also becomes more
difficult. The increasing complex-
ity of implementation gives rise
to additional legal, political,
and administrative requirements,
which must be resolved before a
given option can become viable.
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TABLE 9
ADVANTAGES AND DISADVANTAGES OF THE
AREAWIDE SPECIAL DISTRICT/AUTHORITY
Advantages Disadvantages
No state-imposed debt ceilings Potential lack of accessi-
Timely access to major sources bility and accountability
of capital Activities uncoordinated
Higher salaries to attract more with those of other local
technical and skilled governments
personnel Potentially less cost-
"Quasi-business" effective
Provision of service to areas
that cross jurisdictional
boundaries
Realization of economies of scale
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IV. ANALYSIS AND SELECTION OF A REGIONALIZATION OPTION
Regionalization options for small
water systems, to solve existing
or future supply problems, will
have unique sets of benefits and
costs. Water supply issues are
site-specific and often impose
constraints that limit the applica-
bility, feasibility, and charac-
teristics of a given option.
The majority of the regionaliza-
tion options presented will most
likely require the participation
of at least one local governmental
unit. For this reason, individual
water systems and governmental
entity(s) should both indepen-
dently and collectively assess a
number of factors which can
affect the feasibility and success
of a given approach.
The decision to implement an
informal agreement or basic
service contract will be based
upon the relatively simple fac-
tors of water supply availability
and need and the economy of the
arrangement. The implementation
of the more complex nonstructural
and structural regionalization
options will require increasing
interaction between the par-
ticipants and a greater awareness
of the more complex factors. In
those situations where the imple-
mentation of a regionalization
option will result in the change
or reorganization of existing
governmental funtional roles, the
option selected should have the
following characteristics:
(1) economic efficiency; (2) fiscal
equity; (3) political accountabil-
ity; and (4) administrative
effectiveness. More specifically,
these characteristics include:
o Economic Efficency - a given
entity should be able to
provide water supply at a
monetary rate and level of
effectiveness acceptable to
the customers and should be
able to benefit from econo-
mies of scale if system
expansions are required,
thus providing water supply
service at the lowest pos-
sible cost.
o Fiscal Equity - entities
being considered should
possess the ability to
adequately finance the
service, possess sufficient
size to accommodate the
costs and benefits of the
service and be able to
distribute the costs equally
among the users of the
service.
o Political Accountability - a
given entity will find
greater political backing if
it can provide for a high
level of citizen participa-
tion in the decision-making
process and provide for a
high level of accountability
to the customers served.
o Administrative Effectiveness
an entity selected should
have adequate authority to
carry out the water supply
service function and provide
all aspects of that function
in an administratively effi-
cient and technically profi-
cient manner. The entity
should be able to balance
competing Interests and
demands within their service
areas.
IV-1
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These considerations indicate
that the potential participants
in a more complex regional scheme
should be aware of the financial,
political, or legal burdens which
may arise to inhibit or prevent a
successful implementation.
Ideally, these conversation
subjects and negotiation points
should be identified very early
in the planning stages and cer-
tainly before any formal negoti-
ations begin. The level of
complexity of questions to be
addressed will increase with the
more complex regionalization
options.
The general questions that the
participants should ask them-
selves before attempting to
implement a regional approach
are:
o Do the state's statutes
restrict the authority of
the participants to implement
the approach? What legal
requirements are imposed on
the approach by these statutes?
o Is there adequate trust and
a feeling of mutual coopera-
tion among the participants?
o Are the pooled resources of
the participants adequate to
meet any increased require-
ments created by the imple-
mentation of the regionaliza-
tion option?
o How will costs incurred in
implementing and admin-
istering the entity be
distributed among the partic-
ipants and customers served?
What is an appropriate
method for determining these
costs? What financing and
funding sources become
available to the entity?
Addressing these general ques-
tions early in the planning
process will help to avoid later
misunderstandings which might
otherwise arise after an approach
i s implement ed.
To aid the participants in addressing
specific legal, financial, and
political questions, this section
presents specific questions that
should be addressed. During this
discussion, the word entity will
be used interchangeably to des-
cribe a governmental unit or
water system. The questions are
grouped in four main categories:
o Legal Authority
o Costs
o Policy/Politics
o Assessment of Service De-
livery Resources
LEGAL AUTHORITY
Most states have provisions for
the creation of regionalized
entities and service agreements,
but the methods of creation,
administrative structure, and
legal requirements vary. It is
important to understand how the
courts have interpreted these
provisions under challenge to
avoid any conflicts after implemen-
tation. For example, the issue
of "double taxation" has often
arisen when a governmental entity
extends service beyond its juris-
dictional boundary. The partici-
pants should familiarize them-
selves with the legal interpreta-
tions of those statutory provisions
which apply to the implementation
of the regional approach under
consideration.
Assuming that the participants
have adequate authority to implement
a given regional approach, the
IV-2
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following points will help to
ensure that a sufficient level of
information exists to implement
the given approach.
o For local governments, can
expenditures and revenues be
increased without going
through a supplemental
budgetary process? If not,
what steps must be taken to
get supplemental funds?
o For agreements, does state
law indicate that it is
binding on future govern-
mental bodies? Does the law
specify or suggest language
to be used in the agreement?
Uniform language facilitates
multi-jurisdictional
participation.
o What is the normal life
cycle of the regional entity
or what is the general term
of service agreement?
o Who possesses the legal
authority to create the
regional entity or service
agreement? Must the regional
entity or service agreement
be reviewed for conformance
with the requirements of
state law or local charters?
o Under what conditions can
the entity or service agree-
ment be terminated or dis-
solved? What steps must be
taken to initiate termination
or dissolution?
o What sources of revenue are
available to pay for the
service?
o Do specific legal requirements
address such issues as
liability, damages, and
property disposition at the
termination of the service
agreement?
o Does the law address require-
ments for the hiring, release,
or status of personnel
affected by the service
agreement or employed by the
regional entity? The trend
toward governmental and
quasi-governmental collective
bargaining has a significant
impact on labor costs, which
generally represent the
largest proportion of opera-
tion and maintenance costs.
This will have an impact on
the competitiveness in
providing the service.
o Are specific requirements
available to amend basic
service contracts and service
agreements to adjust to
different levels of service
and attendant costs?
COSTS
A primary consideration is the
cost of providing the service and
an equitable method of computing
all contributions to the total
cost. Where public bodies are
involved, costs are subject to
public exposure and scrutiny. A
prime motivation for regionalizing
water supply service is the
spreading of major capital expend-
itures over a larger customer
base. State laws generally
require, however, that specific
improvement costs be applied only
to those recip-'-^cs of the improve-
ments or improvement in service.
Appropriate accounting practices
should be present for equitable
allocation of the costs.
o If a customer does not pay
for the actual costs of a
rv-3
-------
service provided, will the
question of subsidization
arise and what problems can
be expected? Subsidization
usually reverts to the issue
of "double taxation" when a
provider government uses
general taxes to support a
service provided to only a
portion of its jurisdiction.
o Should an overhead factor be
based on a prorated cost of
all labor costs, depreciation
of assets, rent, and liability
insurance? Should only
costs identified over and
above general overheads be
used? These points should
be weighed carefully as any
decisions during implementa-
tion will act as precedents
for future decisions.
Additional administrative
costs such as additional
recordkeeping, budget accounts
and personnel should be
identified and documented.
o What mechanisms should be
used to adjust costs to
reflect inflation of labor,
equipment, and supply costs?
Appropriate adjustments are
very important in multiyear
agreements to ensure quality
service is maintained and
adequate finances are available
to support the level of
service.
o What is an adequate method
of determining costs, method,
and timing of payment?
Regional water supply enti-
ties often provide service
to smaller water systems
which possess rudimentary
and inadequate methods of
accounting and collection.
o In determining costs, should
consideration be given to
the financial status of the
individual recipient water
systems? How will this
affect the delivery of
service to the individual
systems in terms of their
ability to pay for the
service? These are very
important considerations as
they will affect the ultimate
success of the regional
scheme.
o What forms of Federal and
State funding are available
to the regional entity.
What are the effects of
funding requirements on the
general financing of a
capital improvements project?
What are the effects of
funding requirements on user
charges? These considerations
will have a significant
impact on the feasibility of
a capital improvement project.
POLICY/POLITICAL CONSTRAINTS
The level of trust and cooperation
between the leaders of the partici-
pating entities must be carefully
assessed. Local jealousy and
mistrust have been major inhibiting
factors to regionalization attempts.
Reaction by the local citizenry
to a regional approach must also
be carefully weighed and antici-
pated. General obligation bonds
which might be considered by a
general purpose government to
support a capital improvement
project are subject to public
approval through a bond
referendum.
o What is the expected public
reaction to the regional
proposal? Is sufficient
public support available for
approval of the proposal?
IV-4
-------
What is the expected public
reaction to a possible
increase in taxes or user
charges to support the
project?
Will the increase in the
level and quality of service
offset any negative public
reaction to a tax or user
charge increase? What are
the best methods to publi-
cize the benefits accruing
from a regional approach?
To which entity should
citizens complain about the
service: the provider or
recipient water system or
governmental unit? The
participating entities
should identify responsibil-
ities in responding to
complaints and should estab-
lish methods to address them
efficiently. Efficient
resolution of problems will
develop confidence and
support for the provider
water supply entity.
What policy control will the
participants lose to the
regional entity? The nature
of respective policy control
should be clearly identified
during negotiations between
the participants to avoid
conflicts and misunderstand-
ings later.
What problems are anticipated
during the transition of
service? Methods to address
these problems and keep
citizens informed during the
transition should be ad-
dressed and implemented to
ensure an orderly transition.
ASSESSMENT OF SERVICE DELIVERY
RESOURCES
A thorough assessment must be
made of available and additional
resources that will be required
to implement a regional approach.
Additional resources required
must be accurately identified to
ensure an accurate accounting of
costs incurred in implementing
the regional approach and to ensure
that additional resource require-
ments will not result in a lessen-
ing of service competitiveness.
o What changes in resources
are expected to be necessary
to provide the service?
Personnel, facilities,
equipment, etc.
o Are sufficient resources
available to provide areawide
service coverage to benefit
from increasing economies of
scale?
o Will the regional approach
require a reallocation and
relocation of personnel and
facilities? What impact
will this have on total
costs and should the recipi-
ents bear the costs?
As can be seen from the number
and diversity of questions that
must be addressed, successful
implementation of a regional
option requires careful advance
planning. Implementation of the
complex approaches requires a
full understanding of the legal,
political, and financial issues
before any formal proposals and
negotiations begin.
IV-5
-------
V. IMPLEMENTATION
Previous sections in this manual
have defined and described various
structural and nonstructural
regionalization options. The
advantages and disadvantages of
each have been reviewed, and
questions have been raised for
the consideration of concerned
individuals pursuing a regionali-
zation plan. It is the steps in
this pursuit that are the subject
of this section.
There are no clear cut pathways
in the successful implementation
of a water supply regionalization
plan. The so-called "path of
least resistance" is rarely the
most beneficial. The steps
ultimately followed will primari-
ly depend on the following factors:
o Type of need to be fulfilled
o Location of water system
needing assistance vis-a-vis
other suppliers
o State enabling legislation
o Local political considerations
o Public input
o Cost to the participants
Also, other factors may come into
play depending on the individual
situation.
Figure 1 presents a "Suggested
Sequence of Events for Regionali-
zation Implementation." This
chart presents, in a generalized
format, the steps most likely to
be encountered in the pursuit of
a regionalization plan. It is
not intended to be a static,
unyielding framework. The bottom
line in any implementation effort
is to do what works. Figure 1 is
intended to provide water supply
planners and political leaders
with guidance as to the activities
most likely to be required in the
implementation process. It
should be adjusted as needed to
account for local concerns and
requirements.
The "Suggested Sequence" is
divided into two (2) main branches,
one for nonstructural options and
one for structural options.
Front-end problem identification
and decision making would be
identical, however, until the
actual option to be pursued is
determined. The procedural steps
associated with front-end activi-
ties is determined as follows:
1. A clear determination of the
specific problem(s) facing
the water supplier must be
made.
2. An honest evaluation of
in-house capabilities must
be made to determine if the
problem(s) can be solved
independently, or if external
assistance is required. If
external assistance is not
required, then the decision-
makers need progress no
further in the sequence.
3. If external assistance is
desired, the participant
should identify both the
strengths and weaknesses of
neighboring water suppliers.
If no reasonably close
suppliers exist, or their
strengths are not compatible
with the first supplier's
weaknesses, a structural
remedy may be the only
solution.
V-l
-------
4. If compatibilities do exist
with nearby suppliers,
managerial level discussions
should be undertaken (with
owner knowledge and input)
to identify means of possible
cooperation. This should
lead to a managerial level
determination of the most
appropriate regionalization
option to pursue, and a
determination by the respec-
tive participants to proceed
or not.
At this point in the sequence,
certain steps vary depending on
the type of option pursued,
although similarities exist
within the nonstructural and
structural options. In the
pursuit of nonstructural regionali-
zation options, the following
activities should be anticipated:
1. A negotiating team of indi-
viduals selected by the
water supplier(s) would work
out the terras of any informal
agreement or service contract.
Each party to the agreemnt
should fully understand both
its obligations to the other
participant(s) and the
services or compensation it
shall receive in return.
2. Once the terms of the agree-
ment or contract are negoti-
ated, a legal review by the
respective attorneys is
recommended. In addition,
input from local political
leaders or concerned citizens
should also be obtained and
considered.
3. The finished agreement or
contract is put into
operation.
4. Finally, the document and
its impact on operations
should be reviewed by all
parties at regular intervals
to determine if its perform-
ance is satisfactory, if it
should be terminated, or if
an additional step to a more
permanent structural approach
is in order.
The only nonstructural option not
falling into this general frame-
work would be a regional council
of governments approach. If such
an advisory steering committee is
preferred, their close coopera-
tion must be obtained among
affected municipalities to initi-
ate operations.
Concerning structural regionaliza-
tion options, the following
anticipated tasks would be common
to all:
1. An investigation of the
legal authority to implement
the structural option would
be required. Attorneys for
the interested entities must
determine if appropriate
state enabling legislation
is in place. If such legis-
lation is required, then
contact must be made with
the appropriate state repre-
sentative (s) to initiate
action.
Concerning enabling legisla-
tion, a word of caution is
appropriate at this point.
Legislative requirements
regarding the implementation
of structural regionalization
options vary greatly from
state to state. For instance,
California, a heavily legis-
lated state, has individual
statutes concerning the
formation of county water
work districts, municipal
utility districts, public
utility districts, municipal
V-2
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water districts and water
conservation districts. Any
one or several of these
statutes could impact on the
legal requirements for
structural regionalization
of water systems in Califor-
nia. Conversely, Arizona, a
less heavily legislated
state, has individual stat-
utes concerning public
service corporations and
public utilities. (Concern-
ing the pursuit of non-
structural regionalization
options, it should be noted
that all states have statutes
governing interlocal coopera-
tion and/or the joint exer-
cise of governmental powers.)
Finally, water rights may be
an issue of concern in the
selection of a regionaliza-
tion option, particularly in
the western part of the
United States.
2. Once appropriate general
legal authority is in place,
the water supplier(s) pursu-
ing structural regionaliza-
tion should solicit the
interest and active support
of political leaders and
concerned citizens in the
affected municipalities for
the specific option desired.
3. Finally, once local support
is assured, official creation
of the structural entity,
with its associated elected
or appointed directors, can
proceed.
As indicated in Figure 1, if at
any point in the sequence of
events progress must be irrevocably
terminated, decision making
should revert back to the mana-
gerial/owner consideration of
options step. Also, after an
option is implemented, its per-
formance should be periodically
evaluated and adjustments should
be made as necessary.
As stated previously, this imple-
mentation framework must be
tempered by local considerations.
It does, however, provide a
reasonable outline of the minimum
actions required to guide decision
makers in the water supply region-
alization field.
V-3
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APPENDIX A
CASE HISTORIES
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The following actual case histories are presented to provide the
reader with some insight into the varying complexities associated with a
range of reglonalization actions. They reflect real world situations
and the associated benefits and problems. These case histories pri-
marily reflect county and state level regionalization actions; however,
those considering simpler regionalization options can still gain knowl-
edge and guidance from the experience reflected therein.
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CAMERON, TEXAS
In 1973, the Salem Elm-Ridge Water Supply Corporation, a relatively
small (50 metered connections) water supplier, did not have adequate
resources to staff qualified maintenance personnel. As a result, mal-
functioning equipment was repaired by community volunteers. Customers
read their own meters and submitted payment. Equipment downtime, inac-
curate meter readings and late payments were major shortcomings of the
system.
A small water service contractor was hired to properly maintain equipment
and also to handle billing and collections. By 1977, Marlow Water
Supply Corporation, North Milam Water Supply Corporation and Bell-Milam
Falls Water Supply Corporation, three neighboring small water systems,
were also sharing the services of the service contractor.
The four small water systems have grown over the years (total of
1,500 metered connections in 1983), but the growth has not been sufficient
for any of the individual water systems to hire staff maintenance personnel.
Thus, they expect to continue sharing the services of a system operator
for the foreseeable future.
CADDO MILLS, TEXAS
In the late 1970s, the Hopewell Water System, a small water supplier
(500 customers) in Caddo Mills, Texas, began to experience difficulty in
meeting the increased demands brought on by new customers in certain
areas. Due to the lack of water lines and inadequate pressure and
capacity, a waiting list existed for customers desiring new metered
connections. New housing and a customer desire to switch from private
well water to public water supply had resulted in an overload of segments
of the system. There were also some areas using private wells and not
connected to the water supply system. In 1978, the Hopewell Water
System applied to the Farmers' Home Administration (FmHA) for funds to
finance a system expansion and upgrading.
Simultaneously, the FmHA received requests for loans from three neighboring
small water suppliers, the Floyd Water System, the Merit Water System,
and the Kellogg-Kingston Water System (total of 900 customers). The
three water suppliers required expansions for reasons similar to those
of the Hopewell Water System.
The FmHA strongly suggested that consolidation of the four small suppliers
would result in a more efficient and, consequently, less costly operation.
They felt that a larger system would be in a better position to improve
service to the customers. The Board of Directors of the systems took
the suggestion and voted in favor of merging. The FmHA loaned the funds
for expansion to the newly created entity.
The four systems are not physically connected but they will be under the
control of one administration. They are currently in the process of
hiring a general manager to oversee construction, maintenance and operation
-------
of the system. The maintenance and bookkeeping staff from the Hopewell
Water System will be maintained for the consolidated system.
Plans for construction of new lines and modification and repair of old
lines are currently underway. In the very near future it will be feasi-
ble to accommodate any new customers desiring the service of the water
system.
INDIANA COUNTY MUNICIPAL SERVICES AUTHORITY (Pennsylvania)
In 1973, the Indiana County Board of County Commissioners created the
Indiana County Municipal Services Authority to upgrade the quality of
services provided to the residents of 11 county communities. Seven
systems served 970 households in the central and southwestern portions
of the county.
The commissioners chose an authority (a quasi-governmental unit) as
their appropriate regionalization option because of its expected respon-
siveness to the needs of the residents, because it could move quickly to
undertake a capital improvement project, because of its eligibility for
Federal financing, and because of the success of similar entities through-
out the state. The authority's success is well-demonstrated; the entity
is now negotiating with five more systems that are considering joining
with it.
The authority purchased the seven systems in September 1973; the systems
had been constructed in the late 1800s and early 1900s. The communities
themselves had been built by a coal company to house employees; when the
mines closed or mechanized in the 1930s, the company sold the houses to
a local real estate company. The houses were rented at low monthly
rates, and no attempt was made to maintain the water systems.
Eventually, they fell into poor operating and physical condition. In
some instances, pipes completely disintegrated and water flowed through
channels of packed soil that had originally surrounded the pipes.
Community residents complained about red water, discolored laundry, and
the inadequate supply, and voiced their fear about the general water
quality. Recognizing that the residents could not bear the costs of the
necessary improvements, the commissioners created the authority.
After purchasing the systems, the authority took immediate steps to make
short-term renovations with an interest-free loan from the county commis-
sioners. In addition, the authority raised the flat rate charged to
customers from $4 to $10 per month in an attempt to cover the costs of
operating, maintaining, and renovating the systems.
The loan and rate increase, however, proved insufficient to cover the
authority's operation and maintenance and capital improvement costs.
Thus, in 1974, the Authority moved to begin securing funding from the
Farmers Home Administration (FmHA) and the Appalachian Regional Commis-
sion (ARC).
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A consulting engineering firm estimated the cost of the entire project
to be $3.8 million. After three years of consultation with the FmHA and
ARC, the authority was awarded a $2 million grant from FmHA and a supple-
mental grant of $330,000 from ARC. FmHA financed the remainder with a
long term, low-interest loan.
The authority conducted its own interim financing during construction
through the sale of short-term notes and securities and through the use
of a no-interest revolving fund established by the county commissioners.
The capital improvement project, completed in 1980, resulted in the
construction of three new treatment plants (with processes for removal
of iron, manganese, and hydrogen sulfide); seven new storage tanks; five
new booster stations; 26 miles of distribution line sized for full fire
service; and metering of all customers. Three systems were consolidated,
so that five systems now serve the 11 communities.
The authority now charges a minimum rate of $12.50, with a block struc-
ture of $1.89 per 2,000 gallons. This rate structure results in an
average monthly user charge of approximately $16.30 per month, consist-
ent with projections made four years ago. Total revenues to date are
sufficient to cover the operation and maintenance costs and debt service,
although the authority is having some difficulty maintaining the reserve
fund required in the FmHA grant/loan agreement.
To facilitate and simplify monthly collections, the authority implemented
a coupon system. Customers read their own meters and send in their
coupons and payments to the authority. This approach has proven success-
ful; most payments arrive on an accurate and timely basis.
In addition to an administrative staff, the authority currently employs
four full-time, certified water operators. The authority supplements
this staff with temporary labor as much as possible to minimize overall
labor costs. A laboratory at one of the treatment plants performs
necessary testing. Although the laboratory is equipped for coliform
testing, it is not yet certified to conduct this test.
The authority's success to date can be tied to a number of factors:
o Active participation of the residents affected by the project
o Documentation of the need of the project through the use of surveys
and public meetings
o Active support of the county commissioners
o Aggressive authority management;
o Availability of Federal assistance and funding
The most notable factor making the authority a reality is the active
support and assistance of the county commissioners. The board realized
the importance not only of providing quality supplies of drinking water
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to the county residents, but also of other services, such as sewerage
and solid waste management facilities.
A second major factor was the encouragement and active participation and
support of the residents affected by the project, which helped to ensure
that the project was conceived to best suit their needs. Residents also
helped demonstrate sufficient need to the FmHA and ARC.
Aggressive authority managers helped move the project expeditiously from
early planning stages through construction. The management received
notification of grant and loan awards from FmHA and ARC only three years
after submitting preapplications (first step in the funding process).
Construction took only 18 months and was so well managed that it had
surplus funds after construction was completed. The efficient and
timely construction of the project is, in large part, seen to be the
result of the day-to-day involvement of authority management.
Of particular importance to the grant approval process was the availabil-
ity of the documentation of the severity of the problem — through
survey information.
Finally, the availability of federal funding in the form of grants and
loans was the primary factor that made the project economically feasible.
Direct grants and long-term, low-interest loans were the only methods
the authority could use to finance the project without severely burdening
area residents.
STATE OF WASHINGTON
The State of Washington has provided a mechanism to provide an orderly
water supply planning process and to encourage consolidation of water
systems. Enabling legislation which formally incorporated these concepts
into State policy was the Public Water System Coordination Act (PWSCA)
of 1977. A main reason for initiating this legislation was growing
awareness on the part of state officials of existing and potential water
supply problems within the state. Specifically, they noted that the
state had been experiencing several trends:
o Proliferation of small water systems;
o Non-uniform design standards;
o Overlapping of service areas;
o Conflicts between land use plans and water supply plans; and,
o Unnecessary duplication of water system facilities.
Due to a lack of coordination and communication between water systems,
the state experienced the creation of many small water systems to serve
small developments. This increasing number of small water systems
placed an increasing burden on state government to ensure their proper
-------
operation and maintenance. Additionally, due to their small size and
lack of revenue, these water systems rarely had the financial resources
to employ qualified operators, or properly maintain equipment.
The PWSCA was conceived to develop a planning process that would help to
prevent future water supply problems from occurring as a result of the
lack of communication, cooperation, and coordination. The two primary
objectives of the Act were to:
o Achieve organized development of water utilities within a given
geographic area; and,
o Integrate water system development with land use planning in a
given geographic area.
A number of concepts were incorporated into the PWSCA which promote
various aspects of consolidation. Consideration of shared or joint use
facilities and the satellite support system concept is encouraged in the
development of the Coordinated Water System Plan. Shared or joint use
facilities is what the name implies, a common use of all or a portion of
a facility by more than one water system. Significant reductions in
construction and operation and maintenance costs can be realized by
implementing such an approach.
Another concept promoted by the PWSCA is the "satellite support system"
concept. This approach involves a single entity assuming the responsibil-
ity for the operation and maintenance of one or more small water systems.
The small water system can elect to be either owned or not owned by the
management entity. Economies of scale to be derived from this approach
may make it possible to employ skilled personnel, utilize common repair
parts and equipment, offer quicker response to system breakdowns and
problems, and be more able to operate systems to meet strict federal and
state drinking water standards without excessively burdensome water
rates. Satellite systems can act as a precursor to development of a
totally regional system.
It was also the intent of the Act that the responsibility for decision
making rest with local government and the water supply utilities affected.
The Department of Social and Health Services acts as technical consultant
to the planning process, and review agency at the time of design of
facilities.
To support this process, Funding Referendums 27 and 38 were conceived
and passed to provide financial assistance for the planning, design, and
construction of water supply facilities. Loans may finance 100 percent
of the planning and design of projects, and grants may finance 40 percent
of the eligible construction costs. Construction grants are generally
available for water quality improvements, source development, water
storage facilities, major transmission lines, pumping facilities, equip-
ment and structures related to eligible projects, and site purchase and
preparation.
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The general planning process established by the PWSCA is as follows:
1) A preliminary assessment (evaluation) is prepared for existing
water systems, documenting their problems. Specific problems
addressed include, where appropriate: unreliable water quality,
unreliable service, or lack of coordinated planning. Any of the
problems can initiate the assessment. After completion, the assess-
ment is reviewed by the DSHS and the County Legislative Authority.
2) If the assessment documents the presence of one or more of the
problems, the general area affected is declared a Critical Water
Supply Service Area. This declaration will either be made by the
county or the Department of Social Health Services, and the affected
parties are notified of this declaration.
3) After the declaration of the Critical Water Supply Service Area, a
Water Utility Coordinating Committee is established. Committee
members are appointed by the declaring body and must include repre-
sentatives from the county legislative authority, the county planning
agency, the county health agency, water purveyors serving greater
than 50 customers, and the Department of Social Health Services.
Other members may be appointed at the discretion of the DSHS. The
prime responsibilities of the Water Utility Coordinating Committee
include the establishment of the Critical Water Supply Service Area
and the development of the Coordinated Water System Plan.
4) The development of external boundaries is the first task of the
Water Utility Coordinating Committee. These boundaries establish
the limit of the study area in the development of the Coordinated
Water System Plan. A common set of "ground rules", (i.e., design
standards, policies, etc.), will apply to the entire area. The
proposed boundaries must be delineated within six months of appoint-
ment of the committee, and a report must be prepared justifying the
boundary locations. This report is submitted to the affected
county(s) for their review and consent. Typically, the development
of the boundaries will be based upon a consideration of existing
and projected land use, physical limitations to water service,
existing political boundaries, future service areas of existing
utilities, system hydraulics, and economic ability of water systems
to meet minimum levels of service.
After at least one public hearing, the Committee submits the proposal
to the county(s) for final action. The county(s) must then hold at
least two public hearings before accepting the Committee's proposal
with or without modifications.
5) After the boundaries are approved, the Committee then moves to
develop the Coordinated Water System Plan for the area. The develop-
ment of proposed water system improvements must adhere to specific
minimum design standards and plan development methodologies before
the Department of Social and Health Services grants final approval
to the plan. These minimum requirements are designed to ensure an
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adequate level of evaluation of alternative improvements, their
necessity, and compatibility of improvements with other water
systems in the planning area.
The Plan must assess needs and corresponding water system improve-
ments over a ten year period and must be revised at least once
every five years. A time requirement of two years after boundary
approval is generally applied for the development of the Plan.
The Plan normally consists of two sections:
o Individual Water System Plan
o Areawide Supplement
The Individual Water System Plan is developed for each water system
in the Critical Water Supply Service Area, addressing the system's
existing and projected needs. Basic descriptions include a discus-
sion of service area characteristics, existing facilities, and
anticipated improvements over a ten year period. The detail of the
descriptions is tied to the size of the individual water systems.
Each water system prepares its own plan.
The development of the Areawide Supplement is the responsibility of
the Water Utility Coordinating Committee. This part of the Plan
addresses the interrelationships of water systems within the Critical
Water Supply Service Area. Topics in the supplement normally
include:
o Assessment of related water system plans and policies
o Future service areas in the region
o Minimum areawide design standards
o Process for authorizing new water systems
o Plans for development of joint use or regional facilities
o Application of satellite support systems
o Other topics of importance to the region
o Compatibility of supplement with other plans and policies
o Role of water utility coordinating committee
o Considerations of the State Environmental Policy Act
Two different approaches may be taken in developing the Areawide
Supplement:
o Summarize the Individual Water System Plans
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o Develop a policy direction for Individual Water System Plans
A summary can be developed to satisfy the Areawide Supplement
requirements by compiling appropriate topics from each Individual
Water System Plan. Areawide policies can also be developed first
in the Supplement, and individual water systems can then use these
policies to develop their own programs to meet existing and future
needs.
The use of either one of these approaches will depend in large part
to the specific philosophies and needs within the Critical Water
Supply Service Area. Combinations of both approaches are possible
and allowed.
6) The final step in the PWSCA process is receiving approval for the
Coordinated Water System Plan.
Approval of the Coordinated Water System Plan occurs in two stages.
The first, at the County level, assures that the Plan is consistent
with all adopted land use plans and growth policies. After county
review, the Department of Social and Health Services reviews the
plan for completeness and adequacy of design of proposed facilities.
If any objections from the county(s) arise during the first review
phase, attempts are made to resolve these objections through negoti-
ation between the county(s) and the Water Utility Coordinating
Committee. If these conflicts are not resolved, then the DSHS has
the authority to determine which projects will be approved on a
case-by-case basis.
Once approved, all new water supply facilities within the planning
area must be developed in accordance with the Plan. The Department
of Social and Health Services assumes responsibility for ensuring
conformance with the Plan through its review of individual construc-
tion projects.
The success in implementing the PWSCA planning process is in large part
due to local determinism with a team approach. By ensuring that all
interested and affected parties have the opportunity to participate in
the decision making process, the opportunity for developing an acceptable
plan with the necessary support for acceptance and implementation is
increased substantially.
COWLITZ COUNTY, WASHINGTON
In the mid 1960s the Cowlitz County Commissioners began to take positive
steps to assess water supply needs in various communities within the
county. Formal actions on the county level began in 1967 when the
Washington State Legislature passed the County Area Service Act giving
counties specific authority to own, construct, operate, and maintain
water and/or sewer systems. The Act further gave counties the authority
-------
to issue general obligation bonds, revenue bonds, and utility local
improvement district assessments for the improvement, operation, and
maintenance of these systems.
The first steps towards county consolidation of water and sewer systems
began in 1967 when the citizens of Toutle, an unincorporated community
in Cowlitz County, petitioned the County Commissioners to help them
solve their water supply problems. The community had a population of
1,000 people, a public school, and the potential for significant future
growth. Poor quality well water was cited as the major problem in the
area. An engineering study of the area was conducted, the recommenda-
tions of which were to construct a supply, storage, and distribution
system, and to take over a water system serving a public school in the
community. It was also recommended that the County attempt to secure a
FmHA grant/loan combination to help finance the project cost. A Utility
Local Improvement District was proposed as the means to repay the FmHA
loan by the use of assessments.
In 1970, negotiations were completed with the school district in Toutle
and an application was submitted for FmHA funding to construct the
Toutle water system.
In the same year, the County agreed to assume the ownership and operation
of two developer-proposed water and sewerage systems. One system was
proposed to serve a 50 unit mobile home park and the other was proposed
to serve a residential development of approximately 250 lots. An agreement
was also reached with the Castle Rock School District for the extension
of a water main and sewer interceptor to a new high school in the County.
The water main and sewer interceptor were completed in 1971 and the
County again agreed to accept another developer-proposed water system
serving a recreational area of approximately 15 lots.
In 1971, the County instituted an organizational change, creating a
separate Department of Public Works, which took over the County's programs
in water, sewer, and solid waste. Organizationally, this Department was
to report directly to the Board of County Commissioners. To offset the
minimal revenues being generated at that time from water sales, the
expense of the Department was primarily paid for from property tax
revenues.
With the notice of award of grant monies for the design and construction
of the Toutle project, the County Commissioners also allocated federal
revenue sharing funds to the water project. In order to finance the
local share of the project, a petition was circulated to the residents
of the area for the creation of a Utility Local Improvement District
which was ultimately approved and formed in 1973. Construction began
soon after and was completed in 1974. The completion of this project
marked the first time that the County had directed the design, construc-
tion, and district financing of a water system.
Soon after this date, the County assumed the ownership and operation of
the three previously mentioned developer built systems. The County also
-------
went on to direct the design, construction, financing, and the operation
and maintenance of a regional sewage treatment plant serving the Longview -
Kelso urban area and a complete water and sewerage system for the unincor-
porated community of Ryderwood. Additionally, the County in 1979 began
to contract services with the City of Castle Rock to operate and maintain
their water and sewage treatment plants, and with the City of Winlock to
operate and maintain their sewage treatment plant. Contracts have also
been entered into for the operation of two private water systems, Stude-
baker Heights and Silver Firs.
The County now owns five water systems and contracts for the operation
of one system as follows:
Camelot 65 connections
Toutle 223 connections
West Castle Rock 41 connections
Toutle River View 17 connections
Ryderwood 185 connections
Studebaker Heights 20 connections
(Contracted)
In order to establish an orderly process for the takeover and/or construc-
tion of the project, the County also established several important
policies:
o The County will investigate the feasibility of constructing a water
system after first receiving a petition signed by a majority of the
property owners that would be affected by such a system.
o The County will provide funds for the preliminary engineering
and/or feasibility study which will become part of the project
costs in the event the project becomes a reality.
o If a Utility Local Improvement District is necessary to finance the
project, the County will proceed beyond the preliminary engineering
and/or feasibility study stages only after its successful
establishment.
o The County will create a Utility Local Improvement District only if
petitioned to do so by the affected property owners, and if a
serious public health or other extenuating circumstance exists.
o Utility Local Improvement District assessments will be developed as
nearly as possible, according to the benefit derived by that property
as a result of the improvement.
The County has found effective scheduling of time to be critical in the
operation and maintenance of satellite water and sewer systems. Scheduling
is particularly important in minimizing labor costs, a major contribution
to operation and maintenance costs. As each system served varies in
system process, and therefore, operation and maintenance requirements,
scheduling of time was largely determined from manufacturers' and state
requirements.
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With the exception of the Ryderwood System, service routes to all the
systems were relatively easy to establish, using the Castle Rock system
as the focus. Due to their experience in operating and maintaining the
Ryderwood System, the Public Works Department learned that geographic
location is an important decision in determining the feasibility of
including future systems in the management system. The Department has
learned that the cost of providing a given service is largely dependent
upon the frequency of service required and the amount of additional
travel time required per service. Therefore, the Department will be
much more willing to provide service to, or accept, systems close to
systems already being served or along routes to systems being served.
In recent years the Department of Public Works has been experiencing
sharply increasing costs. This has required several rate increases, and
a continued operating subsidy from the County to make up deficits. The
County, in 1980, was informed by the State Auditor that this subsidy had
to be eliminated and yet was also informed by some of the users that the
present rate was considered excessive and any future increases would be
unacceptable. In 1981, the City of Castle Rock and City of Winlock
terminated their contracts with the County. As a result of this pressure,
the County was ultimately forced to ask the Department of Public Works
to study alternatives to reduce the costs of operating and maintaining
the systems under County management.
In justifying the County's role in managing a number of water and sewerage
systems, the Department of Public Works cited the availability of funding
to county level government as the most compelling reason. A number of
these funding sources would not have been available to the communities
or to a water or sewer district if the communities had created them. To
help finance the construction of capital improvement projects to upgrade
water and sewerage systems, the County had received federal revenue
sharing funds, federal grants, and state grants.
The County was also advised by their Bond Counsel and Financial Consultant
to attempt a County based management system rather than let each community
form their own ULID. This recommendation was based upon the ability of
a county to sell bonds easier and at a lower interest rate than small
communities. Contributing factors were the ability of a County to
establish a single and uniform accounting system and a larger resource
base to respond to emergencies and major system repairs.
The Department identified a number of possible alternatives to consider:
o Return ownership of the systems to the communities
o Reduce labor costs
o Reduce overhead
o Reduce level of services
o Contract the operation of the systems
o Allow customers to read meters
o Eliminate debt service requirement
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The return of ownership of the systems to the communities was considered
unacceptable by the Department. As the systems were improved, and a
level of debt incurred to finance these improvements, the County developed
a legal responsibility to the holders of the outstanding bonds. In
addition, the communities would have to accomplish the same level of
service as was provided by the County. The only potential savings to
the communities would be to use low paid or voluntary help to run their
systems. This cost savings, however, would most likely be offset by
lowering the quality of water service provided to the residents of the
communities.
The County or communities certainly would not be able to raise funds
necessary to satisfy bond repayment and operational requirements. On
the basis of these considerations, neither the County nor the communities
could afford to pursue this approach.
Inspection of their 1981 budget revealed that 51% of Department operation
and maintenance costs was allocated to labor. They are considering
staff reorganizations to possibly reduce some of the workload being
expended at a number of the systems and to possibly eliminate some full
time positions and replace them with part time help. Only a minor
reorganization and staff reduction could be considered; any further
changes other than what is contemplated would be expected to have a
serious impact on the level and quality of service currently being
provided.
While minor reductions in labor costs could occur, the Department knows
that it would be virtually impossible to achieve any further reductions
because of State imposed reporting and record keeping requirements.
Delegating accounting functions and services to the communities and
reducing this function in the Department would create legal and liability
problems. Specifically, bond resolutions stipulate certain legally
enforceable minimum requirements for record keeping, accounting, etc.
Daily monitoring, testing, and reporting of water and wastewater quality,
and the general level of service required by permit conditions is based
upon federal and state requirements. In addition, state law requires
the presence of a certified operator to perform normal operation and
maintenance procedures. As the Department's staff includes these certified
operators, compensation rates must be comparable to other potential
employers to ensure their continued employement with the Department.
Federal funding sources which were used to finance the construction of
many of the systems also have stipulations on proper operation and
maintenance of these systems. For these reasons, the Department does
not feel that it could feasibly reduce the level of services provided to
its participating systems.
State law conveys the legal authority to counties to contract with other
local governmental units. The most likely candidate to arrange a contract
agreement with would be Ryderwood, the most distant satellite system.
Ryderwood has an association which once owned and operated the community
water system. The other systems currently do not have the necessary
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institutional mechanism by which to enter into such a legal agreement.
The Department does not feel that this alternative would result, however,
in any significant cost savings either to the Department or to the
communities served.
As the Department has found that it only uses eight manhours per month
to read customer meters, the cost savings of turning this responsibility
over to the customers would be offset by the time that would be required
for re-reads, correcting mistakes, pursuing delinquencies, etc. For
this reason, the Department has dismissed this factor as a viable
alternative.
As not all of the Toutle revenue bonds are covered by the assessments
levied as a part of the Utility Local Improvement District, expenditures
are required for bond redemption. As the County currently has a substan-
tial amount of money in its Water and Sewer Revenue Bond Fund, the
Department is considering investing those monies and their outstanding
balance in such way to reduce substantially, if not eliminate, the
difference between the special assessments and the total amount of bonds
outstanding.
It has been projected by the Department that the implementation of the
various feasible alternatives could result in a significant savings, but
an increase in rates will again be necessary in 1982 to balance the
department's budget. After that time, the Department would anticipate
future rate increases only if the growth in revenues from new customers
does not exceed the inflationary increase in expenses.
The Department of Public Works believes that the County should continue
to support their efforts to make the present water and sewer system
management structure more cost effective and self-sufficient, and to
continue the policy of providing water and sewer service to those residents
requesting it. Each proposed new addition to the system, however, will
be evaluated as to its financial impact prior to its acceptance.
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APPENDIX B
REFERENCES
AND
OTHER SOURCES OF INFORMATION
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REFERENCES
1. U.S. General Accounting Office. Review of the Safe Drinking Water
Act. Washington, DC, March 1982.
2. National Research Council. Drinking Water and Health. Washington,
DC, National Academy of Sciences, 1977.
3. Hesse, Richard J., "A Regional Approach to Public Water Supply,"
Journal American Water Works Association, May 1977.
4. Herman, James A. and Farr, Walten, "A Case History of Making the
Central City's Distribution System a Regional Facility," Journal
American Water Works Association, August 1976.
5. Hurd, Merna, "Regionalization Opportunities and Obstacles: A Case
Study," Journal American Water Works Association, December 1979.
6. Personal Communications - Mike Duffalo, Indiana County Municipal
Services Authority, March 1981.
7. Department of Local Government Affairs, Intergovernmental Coopera-
tion in Illinois, (Illinois), 1976.
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OTHER SOURCES OF INFORMATION
Advisory Commission on Intergovernmental Relations. A Handbook for Inter-
local Agreements and Contracts. Washington, DC: US Government
Printing Office, 1967.
Advisory Commission on Intergovernmental Relations. State and Local
Roles in the Federal Systems, A-88. Washington, DC: U.S. Govern-
mental Printing Office.
AWWA Management Division, "Regionalization of Water Utilities: Needs and
Issues", Journal American Water Works Association, December, 1979.
AWWA Regionalization Committee, "Regionalization of Water Utilities: A
Survey", Journal American Water Works Association, December 1979.
Bakken, J.D., "Evolution of a Regional System", Journal American Water
Works Association, May 1981.
Bakken, J.D., "Regionalization - Development of a Regional System",
Proceedings AWWA 1980 Annual Conference - Water for the World,
Challenge of the 80s (Atlanta, GA, June 15-20, 1980).
Boyd, K.A. and Bell, F.A. Jr., "A Rationale for the Regionalization of
Public Water Systems", Water Resources Bulletin, EPA Division of
Water Supply, Vol. 9. No. 1, 1973.
Brewer, Deborah J., "Theme Introduction—Regionalization of Water Utili-
ties", Journal American Water Works Association, December 1979.
Bumstead, John C., "Politics of Regionalization - A Public Perspective",
Proceedings AWWA 1978 Annual Conference - What Price Water (Atlantic
City, NJ, June 25-30 1978).
Bumstead, John C., "The Politics of Regionalization: A Public Perspective",
Journal American Water Works Association, December 1979.
Capen, Charles H., "Real or Rash Regionalization", Journal American Water
Works Association, October 1975.
Clark, R.M., "Small Water Systems: Role of Technology", Journal of the
Environmental Engineering Division, Proceedings of the American
Society of Civil Engineers, Vol. 106, February 1980.
Clark, Robert M., "Minimize Water Supply Costs: Regional and Management
Options," Proceedings AWWA Seminar on Small Water Systems Problems
(St. Louis, MO, June 7, 1981).
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Department of Social and Health Services, "Satellite Support System - A
Means to Assure the Proper Management and Operation of Small Public
Water Supplies Under the Safe Drinking Water Act", Supplement to
Status Report, November, 1975, On the State's Drinking Water Program,
Washington State Office of Environmental Health Programs, May 1977.
Gillean, James I.; Stevie, Richard G.; Clark, Robert M.; and Adams,
Jeffery Q., Managing Small Water Systems: A Cost Study, Vol. I, EPA
Report No. EPA/600/279/147A, Cincinnati, OH, September 1979.
Gillean, James I.; Adams, W. Kyle; and Clark, Robert M. , Managing Small
Water Systems; A Cost Study, Vol. II, EPA Report No. EPA/600/279/147B,
Cincinnati, OH, September 1979.
Holtz, David and Sebastian, Scott, Municipal Water Systems -The Challenge
for Urban Resource Management (Bloomington: Indiana University
Press, 1978).
Homerosky, Frank Jr.; Bell, Frank A.; and Randall, Clifford W., Survey of
State Programs and Attitudes on Regionalization for Public Water
Systems.
Hooker, Donald, "A Regional Response to Water Supply Emergencies",
Journal American Water Works Association, May 1981.
Hooks, Donald L., Treated Water Demand and the Economics of Regionaliza-
tion, Volume 2, Economics of Regionalization: The Electric Power
Example, EPA Report No. EPA/600/2-80-163, Cincinnati, OH, August 1980.
Kurd, Merna, "Economic Considerations of Regionalization of Water Supply
Systems", Proceedings AWWA 1978 Annual Conference - What Price
Water (Atlantic City, NJ, June 25-30, 1978).
Institute of Urban Studies. Handbook for Interlocal Contracting in Texas.
The University of Texas at Arlington, 1972.
Levin, A. and Hanson, H.F., "Small Water Systems: What Can Government
Do for them" Water/Engineering and Management, Vol. 128, No. 3,
March 1981.
Lyndon B. Johnson School of Public Affairs. A Guide to Cooperative
Service Arrangements for Community Water Systems. Austin, TX: The
University of Texas.
Manwaring, James F., "Viewpoint - Regionalization of Water Utilities;
Advantages", Journal American Water Works Association, May 1979.
McCall, Robert G., "Interim Report - Ad Hoc Committee to Define and
Investigate Problems in Small Water Utilities," Proceedings AWWA
Seminar on Small Water System Problems (St. Louis, MO, June 7, 1981).
-------
McCall, Robert G.; Bennett, Glen; Clark, Robert M.; Gaston, John M.;
Hanson, Hugh F.; Johnson, Robert K.; Kimm, Victor J.; Lamson,
Robert R.; Leidholdt, Ralph W.; Markwood, Ira; Price, James; Sorg,
Thomas J.; Thompson, Meredith H.; and Wubbens, Robert L., "Small
Water Systems Problems - Panel Discussion.", Proceedings AWWA
Seminar on Small Water System Problems (St. Louis, MO, June 7, 1981).
McCall, Robert J.; Hansen, Hugh; Thompson, Meredith; Leidholdt, Ralph;
Hertzer, Hugh; Markwood, Ira; Sorg, Thomas J.; Johnson, Robert;
Clark, Robert; Taylor, Ray; and Wubbens, Robert, "Roundtable -
Problems of Small Water Systems", Journal American Water Works
Association, February 1982.
Morris, Robert C., "The Regionalization Process," Proceedings AWWA 1981
Annual Conference (St. Louis, MO, June 7-11, 1981).
National Association of Counties Research Foundation. A Practical Guide
to Intergovernmental Agreements/Contracts for Local Officials.
Washington, DC, 1977.
Okun, Daniel A., Regionalization of Water Management; A Revolution in
England and Wales London; Applied Science Publishers, Ltd., 1977).
Okun, Daniel A., "State Initiatives for Regionalization", Journal American
Water Works Association, May 1981.
Palmer, Robert T., "Letters to the Editor - Regionalization Effort
Reaffirmed", Journal American Water Works Association, May 1981.
Ritsema, J.J., "Miami Pushes Regionalization to keep Pace with Population",
Water Wastes Engineering, No. 9, 1975.
Rowntree, Norman A.F., "Regionalization of Water Supply in England",
Proceedings AWWA 1978 Annual Conference - What Price Water (Atlantic
City, NJ, June 25-30, 1978).
Schwartz, Harry E. , "Joint Discussion - Northeastern US Water Supply
Study: Scope of the NEWS Study", Journal American Water Works
Association, May 1971.
Smith, Robert G., Public Authorities, Special District and Local Government.
Washington, DC: National Association of Counties, 1964.
Smith, William R. , "Regional Allocation of Water Resources", Journal
American Water Works Association, May 1981.
Stevie, R.G. and Clark, R.M., "Costs for Small Systems to Meet the
National Interim Drinking Water Regulations", Journal of the American
Water Works Association, Vol. 74, January 1982.
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Williams, Norman C. and Redfern, J. Martin, "The Financial Feasibility
of Regionalization", Journal American Water Works Association,
March 1973.
Wubbens, Robert L., "Regionalization of Water Utilities - An Interim
Committee Report", Proceedings AWWA 1978 Annual Conference - What
Price Water (Atlantic City, NJ, June 25-30, 1978).
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