United States Office of Water EPA-570 19-89-004
Environmental Protection (WH-550) April 1989
Agency
EPA Ensuring The Viability
of New, Small
Drinking Water Systems
A Study of
State Programs
Prirded on Recycled Paper

-------
            United States       Office of Water       EPA-570/9-89-004
            Environmental Protection   (WH-550)          April 1989
            Agency
vvEPA      Ensuring The Viability
            of New, Small
            Drinking Water Systems

            A Study of
            State Programs
                    Printed on Recycled Paper

-------
                        TABLE OP CONTENTS

                                                             Page

EXECUTIVE SUMMARY                                               i

CHAPTER 1:   INTRODUCTION

     1.1  Background                                            1
     1.2  Purpose and Scope of the Study                        2
     1.3  Study Design                                          2
     1.4  Availability of State Documents                       3

CHAPTER 2:   CONNECTICUT CASE STUDY

     2.1  Introduction                                          5
     2.2  Organization and Legislative Structure                9
     2.3  Implementation of Controls                           15
     2.4  Case Studies                                         23
     2.5  Application to Other States                          26

CHAPTER 3:   GEORGIA CASE STUDY

     3.1  Introduction                                         33
     3.2  Organization and Legislative Structure               38
     3.3  Implementation of Controls                           43
     3.4  Case Studies                                         47

CHAPTER 4:   MARYLAND CASE STUDY

     4.1  Introduction                                         55
     4.2  Organization and Legislative Authority               58
     4.3  Implementation of Controls                           62
     4.4  Case Studies                                         66
     4.5  Application to Other States                          70

CHAPTER 5:   WASHINGTON CASE STUDY

     5.1  Introduction                                         75
     5.2  Organizational Structure of State Agencies
          Regulating Drinking Water                            81
     5.3  Implementation of Controls                           83
     5.4  Case Studies                                         97
     5.5  Application to Other States                         109

CHAPTER 6:   CONCLUSIONS

     6.1  Summary of the Four State Programs                  113
     6.2  Comparison of the State Programs                    115
     6.3  Effectiveness of the State Programs                 118
     6.4  Problems                                            119
     6.5  Federal and State Role                              121

-------
A Study of State Programs to Ensure the Viability
of New Small Drinking Water Systein
EXECUTIVE SUNMARY
1. Introduction
Small drinking water systems serve only eight percent of the
U.S. population, yet they account for 93 percent of maximum contain—
inant level (MCL) violations and 94 percent of monitoring/reporting
(M/R) violations. 1 Plagued by personnel and infrastructure prob-
lems, many small systems are unable to meet the challenges of
aging equipment, unexpected sources of contamination, and more
stringent drinking water regulations mandated by the 1986 Safe
Drinking Water Act Amendments. Underlying their difficulties
are a lack of financial capacity, technical and management capa-
bility, and information about the regulations. Some small system
operators are simply unwilling to comply with the regulations
that affect their operations.
In the past two years, State drinking water programs have
shown a heightened interest in limiting the creation of new small
systems that are non—viable. By tInon...viableI we refer to systems
with technical, financial, or managerial weaknesses that may
render them incapable of complying with drinking water regulations.
In response to this interest, the Office of Drinking Water asked
The Cadmus Group, Inc. to prepare a study of State programs in
this area and to disseminate the results of this study to the
States.
Four States were selected to be case studies: Connecticut,
Georgia, Maryland, and Washington. They were chosen to provide
geographic, demographic, and programmatic diversity. A comparison
of the selected States appears on page ii. Interviews with State
and county administrators and detailed reviews of statutes, regu-
lations, and case studies formed the basis of the research.
We did not examine programs in every State that has estab-
lished mechanisms to control the creation of potentially non-
viable small systems. Nor did we examine the full range of insti-
tutional responses to the problem of existing non—viable ‘systems.
We do, however, briefly discuss some State responses to existing
system problems when to do so sheds light on a State’s efforts to
control potentially non—viable system creation.
1 FRDS 07 and FRDS 19A, FY1987

-------
COMPARISON OF STUDY STATES’ CHARACTERISTICS
(Figures are for FY 1987)
CT GA MD WA
Area (sq. mi.)
Population (millions)
Density (pop. per sq. mi.)
Percent Rural
Median Income per Capita
Community Water Systems
Small Water Systems
(Serving <3300 persons)
Percent Small Systems
Percent Population 2 Served
by Small Systems
Percent of all Bacti MCL 3
Violations by Small Systems
Percent of all M/R 4
Violations by Small Systems
Average MCL Violations per
Small System
Average M/R Violations per
Small System
4,872
3.211
659. 1
8.2%
$14, 090
656
597
91.0%
5.6%
100.0%
97.7%
0.11
0.07
58,056
6.222
107.2
36.2%
$10, 191
1,558
1,387
89.0%
12.2%
99.1%
97.1%
0.21
0.38
9,837
4.535
461.0
7.2%
$12,967
597
539
90.3%
6.6%
91.7%
96.0%
0.07
0.14
66,522
4.498
71.9
19.0%
$10,866
2,355
2,207
93.7%
15. 8%
97.4%
97.2%
0.33
1.08
2 Percentage of the populations served by community water systems,
not the percentage of the States’ population. The population served is
greater than the State population because individuals are served by
more than one water system.
3 Maximum Contaminant Level
4 Monitoring and Reporting
11

-------
2. Findings
The Permittina Process
Each of the four States uses permitting to ensure that new
small systems comply with minimum design, operating, and
construction standards. Connecticut, Maryland, and Washington
combine the permit process with additional controls to identify
proposed systems and to require financial, operational, and manage-
ment evaluations before installation. Connecticut uses its review
of proposed systems to grant a Certificate of Public Convenience
and Necessity. Maryland requires financial and managerial plan
reviews of all proposed privately owned systems. Also, at the
time of permitting, Maryland requires privately owned systems to
deposit funds in escrow. The financial and operational review in
Washington is referred to as the Small Systems Management Program.
Encouraging Interconnections with Existing Systems
Although programs vary in scope, each State in this study
requires or encourages new small systems to connect with nearby
systems when feasible. Connecticut requires proposed new systems
to interconnect with an existing system when the State determines
it to be feasible. This is a requirement of the Certificate of
Public Convenience and Necessity. Georgia encourages interconnec-
tions during permitting if a proposed system is within 500 feet
of a publicly owned system.
Satellite Management or Ownership
Connecticut, Maryland, and Washington actively encourage
satellite systems. A satellite system is an arrangement in which
a large system agrees to assume ownership, management, or operation
of a small systthn. In Connecticut, satellite management or owner-
ship agreements are required by the State where feasible. In
Maryland and Washington, satellite systems are described in the
regional plans. Connecticut and Washington review satellite
arrangements to determine whether the proposed owner or operator
has the financial, operational, and managerial qualifications
needed for the responsibilities it will assume. In Maryland,
counties implement satellite arrangements through county plans.
If Maryland State officials find that a system potentially threat-
ens public health, the State may appoint Maryland Environmental
Services (a quasi-public agency that provides contract O&M ser-
vices) to manage it. At least one county in Georgia, Rockdale,
has developed its own program for promoting satellite management
in the county.
Financial and Operational Reguirements
Each of the States requires new small systems to take measures
to ensure their financial viability. In Connecticut, financial,
operational, and managerial reviews by the State are carried out
111

-------
during permit approval. In Maryland, after the county determines
the need for a new system and includes the proposed system in its
county plan, the State reviews the system’s financial, operational,
and managerial qualifications in conjunction with its permit
review. Maryland also requires privately owned systems to deposit
funds in escrow to cover future expenses.In Washington, new public
water systems are required to develop a financial management
program. The State may review plans and require changes to ensure
that water systems are effectively operated and managed and “con-
tinue to exist as functional and viable entities.” 5
Financial Assistance and Incentives
Connecticut, Maryland, and Washington provide funding for
area—wide planning. Because the costs of such planning are high,
planning bodies need State funding to hire consultants. Area—
wide planning prevents many potentially non—viable systems from
being created by identifying alternative methods of providing water
service. Georgia provides free technical assistance to help
resolve design problems in new systems. Funding for area—wide
planning in Washington, however, is nearly exhausted.
Water Su ly Planning
In some localities, effective planning may reduce the demand
for new small water systems. Connecticut, Maryland, and Washington
have instituted area-wide planning programs that restrict the
development of new water systems. Washington’s program is imple-
mented at the option of the county. Area-wide planning specifies
each water system’s present and future exclusive service areas,
system improvements, and expansion plans. In Maryland and
Washington, the State and the counties have major roles in area—
wide planning. In these two States, counties determine opera-
tional and design requirements for all public water systems.
Connecticut and Washington incorporate satellite management plans
and guidelines in their area-wide planning. State authorities in
Connecticut oversee area-wide planning efforts.
Interrelationship of Methods
The methods described above are complementary. Connecticut,
Maryland, and Washington use the permit process to control small
system creation by encouraging interconnections and satellite
operations whenever possible. In these States, the permitting
and planning processes are closely linked. Planning programs
determine whether there is a need for new water systems and specify
how to achieve future water system development and expansion most
5 washington State Drinking Water Regulations, WAC 248-54-
196, 1970.
iv

-------
efficiently. The permitting process requires new systems to meet
the standards established in the region or county after the need
for a new small water system has been determined.
If interconnections or satellite management are not pursued,
the proposed system is reviewed for technical, financial, and
managerial soundness. In Connecticut, Maryland, and Washington,
the State uses its permitting authority to assure viability of
new systems through financial, operational, and managerial reviews.
In Maryland and Washington, State law requires that new systems
be consistent with county plan guidelines in addition to State
permit and operational standards.
Georgia uses its permitting process to identify systems that
require technical assistance to meet State technical standards.
As part of the permitting process, privately owned new systems
must consider connecting to existing publicly owned systems. The
State, however, lacks the authority to order interconnections.
State attorneys hold that, under current law, the State cannot
require an existing system to accept new customers. Therefore,
Georgia’s efforts to control small system creation may be hampered
by a lack of statutory authority.
Effectiveness
In each of the States, we reviewed case histories of actions
that succeeded in preventing the creation of new non—viable sys-
tems. We found that it is not possible to derive any simple
causal relationship between State control programs and the growth
(or decline) in the numbers of new systems. Such an analysis is
confounded by several factors, but particularly by the large
number of external variables that might influence the creation of
new systems. For example, the rate of growth of new water systems
is more likely to be influenced by economic growth in the State
than by State efforts to control their creation. Nevertheless,
we can report on the specific case studies reviewed in each of
the study States.
Connecticut . Because Connecticut’s program was new, we
looked at all of the State’s actions to date. In one year of
operation, the Certificate requirements prevented the creation of
approximately 30 new systems. In addition, twenty—two systems
were eliminated through State—endorsed takeovers.
Maryland . In Maryland, we looked at a sample of cases.
State officials estimate that only 12 new systems are planned each
year. The three cases we reviewed demonstrate the effectiveness
of a program that prevents the creation of new systems. Two of the
systems were required to hook up to larger systems; the oper-
ation of a third was taken over by a larger system, but without
an interconnection.
V

-------
Washington . The program in Washington has been initiated in
18 of 39 counties. We reviewed six cases in two counties; in
each, a new system was prevented from being formed. Among the
six counties that implemented the program prior to 1986, the
annual increase in new systems serving between 10 and 1,000 people
is no greater than 3 per county. Local officials have estimated
that growth rates would have been significantly higher in the
absence of the program.
Georgia . The creation of small systems, per Se, is not a main
topic of concern for the Georgia PWS program. Thus, many of the
program elements developed by the other States do not exist in
Georgia. Georgia officials use their administrative tools to
avert technical (e.g. design and construction) inadequacies in
new systems, thus controlling one potential source of eventual
problems. They also attempt to discourage the development of
privately owned systems. The State’s main effort is directed
toward bringing non—permitted existing systems into compliance
with State regulations. In two case studies, previously non—
permitted privately owned small systems were required to connect
to existing publicly owned systems. Another was required to comply
with State technical standards and to receive a permit. In one
case, however, a water system avoided regulation by reducing its
service population below the regulatory limit of the Georgia Safe
Drinking Water Act.
PotentIal Drawbacks
At the outset of this study we anticipated three problems that
might result from State programs to control the creation of poten-
tially non-viable systems.
— The first was opposition from property owners, who might
argue that limits on the creation of new water systems
would restrict land development, thereby depriving them
of the maximum use of their property.
- The second problem was the possibility that efforts to
control creation might become an obstacle to the provi-
sion of safe drinking water to isolated rural communi-
ties.
- Third, if State control programs generate substantial
opposition, there might be a tendency to evade those
programs by operating systems outside the State regula-
tory structure. Respondents in the four States examined
in this study reported that these problems were ] ess
significant than we had anticipated.
vi

-------
3. Conclusions
Effectiveness of State Programs
It is not possible to generalize conclusively about the
effectiveness of these programs for a variety of reasons, includ-
ing the small sample of States and the short period of time since
program implementation. Nevertheless, several conclusions are
supportable.
Permitting and planning processes, such as those of Connecti-
cut, Maryland, and Washington, can be used to evaluate whether
proposed systems can be interconnected with existing systems or
could be run better through satellite management. Georgia’s
permitting process, although restricted in scope, encourages
small privately owned systems to consider connecting to nearby
publicly owned ones. In the States studied, these efforts decrease
the number of new small systems created, thereby reducing the
likelihood of small system non-viability.
Th permitting process may be used to ensure the financial,
managerial, and technical qualifications of water system owners
and operators by requiring comprehensive reviews of the systems.
The effectiveness of such reviews is enhanced when follow—up
audits are made by the regulating authority.
In three of the States studied, the role of water supply
planning is recognized as a means of addressing current and future
problems in an orderly manner. It allows the identification of
all regulated water systems in the area and the determination of
how best to coordinate future development. Planning facilitates
interconnections and satellite operations by detailing the future
expansion plans and capabilities of existing water systems.
Of the controls examined in this study, satellite management
and ownership appears to be the most effective and efficient way
to increase the likelihood of viable water service in isolated
areas where interconnections are not feasible.
The Federal and State Roles
Programs to control the creation of potentially non—viable
drinking water systems are best developed at the State and local
levels of government. As shown in this report, these programs
often are part of broader State—wide policies concerning land use
planning, economic development, and natural resource management.
If they are concerned about the creation of new potentially non-
viable water systems, States should consider legislation and/or
regulations that would enable them to establish control programs.
vii

-------
EPA’S interest in this issue is best served through two
types of activities. First, working with the States, EPA should
encourage the dissemination of information about successful control
programs. Many States are eager to develop such programs, and
EPA can assist by facilitating the exchange of information.
Second, EPA can adopt a strategy favoring development of programs
to control creation of non—viable systems. Once such a strategy
is established, EPA Regional Offices can work with States to
encourage development of such programs.
viii

-------
CHAP I’ER 1: INTRODUCTION
1.1 Background
Small drinking water systems traditionally have had difficulty
complying with the National Primary Drinking Water Regulations.
Small systems account for a disproportionate share of maximum
contaminant level (MCL) and monitoring/reporting (M/R) violations.
The rate of noncompliance by small systems is likely to increase
as the 1986 Safe Drinking Water Act Amendments are implemented.
The reasons for small system noncompliance are well known.
In general, both the infrastructure and the human resources avail-
able to small system operators are inadequate to meet the challenge
of aging equipment, unexpected sources of contamination, or more
stringent drinking water regulations. The underlying causes
include a lack of: financial capacity, technical capability,
information about the regulations, and for some system willingness
to comply with those regulations.
To address the problems facing small drinking water systems,
the American Water Works Association Research Foundation (AWWARF)
commissioned a study on “Institutional Alternatives for Small
Water Systems.” 1 Its purpose was to assist legislators, local
officials, planners, and public interest groups who were concerned
about public water supply issues. One institutional alternative
identified by the author was to control the creation of small
water systems. 2
In the past two years, there has been a heightened interest
on the part of State drinking water programs for information
about programs to control small system creation. Some States
have assumed that compliance rates would improve if they could
restrict the creation of new systems, potentially “non—viable”
systems. (By “non—viable” we mean systems with technical, finan-
cial, or managerial weaknesses that will likely render the system
incapable of complying with drinking water regulations.) In
response to this interest, the Office of Drinking Water asked The
Cadmus Group, Inc. to prepare a study of State programs in this
area and to disseminate the results of this study to all States.
1 Robert G. McCall, “Guidance Manual: Institutional’Alterna-
tives for Small Water Systems,” prepared for the American Water
Works Association Research Foundation, 1986.
2 The AWWARF study was a precursor to this report. Our study
is different, however, in that it focuses on non—viable small
systems, not small systems in general.

-------
1.2 Purpose and Scope of the Study
The purpose of this project is to disseminate information on
State programs aimed at controlling the creation of non—viable
small drinking water systems by:
— examining State efforts to control the creation of non-
viable small systems through legislation or regulation;
— evaluating the effectiveness of such programs on reducing
the emergence of small non—viable systems; and
— describing a series of legislative tools that other
States could use to implement their own control programs.
This study examines programs to restrict the creation of
potentially non—viable small systems in four States: Connecticut,
Georgia, Maryland, and Washington. We have evaluated their pro-
grams, the cost of these programs, and how these programs have
affected the creation of new potentially non—viable small systems.
We have also examined State characteristics that contribute to
program effectiveness.
We did n t examine programs in every State that has estab-
lished mechanisms to control the creation of potentially non-
viable small systems. Nor was our task to examine the full insti-
tutional responses to the problem of existing non—viable systems.
(We do, however, briefly discuss some State responses to existing
system problems when to do so sheds light on a State’s efforts to
control potentially non-viable system creation.)
1.3 Study Design
A survey of drinking water administrators, used in the AWWARF
study, identified several States with laws or regulations to
control small system creation. Based on telephone interviews
with EPA Regional offices and with State administrators, we
reviewed the information on candidate States. The selection
criteria included:
- population density,
— percent of population in rural areas,
— rates of compliance by small systems,
- variation in geography, e.g., climate and availakility
of water,
— variation in methods to control system creation, and
— reputation of the State’s control program.
2

-------
We selected the following States.
- Washington is a large rural State on the West Coast with
the first nationally-recognized program for controlling
the creation of potentially non—viable new systems.
Washington also has large arid regions in the eastern
half of the State, where water rights are an important
issue.
— Connecticut was selected because it is a small urban
State in the Northeast. The Connecticut program is based
on the Washington program. Unlike Washington (where
implementation in each county is optional), the
Connecticut program is implemented state—wide.
- Maryland is a small, urban mid—Atlantic State. Maryland
has had a strong control program for the past 20 years.
— Georgia was selected to represent a rural southern
State. Its legislation provides some authority to
control small system creation, but the State has no
program, as such, to do so.
For each State selected, we contacted the appropriate EPA
Regional Office and visited the State officials who implement the
program. In addition, depending on the State, we contacted county
or local officials, developers, utility owners or operators, and
representatives of isolated rural populations.
We supplemented our explanation of each State program with
case studies which illustrate how the program works. We analyzed
these case studies to gain insight into implementation successes
and failures.
1.4 Availability of State Documents
Since the purpose of this study is to disseminate information
about innovative State legislation and regulations, we collected
the most important documents from each of the States in our study.
The Association of State Drinking Water Administrators has agreed
to become the repository for these documents. If readers are
interested in obtaining them, they may contact Mr. G. Wade Miller,
Executive Director, at Suite 400, 1911 North Fort Myer Drive,
Arlington, VA 22209, (703) 524—2428.
3

-------
CHA ? ER 2: CONNECTICUT CASE STUDY
2.1 Introduction
Connecticut has developed a comprehensive program for pre-
venting the creation of new, potentially non-viable small systems.
Using legislation passed in 1984 and 1985, Connecticut has insti-
tuted the following mechanisms for restricting the creation of
new community water systems (CWSs), expanding the service of
existing community water systems, and addressing the problem of
existing non—viable small systems.
- Certificate of Public Convenience arid Necessity (referred
to below as the certificate) requires a new or expanding
water system serving between 25 and 1,000 people to obtain
a permit, requiring assurances of technical, financial, and
managerial viability. The creation of a new water system
is allowed only when the State determines that an inter-
connection or a satellite system is not feasible. If
such a determination is made, the technical, financial,
and managerial qualifications of the system’s owners are
then evaluated by the State.
- The Connecticut Plan (based on the Washington PWSCA)
establishes “exclusive service areas” for existing utili-
ties using a area-wide planning approach. 1 The utility
accepts responsibility for all new and existing water
systems in its service area, thereby reducing demand for
new, potentially non—viable small systems.
- Takeover of Existing Water Companies . The State has the
authority to order a solvent water company or municipal-
ity to take over a failing small water company. These
laws may deter system developers from seeking to create
new water systems without adequate resources.
The laws are described in greater detail in Section 2.2.
Although a major goal of the Connecticut program is to elimi-
nate new, potentially non—viable small systems, it also restricts
the creation of all new small systems whenever possible and encour-
ages a decrease in the number of existing non—viable small systems.
Connecticut addresses the problems of new and existing small
systems in the same legislation because the State wants to ensure
the viability of all of its public water systems. Hence the dis-
tinction between programs for new and existing small systems is
often blurred. However, this chapter will focus on the control
of new small systems and will discuss other controls only as they
relate to the central topic.
1 See Chapter 5 for a discussion of the Washington PWSCA.

-------
The measures outlined above were adopted by Connecticut in
response to a drought that drew attention to small system owners’
and operators’ lack of financial and human resources. On the
assumption that many small systems are likely to become non—viable,
the State has focused on restricting the creation of new small
water systems by promoting interconnections and satellite manage-
ment, and by decreasing the number of existing non—viable small
systems through the use of receivership and acquisition statutes.
All three of Connecticut’s programs contribute to the goal of
increasing the number of interconnections and satellite systems
throughout the State.
State Profile
Connecticut has 169 towns and eight counties. Counties do
not have governing authority in the State. The population of
this small, densely populated State is 3.2 million. 2 Real estate
values are hign in comparison to the national average. Connecti-
cut’s median value of owner—occupied homes ranks fifth in the
nation, according to the 1980 census. Fairfield, Hartford, and
New Haven counties comprise 76 percent of the State’s popula-
tion 3 arid 40 percent of the State’s area. Another illustration
of Connecticut’s concentrated development is the fact that 79
percent of the population lives in urban areas while 60 percent
of the land in the State is forested.
Roughly one-third of Connecticut’s population relies on
groundwater for safe drinking water. In Connecticut, CWSs provide
an average of 65 million gallons of groundwater and 314 million
gallons of surface water average daily. 4
In general, Connecticut has an abundant supply of high-quality
water. Although the commissioner of Department of Health Services
has the authority to allow the use of Class B waters——water into
which sewage is discharged—-in certain emergencies, 5 he has never
exercised this authority. However, several water supply issues
continue to trouble State health officials. There are 798 wells-—
ill public, 630 private, and 57 commercial--that are known to have
been contaminated as of September 1984. The contaminants include
2 office of Policy Management Population Projection, 1984,
Appendix, Individual Water Su lv Plan Manual .
3 Ibid.
4 water Resources Task Force Final Report , 1984, 33, 52.
5 0D. cit. , 52.
6

-------
solvents, hydrocarbons, salt, and landfill leachate. In addition,
20 percent of all water lines in Connecticut are over 80 years
old. 6
The Small Systems Problem
There are 656 community water systems in Connecticut, accord-
ing to 1987 Federal Reporting Data System data. Fifty are publicly
owned by either a municipal or regional authority; these systems
are generally found in the areas of greatest population density
and serve 58 percent of the population served by community water
systems. Small water systems, on the other hand, are typically
found in the suburban and rural sections of the State. 7
As shown in Exhibit 2.1, 91 percent of Connecticut’s water
systems are small; however, they supply water to only 5.6 percent
of the population served by community water systems. Similarly,
although 86 percent of the population served by community water
systems is supplied by surface—water sources, 92 percent of the
systems use groundwater sources.
The Water Resources Task Force was formed in 1982 to evaluate
Connecticut’s water supply issues and to recommend improvements
in the manage aent of water resources. The Task Force found that
small system failures were often due to poor management and lack
of finances. The Task Force found many instances of small water
companies being unable or unwilling to cope with pollution of
wells, deteriorated infrastructure, inadequate pressure, poor water
quality, water system breakdowns, and dry wells. In part because
of part—time and inexperienced management, small water systems do
not regularly apply for the rate increases that would fund system
maintenance and repair. Moreover, our review of Connecticut’s
files revealed that many small systems have negative net worth and
that their owners are no longer interested in running them.
State administrators believe that proper design, service,
and management would greatly improve the condition of Connecticut’s
public water systems. Many of the State’s small water systems
are old and, in many cases, cannot remain viable. Connecticut
State officials express their support for the State program to
restrict the creation of small systems.
6 0p. cit. , 54.
7 0p. cit. , Introduction.
7

-------
Exhibit 2.1
Connecticut Water Systen , Viotatione arid Systees In Violation
FT 1987
Population Served;
Total Total
25-100 101-500 501-1,000 1,001-2,500 2,501-3,300 3,300 3,300 TOTAL
Systens 326 213 25 23 10 597 59 656
49.7% 32.5% 3.8% 3.5% 1.5% 91.0% 7.0% 100%
Populat Ion 16.000 49,000 18,000 38,000 29,000 150,000 2,549,000 2,701,000
NCL VIoletloms 40 17 6 2 3 68 12 80
50.0% 21.3% 7.5% 2.5% 3.8% 85.0% 15.0% 100%
M/R ViolatIons 7 12 1 4 16 40 15 55
12.7% 21.8% 1.8% 7.3% 29.0% 72.7% 27.3% 100%
00
Average MCL ViolatIons 0.12 0.07 0.24 0.08 0.30 0.11 0.20 0.12
per systeWye.r
Average N/ I ViolatIons 0.02 0.06 0.04 0.17 1.60 0.07 0.25 0.08
per syst.iVyear
Systems with NCL VIolations 26 15 4 2 2 49 7 56
46.4% 25.7% 7.1X 3.6% 3. X 87.5% 12.5% 100%
Systems with N/R ViolatIons 7 9 1 2 3 22 5 27
25.9% 33.3% 3.7% 7.4% 11.1% 81.5% 18.5% 100%
Source: Federal Reporting Data System, Reports 7, 19A, 19B, 1987
Note: Percentages may riot a i due to ro.sidirig.

-------
2.2 organizational and Legislative Structure
History
A drought in 1980 resulted in water shortages in the south
western portion of Connecticut, which affected many small systems.
Their problems drew attention to the need for improved water
supply management, and the State executive and legislative branches
responded.
As a result of the growing concern over water resources, the
Water Resources Task Force was formed. This special, temporary
committee addressed two major issues that concern this study:
— restricting the creation of new systems, and
- establishing a mechanism for taking over failing small
water systems.
The Task Force was charged with recommending legislation to
deal with the State’s water supply problems. It found that,
because of the State’s large number of small systems, State agen-
cies had difCiculty ensuring that water quantity and quality
standards were maintained. The Task Force therefore recommended
that actions be taken to restrict the creation of small systems.
State Organization
Two State agencies have major roles in regulating
Connecticut’s public drinking water supply. The organizations
with the authority to restrict small system creation are the
Department of Health Services (DOHS) and the Department of Public
Utility Control (DPUC). Organization charts for these two agencies
are shown in Exhibits 2.2 and 2.3, respectively.
A primary function of DORS is to ensure adequate water quality
and quantity for the State’s residents. Therefore, the DOHS has
final approval over the individual water supply plans and the
coordinated (area—wide) plan. Because DOllS already has engineering
and planning sections that approve and monitor all community
water systems in the State, it has the technical background and
administrative experience necessary for overseeing and approving
the Connecticut Plan. DONS reviews proposed projects, long-range
water supply plans, water quality data, and permits. It also
shares responsibility with DPUC for implementing the statutes
concerning water system takeovers and receiverships.
The DPUC regulates the rates of all public service companies
in the State, including water companies serving more than 50
customers. In addition, the Connecticut statutes stipulate that
DPUC’s definition of public service companies does not include
municipal water systems (CGS Sec. 16-1). DPUC approves utility
9

-------
Exhibit 2.2
Connecticut
Department
of Health
Preventable
Disease Division
Water Supp11e
Section
Services
AssIstant SectIon
Chief. Planning
Connecticut Department
of Health Services
I I
0
Bureau of
Health Promotion
Other Bureaus
Asslst nt Section
Chief, Engineering

-------
Exhibit 2.3
Connecticut
Department
of Public
Utility
Control
I .J
Utility Regulation
nd Research Division
Utility
Regulation Unit
Water Section
Department of
Public Utility Control
Other
Divisions

-------
rates; regulates plant and equipment expansion, transfers of
assets, franchises, and the issuance of notes, bonds or other
securities; performs management audits; and requires annual audits.
In addition, DPUC, in conjunction with DONS, has authority to
approve and permit the creation or expansion of any water system
serving 25 to 1,000 persons.
Under the authority of CGS Sec. 16-262n, DPUC, in consultation
with DONS, may require takeover of a water company that is in vio-
lation of any DOHS or DPUC order. Although DOHS has the leading
role in implementing the Connecticut Plan, DPUC must concur with
DOllS on individual water supply plans before DONS can approve
them. Finally, DPUC reviews the coordinated water supply plan, but
does not have final approval authority.
In addition to the DONS and the DPUC, two other agencies are
concerned with drinking water supplies. The Department of
Environmental Protection (DEP) primarily regulates discharges
into the waters of the State. DEP also issues diversion permits
and controls resource allocation. The DEP’s role in restricting
creation is to review the coordinated plan and concur on the
approval of individual water plans.
The Of fi e of Policy and Management (OPM) also reviews the
individual and coordinated water supply plans. In practice,
DPUC, DEP, and OPM have considerable responsibility and input in
the approval process.
The certificate regulations define “satellite system” as a
non—connected water system owned by an existing system.
Legislative Structure
In response to the recommendations of the Water Resources
Task Force, the General Assembly passed the following legislation
1984 and 1985:
— P.A. 84-330 , “An Act Concerning Small Water Companies and
the Receivership of Water Companies,” which led to impor-
tant amendments to the Connecticut General Statutes (CGS
16—262); and
— P.A. 85—535 , “An Act Concerning a Connecticut Plan for
Public Water Supply Coordination,” then incorporated into
the Statutes as CGS 25—32d and 25—33e—j.
The first of these Acts established more effective legal c ontro1s
over the formation of new water systems and over the takeover of
existing systems. The second, known as the Connecticut Plan,
deals primarily with future water supply planning by establishing
area—wide planning and exclusive service areas.
12

-------
P.A. 84—330 amended CGS Sections 16—2621 and 16—262m to
clarify the conditions of a receivership and to improve State
control over small system creation. 8 In addition, P.A. 84—330
added five new provisions that concern the takeover of existing
water systems.
Certificate Laws
- CGS 16-262m establishes a joint DPUC and DONS certifica-
tion procedure for any new small system serving between
25 and 1,000 persons. The certificate, called a Certifi-
cate of Public Convenience and Necessity, restricts the
creation of new small systems by encouraging feasible
interconnections with an existing utility and by establish-
ing a set of regulations for approval of the system’s
desigz and management, if an applicant cannot intercon-
nect with an existing utility.
- CGS Sec. 8-25a requires that if a municipality approves
a new water system without having received a Certificate
of Public Convenience and Necessity from the State, the
city or town is responsible for the operation of that
system if that water system’s ability to provide adequate
service to its customers is impaired.
The statutes establish guidelines for ordering a municipality
or water company to take over a failing small water company. A
water system may be subject to acquisition if the system has
repeatedly been found in violation of State drinking water regula-
tions, a notice of violation, and an administration order have been
issued, and the system has failed to comply with the administrative
order. The acquiring community water system must either extend
its mains or set—up a satellite system to serve the area, and
must make any necessary improvements to the failing system. The
DPUC subsequently adjusts the allowable water rates to compen-
sate the acquiring company for the reasonable cost of acquiring
and operating the new system. 9
8 The initial version of CGS 16—2621 was authorized in 1981
by P.A. 81-358. The first draft of l6-262m was authorized in
1981 by P.A. 81—427.
9 One large utility has suggested that DPUC has not a,llowed
rate increases that provide adequate financial incentives for
acquisition. On the other hand, in a few cases water rates in
Connecticut are higher than those deemed affordable by a National
Regulatory Research Institute survey of 45 commissions that regu-
late water systems.
13

-------
Takeover Laws
- CGS Sec. 16-2621 . If DPUC determines that any water
company is unable or unwilling to provide adequate service
to its consumers, the DPUC may make an order “attaching
the assets of the company and placing it under the sole
control and responsibility of a receiver” (CGS Title 16
Sec. 16-2621(b)). A water company must pay for improve-
ments made to the water system while in receivership if
the company intends to continue to own the system.
- CGS Sec. 16-262n . DPUC and DOHS may call for an acquisi-
tion hearing. The departments must give notice to public
and private water companies that a search for the most
suitable acquiring entity will begin.
- CGS Sec. 16-2620 . DPUC and DOHS may order the acquisi-
tion of a water company by the most suitable public or
private entity. This section also provides for the recov-
ery of all reasonable costs of the acquisition and improve-
ments. To date, only privately owned systems have been
taken over under this law.
- CGS c. 16-262p . Any company that has acquired another
system through Sec. 16.2620 must make the necessary
improvements to that failed system. This section also
requires the acquired company to transfer ownership to
the buyer immediately.
— Sec. 16-262g . The acquired company is to be compensated
by an amount agreed upon by the parties involved so long
as the agreement is approved by DPUC and DOHS.
The Connecticut Plan
The 1985 Final Report of the Water Resources Task Force led
to the passage of P.A. 85-535, “An Act Concerning a Connecticut
Plan for Public Water Supply Coordination.” DOHS Water Supply
Section distributed a guidance manual for writing individual
water system plans.
The first task specified by P.A. 85—535 was for DOHS to
delineate boundaries for the Public Water Supply Management areas.
These boundaries were established based on the similarity of
water supply problems, geology, and population density within an
area. In addition, DOHS considered the location of existing
water supply sources and water systems.
The next step was to establish priority management areas to
begin area—wide planning. The high—priority areas were chosen
based on the severity of their water quality problems and planning
needs.
14

-------
The Act then called for the establishment of Water Utility
Coordinating Committees (WUCCs) composed of members of all util-
ities serving over 25 persons, with assistance provided by repre-
sentatives of area—wide planning authorities and State agencies.
WUCCS were created as a forum for:
— determining future water needs in their area, and
— establishing exclusive service area boundaries.
The WUCC is charged with developing a Coordinated Water
System Plan (CWSP) that allows utilities to maintain their present
service areas to avoid “unserviced islands” and to ensure that
service areas do not overlap or create a duplication of service.
The CWSP has of two major components, the individual water system
plans, and an area—wide supplement. An individual water system
plan is written by each community water system within the regional
management area that serves over 1,000 customers. The individual
plan, which details the water sources the company plans to use
and areas it plans to service over the next 50 years, is updated
every five years.
The area—wide supplement has three major components: water
supply assessz ent, delineation of exclusive service areas, and
the integrated report. The water supply assessment evaluates the
water systems in the management area, giving special consideration
to areas with a history of water quality, service, and supply
problems. Exclusive service area boundaries identify particular
areas for which utilities are responsible. If the WUCC cannot
agree on these boundaries, the WUCC must consult with the DPUC.
The DOHS is authorized to make the final decision on service area
issues unresolved by the WUCC and the DPUC. The integrated report
provides an overyiew of the individual community water systems,
addresses area—wide water supply issues, and promotes cooperation
among community water systems.
2.3 Implementation of Controls
All three aspects of Connecticut’s program to control the
creation of small systems——the certificate, acquisition, and
area-wide planning--have been carefully and specifically drafted
to facilitate the implementation of these laws. The recommenda-
tions of the Water Resources Task Force were adopted in the
Connecticut General Statutes. The presence on the Task Force of
members from DPUC, DOHS, OPM, DEP, and the State legislature
resulted in a document that attempted to lay out solutions to the
problems of small water systems as precisely as possible.’ Even
with this extensive preparation, DPUC and DOHS officials expressed
the need for amendments as problems arise in the implementation
of the programs.
15

-------
Below, we examine how Connecticut has chosen to implement
its laws to restrict the creation of small systems.
Certificate of Public Convenience and Necessity Program
The Certificate of Public Convenience and Necessity Program,
implemented jointly by the DPUC and the DOHS, has proven effective
in preventing non—viable small systems from forming. The certif i—
cate, which requires the applicant to pay a $100 application fee,
successfully restricts the creation of non—viable systems when
any of the following occur:
— a proposed system voluntarily combines with an existing
system. This option does not require the applicant to
continue the certificate process;
- the DPUC and the DOHS jointly deny the certificate and
thereby prohibit a potentially non-viable system from
operating independently; or
- DPUC and DOHS approve the certificate. In this case, the
new system is likely to operate as a viable water system.
The firzt response is probably the most common. It is dif-
ficult to determine how many water systems chose to combine with
larger systems, since these systems were never independently formed
and are therefore never recorded. An employee of the Connecticut
Water Company, (a water utility serving approximately 52,000
persons) indicated that the company is currently reviewing 45
applications from water systems that wish to be taken over. Only
two certificates have been denied since the program began, and 12
certificates are granted each year.
When interconnection through a main extension is not feasible,
a proposed system must seek a satellite management arrangement
with an existing community water system. Satellite management
means that the water system would not be physically connected to
the parent water system. However, the parent water system would
have operational and managerial responsibility for the satellite
water system. Although the motivation for a proposed water system
to seek satellite management or main extension from an existing
system may be to avoid the certificate review process, such volun-
tary mergers or arrangements are among the stated goals of the
certificate program. The certificate regulations state that they
are intended to restrict the creation of new, small water systems
and to establish minimum design, construction and operation stan-
dards to be observed when creating new small systems or expanding
existing systems. 10 Further, the certificate regulations require
10 DPUC. Regulations for A lication Procedures and Criteria
for Issuing Certificates of Public Convenience and Necessity for
Small Water Companies , Final Regulations, September 28, 1987.
16

-------
a proposed new system to consider the feasibility of interconnec-
tion with an existing system before considering any other option.
The next option proposed small systems must consider is satellite
management.
One reason new small systems may seek larger systems to take
over their management and operation is that systems serving over
1,000 people are not required to obtain a certificate. Therefore,
by combining with a large system, they avoid delays associated
with the certificate approval process (estimated by interviewees
to be between six months and two years). In addition, the larger
systems are usually better equipped to meet existing drinking
water regulations, including the Safe Drinking Water Act (SDWA)
Amendments of 1986.
Many banks require proposed water system owners to construct
wells and to receive Certificate approval before they will approve
a loan. Although banks have made this decision independently, it
helps to prevent any circumvention of the requirement.
The certificate law, CGS Sec. 16-262m, calls for DPUC to adopt
regulations to carry out the law. The regulations became effective
September 28, 1987. The certificate regulations go beyond the
Statute (1) to define the terms and the chronology of events in
the application process and (2) describe technical issues not
stated in the Statute.
The regulations define a series of phases that must be fol-
lowed when an applicant intends to: (a) build a new community
water system, or (b) expand an existing water system by five
percent above the number allowed in an existing permit or five
percent above the number served as of the date of these regula-
tions. The following options must be considered by the State
before a system may continue to the next phase:
— interconnection with an existing system,
— satellite management, or
- withdrawal of the application to seek zoning for individual
wells in areas that allow individual wells,
To continue the application and be granted a certificate, the
applicant must prove that the entity has the financial, managerial,
and technical resources to operate the proposed water system.
These options must be pursued in the order in which they are
listed. The option of seeking local approval for individual
wells is listed because there are rural areas of the State where
dwellings are far apart. Some towns have therefore established
the practice of private wells as the most viable alternative.
The regulations list all the information the applicant must
provide to continue to apply for the certificate. The requirements
17

-------
include certified engineering data, test results, design criteria,
source protection, and specifications for the atmospheric storage
tank, construction materials, fire protection, on—site standby
power, distribution system, service pipes, and pump house.
The regulations also specify what qualifications an applicant
must hold if applying to become the manager of a new small water
system. The applicant must present such information as the income
tax returns of the proposed owner, evidence that the owner is
well capitalized and has adequate deposits available, a balance
sheet, a proposed rate structure, a capitalization plan, proposed
periodic budget review, a description of the operational plans
and qualifications of any persons who will have any role in the
management, operation or maintenance of the proposed system, and
maintenance, conservation, and operator safety plans.
Central to the success of the certificate process is the
fact that both the DPUC and DOHS simultaneously review each stage
of it. With its staff routinely evaluating water systems’ finances
under its rate setting authority, DPUC is prepared to evaluate
the feasibility of interconnections and satellite arrangements,
and the financial information the proposed system provides at
later stages of the application process. DOHS staff are trained
to determine the technical feasibility of these arrangements, the
technical and managerial qualifications of proposed system opera-
tors, and the adequacy of the water supply. DPUC and DOHS consult
with each other throughout the certificate process; a certificate
may not be issued without the consent of both agencies.
Both water main extensions and formation of satellite systems
reduce the number of small systems to be regulated by the State.
Assuming that there is a direct link between the number of small
systems and the rate of non—compliance, reducing the number of
small systems is desirable as a means of improving compliance.
Although certificate approval creates a new small water
system, it increases the likelihood that the system will be well
designed, maintained, and managed. Agency officials believe that
the requirements are sufficiently stringent that the systems
created will be as professionally run as the State’s larger utili-
ties.
The number of small systems in Connecticut has decreased since
the regulations were promulgated in 1984. From FY 1985 to FY 1987,
the total number of community water systems fell from 685 to 656,
a four percent reduction. DOHS estimates that this reduction is
due to voluntary and forcible acquisitions as well as inventory
modification.
The Connecticut Plan
As described in Section 2.2, P.A. 85—535 established laws
that called for the Connecticut Plan. DOHS drafted regulations
18

-------
concerning Coordinated Water System Plan. These describe the
composition and duties of the Water Utility Coordinating Commit-
tees, which generate CWSP5. Currently, three CWSPs are in various
stages of development and approval. DONS is phasing the iluplemen-
tation of the Connecticut plan because of revenue and staff limi-
tations. Because of the State budget deficit and anticipated
cut—backs, there is presently no schedule for implementing the
Connecticut Plan in the remaining four management areas. However,
legislation requires that the plan be implemented state-wide.
Before the WUCCs were established, the State set priorities
as to which WUCCs should be established first. After several
public hearings, Connecticut was divided into seven management
areas. The Housatonic Region was chosen as the Connecticut Plan’s
first priority and was therefore directed to develop a WUCC first.
As Exhibit 2.4 shows, the Upper Connecticut River Area and South
Central Connecticut were given second and third priorities respec-
tively. Each is developing a CWSP. These areas were chosen to
begin implementation because of their severe water quality and
quantity problems and their need for area-wide planning.
On major component of the WUCC’s CWSP are the individual
water system plans, submitted by each community water system.
Although many individual water supply plans have been submitted,
only one has been approved. One problem with this process is that
water systems frequently require much time to complete their
plans and to make any revisions required by DONS. This delay
makes the delineation of exclusive service areas more difficult.
All water companies serving more than 1,000 customers (and any
water systems specifically requested by DOHS) are required to write
individual water supply plans. DOHS has issued a guidance manual
that must be followed when drafting the individual plan. Each
plan must contain a description of the company structure and
assets, a description of existing sources, their safe yields, and
performance. Each plan must also contain a listing of the current
population served and a projection 5, 20, and 50 years ahead. The
plans projecting 50 years into the future are far less specific
than those projecting 5 or 20 years. Water consumption trends
and projections are included in order to estimate future water
demand areas. The section on existing and anticipated land use
also serves to pinpoint areas that will require water service in
the future. Water companies are required to define future service
areas. This section includes a detailed map delineating the
boundaries of the current service area, and the boundaries of the
service area 5, 20, and 50 years in the future.
19

-------
t.J
0
C I ,
x
0
p . ..
R&IC WATER SUPPLY
NAGB ff AREAS
PRIORITI FS
1. -CUSATONIC AREA
2 UPPER cot EcTICuT RIVER AREA
3. souni A$

-------
The purpose of the area-wide plan is to coordinate the indi-
vidual plans submitted. The area—wide plan has two main concerns:
— to assess existing water systems for water quality and
quantity and operational problems; and
— to set exclusive service area boundaries.
At this time, only one CWSP, the Housatonic Regional Plan, has
been submitted. It has reached final review but has not yet been
approved because the individual water supply plans have not been
approved. The Housatonic Management Area consists of 12 communi-
ties in the western portion of the State.
Exclusive service areas were delineated based on requests
from utilities in the Housatonic WUCC that desired to expand
beyond their present service areas. As the statutes stipulate,
no existing service areas were taken from a utility. According
to the map included in the Housatonic plan, large portions of the
Housatonic Management Area are not designated as exclusive service
areas. These unserviced areas include significant portions of
the towns of Sherman, Roxbury, New Fairfield, and Bethel. In
addition, the Housatonic plan states that many portions of an
exclusive se v ice area will not be developed, and therefore will
not require future public water supplies.
The Executive Summary of the Housatonic plan states that the
principal water supply concern within the region is the existence
of small water systems with inadequate technical, financial, and
managerial qualifications. The plan calls for a State program of
loan guarantees, grants or revolving funds for system improvements.
Housatonic members are concerned that required improvements would
unduly burden small system customers.
The State has ultimate approval authority for all area-wide
plans. It can also establish exclusive service areas for water
utilities if the WUCC cannot agree after consultation with DPUC.
Therefore, it is in the interest of the WUCC members to reach
agreement. Certainly, most utilities would want to have as much
control as possible in determining their future expansion.
The Connecticut Plan avoids creating new regulatory authority
and limits the State’s role to plan approval. Once the coordinated
area-wide plan is developed, the WUCC is not required by law to
reconvene until the DOHS determines that the coordinated plan
needs revision, or at least every ten years. However, some WUCC
members may wish to meet without DOHS advisors to discuss mutual
problems.
It is difficult to evaluate the effectiveness of this program,
since no area—wide plans have been approved. However, we can
examine the progress of the process, and assess the role that the
plan is likely to have in preventing small systems creation.
21

-------
One problem with the process has been delays in approving
individual plans. According to DOHS staff, one reason the approval
process moves slowly is that the plans are reviewed by four State
agencies (DOHS, DPUC, DEP, and OPM) as well as communities within
the region. Although ultimate approval authority lies with the
DOHS, the review process requires consideration of many viewpoints.
In addition, the DOHS must review the individual plans to ensure
that water sources are sufficient to handle projected future
plans. This is a difficult and complex task.
Another potential problem with the process, which was iden-
tified by a member of one of the existing WUCCs, is the relative
timing of the individual and area-wide plans. In the first WUCC
to be established, both the individual and the area-wide plans
were due at roughly the same time. Ideally, individual plans
would be developed well in advance of the area—wide plan.
Assuming that the seven area—wide plans are eventually
approved as the law requires, the Connecticut Plan may become an
effective mechanism for preventing the creation of non—viable
small systems. In particular, the establishment of exclusive
service areas in the State will streamline the regulatory process
by establishing areas of responsibility among water supply systems.
Rather than gcing through a complex hearing process, the State
would know immediately to which water utility an existing failing
system should be assigned. In addition, developers would know
where to seek water service needed for new development. This
should further reduce the demand for new small systems. Finally,
the Connecticut plan may ultimately reduce the need for new laws
or regulations to restrict the creation of non—viable small sys-
tems. Many problems may be solved between WUCC members or at
the local level as a result of the dialogue and planning accom-
plished in the WUCC5.
Controlling Existing Failing Small Water Supply Systems
CGS Sections 16—2621, n, 0, p, and q authorize DPUC to order
a takeover of an existing water system and to establish ground
rules for this process. Two components of the regulatory system
are essential to its effectiveness:
- the laws explicitly state that DPUC must allow the parent
company to recover reasonable costs associated with taking
over a failing system, and
— if a company does not agree to take over a failing small
system, the DPUC has the power to order it.
Regarding the first of these, the cost of improving the
failing system is specified in the joint agency hearing. There-
fore, the company taking over the small system knows that it will
be able to recover the costs associated with system improvements.
However, problems arise if costs are not fully anticipated by the
22

-------
parent water company in the joint hearing. In this case, the
company has to assume in advance that when it applies for a rate
increase, the DPUC will agree that the additional costs were
reasonable and necessary.
The second component, DPUC’s authority to order a take over,
may induce interested or nearby water companies to reach “volun-
tary” agreements to acquire small systems before being forced to
do so.
The decision that a water company is no longer viable is made
after the following events have occurred:
— a notice of violation is issued,
— an administrative order is issued, and
- the system fails to comply with the administrative order.
In the cases we studied, several administrative orders were issued
without response before a takeover was initiated. The systems
taken over were generally those that repeatedly failed to comply
with administrative orders.
Once a system is designated for acquisition, a joint agency
hearing occurs. Based on the examination of the case, the State
issues a decision about what must be done to ensure that water of
adequate quality and quantity is supplied to the population served
by the “problem” system. To solve problems that arise after the
hearing, several amended decisions often follow, either to extend
the schedule or revise the required actions based on new informa-
tion.
Although recently implemented, the program has already had
some success. DPUC estimates that 22 water systems were taken
over under the 16-262 process since 1985, and six of these acqui-
sitions were voluntary sales. The new owner of the acquired
system is required to follow a DOHS schedule of improvements so
that the system will conform to State drinking water regulations.
In contrast, during 1981-1985, only three water system consolida-
tions occurred; all of them voluntary.
2.4 Case Studies
The following case studies illustrate the use of controls
for both new and existing small water systems. The first case is
an example of a denied application for Certificates of P ib1ic
Convenience and Necessity. The second is an example of the State’s
use of its authority to order an acquisition of a failing water
system.
23

-------
Broadleaf Circle
In December 1985, DPUC denied a Certificate of Public
Convenience and Necessity for Broadleaf Circle, a proposed sub-
division with 24 single-family houses in West Suffield. Further-
more, DPUC informed the Town of Suffield, which had already
approved the subdivision of land, that if it allowed the develop-
ment to proceed without a certificate, Suffield would be held
accountable for future system operation under CGS Sec. 8—25a.
DPUC recommended an interconnection with West Service Corporation
Water Company (WSCWC), a water utility under DPUC jurisdiction.
Although WSCWC was unwilling to provide this service, CGS Sec.
16-20 allows DPUC to order that service be provided.
DPUC ordered that a main extension from WSCWC be made in
1986. Several meetings were held by the parties, but they were
unable to agree on terms of the main extension contract. CGS
Section 16-20 states that if DPUC finds that any public service
company unreasonably fails or refuses to furnish adequate service
at reasonable rates to any person within the company’s service
area, DPUC may, after a petition and hearing, prescribe service
to be furnished by the company and prescribe the maximum rates at
which the service shall be furnished.
As a result of the hearings on the 16-20 petition, the DPUC
wrote the main extension agreement between the developer and the
WSCWC, a function it rarely performs. The parties failed to
execute this agreement and the DPUC created another docket, pursu-
ant to Section 16-41 of the General Statutes of Connecticut, to
show cause why WSCWC should not be fined, or why the developer’s
request for service should not be dismissed. A hearing on the
second docket was scheduled, but was not held because the parties
executed the main extension agreement on August 5, 1988. Construc-
tion of the main extension commenced on November 7, 1988. The
future residents of Broadleaf Circle will pay WSCWC rates of $199
per 72,000 gallons of water.
Lebanon Water ComDanv
This case shows the extensive time and effort required by
the State in taking over an existing system, if difficult legal
and technical issues are involved. In addition, this case illus-
trates the State’s power to order takeovers, even without coopera-
tion from the owner.
The Lebanon Water Company served 53 customers, most of which
were single—family units in a residential development called
Frankel Acres in Lebanon. Although treatment equipment existed
on the premises, it had not been used for a long time. The orig-
inal treatment had consisted of manganese greensand filters, pH
adjustment and oxidation. There appears to have been no operator
other than the owner.
24

-------
In 1977, DPUC ordered Lebanon Water Company to provide an
adequate and continuous supply of water to its customers. The
owner was required to maintain daily records regarding the quality
and quantity of water produced. On March 21, 1985, DPUC determined
that the owner had abandoned his company and was in non—compliance
with DPUC’s orders. A temporary receiver was appointed by the
Superior Court on July 8, 1985; Connecticut American Water Company
(CAWC) agreed to provide maintenance for Lebanon under a service
contract. The DPUC subpoenaed the owner, who did not appear at
the hearings or in court. Between July 1985 and January 1986,
CAWC unsuccessfully attempted to come to agreement with the owner
of Lebanon Water Company for a voluntary transfer of ownership.
The joint investigation by the DPUC and DORS into the adequacy
of service rendered by -the Lebanon Water Company revealed that
the owner of Lebanon Water had violated administrative orders
issued by DPUC and had abandoned his company as of August 1984.
In a series of Interim Decisions, CAWC was ordered to install
a temporary treatment system and to remove and test a piece of
asbestos cement pipe. CAWC was assured by the DPUC that CAWC
would recover all costs incurred in providing service to Lebanon
customers. The final decision ordering the transfer of ownership
was rendered uii March 19, 1987.
The DPUC transferred ownership to CAWC pursuant to CGS
Sections 16—262n and 16—2620. Connecticut American was ordered to
pay all of Lebanon’s debts. Further, they were ordered to make
the necessary capital improvements to Lebanon and to submit their
proposals by the specific timetable outlined in the decision.
CAWC was required to adjust and monitor the chlorination and pH
levels entering the distribution system and to set up a backwash
pump approved by DONS.
The owner of Lebanon refused to sign a quit—claim deed turning
over his company to CAWC. The DPUC then informed the owner that
he faced.a $50,000 fine for failure to comply with the transfer
order. The DPUC found that the business and other assets of the
owner were not kept in the owner’s name however, and collection
of the penalty would have been difficult. The DPUC ruled that
the water company could be transferred without the authorization
or signature of the owner, pursuant to CCS Sections l6—262n and
16—2620.
Before acquisition, the temporary receiver had not charged
Lebanon’s customers because the water had a high iron and manganese
content and was aesthetically unacceptable. Until all former
customers of Lebanon were metered, CAWC billed these customers at
their flat rate of $144 per year, which was set on September
1973. After being metered, the customers were billed at the rate
set for the Mystic Valley District of CAWC in a decision dated
April 30, 1985. The typical Mystic Valley customer pays $470
annually.
25

-------
To reduce costs, improve efficiencies, provide rate stability,
and broaden the rate base to support capital improvements, the
DPUC began integrating the divisions of large water companies and
equalizing rates among the divisions. The rates of the Mystic
Valley Division of CAWC were among the highest in the State. The
DPUC ordered CAWC to equalize its rates. The Mystic Valley
Division serves approximately 3,500 customers. The Division has
recently had to distribute, over a small rate base, the costs of
a new treatment and storage tank, the upgrading of a filter, and
a legal dispute over sludge disposal. Another division of CAWC,
the Greenwich Division, serves approximately 20,000 customers and
has rates that are average for the State, $242 for 72,000 gallons
of water annually. The customers of the Greenwich Division pro-
tested the equalization process; this issue is now on appeal.
However, since a stay of the DPUC’s order regarding the equaliza-
tion was not issued, the equalization of CAWC’s rates are now in
effect. The DPUC estimates that with equalized rates, all of
CAWC’s customcrs will pay approximately $269 per year.
Former Lebanon customers have not complained about their
water rates. DPUC considers the rates to be reasonable. DPUC
estimates that the rates charged to former Lebanon customers
would have been $1,000 per year if the Lebanon customers had not
shared the acquisition and upgrading expenses with the Mystic
Valley District customers.
2.5 Application to Other States
In this section, we evaluate whether elements of the
Connecticut program could be useful to other States. In addition,
we examine implementation problems that other States may need to
consider when drafting their own regulations. We have received
input on these subjects from water systems, developers, and State
officials.
Connecticut’s system for restricting creation has three
components:
— Certificate of Public Convenience and Necessity,
— The Connecticut Plan, and
— Takeovers of existing water companies that are failing.
The program of requiring new small systems to obtain a Certificate
of Public Convenience and Necessity has prevented non—viable
small systems from forming. The laws that empower the DPU C to
order a takeover of a failing water company have also enabled the
DPUC to reduce the number of existing non—viable small systems.
Together, these laws provide the DPUC and the DOHS with the
required authority both to prevent future small systems problems
and to react to existing ones.
26

-------
It is difficult to assess the success of the Connecticut
Plan because the process is just starting. As the program matures,
we may be able to judge its effectiveness in addressing small
systems creation.
State Characteristics that Enhance Program Effectiveness
Several characteristics of the State of Connecticut contribute
to the effectiveness of its program to restrict the creation of
non—viable small systems. Although we cannot quantify the extent
to which program success is dependent on these characteristics, it
is helpful to examine them and the effect they have on the process.
The following characteristics may affect program effective-
ness:
— Real estate values . Connecticut has the fifth highest
real estate values in the country. This may make the
increased costs associated with water system development
more acceptable, since this cost is small in relation to
the total investment.
— Water su plv . Connecticut has an abundant water supply.
If potable water were less plentiful, existing systems
would be less willing and able to take on troubled systems.
Further, the State would not order a takeover if the
water supply were not adequate to meet the additional
demand.
— State size . Connecticut is compact-—one can drive across
the State in about two hours. Connecticut’s size makes the
program more manageable; there are potentially fewer
remote areas that no water company would wish to service.
- Organizational cooperation . The DPUC has responsibility
in the Certificate of Convenience and Necessity process
for both private and public water systems, which is broader
than the responsibility usually given to a State PUC.
The Connecticut program is run cooperatively by the DPUC
and the DOHS, as dictated by law. Cooperation between
these two agencies is essential to the success of the
program. The DPUC provides expertise in rate setting and
determining the viability of small water systems. The
DOHS provides engineering expertise regarding water quality
and quantity.
— Legislative support . From the beginning, Connecticut’s
program has had substantial legislative support. There
were no objections to the Connecticut Plan when it was
being heard by the legislature, although towns expressed
dissatisfaction about being excluded from the WUCCs.
27

-------
- Strona State Agencies . The Connecticut DPUC and DOHS
take a central role in administering the State’s control
program. The certificate program and the regulations
concerning system takeovers might not be as effective in
a State that delegates this function to local authorities.
In this case, the State would either have to preempt local
authority or accept inconsistencies in local implementa-
tion.
Proaram Benefits
The Certificate of Public Convenience and Necessity sets
minimum design standards for emerging systems and encourages
small systems to combine with larger ones. The certificate process
has served to establish a formal review of system viability as
part of the permitting process. DONS has found that the certif i-
cate process’ primary benefit is the review that allows DONS to
investigate questions they have prior to approval. One element
of the process that makes the process work smoothly is that both
the DPUC and the DOHS work together to assess:
— feasibility of interconnection or formation of a satellite
systel!,
— financial viability of the potential water supplier, and
- adequacy of the water supply.
Another important element of the process is that, if towns approve
a water system that does not obtain a certificate from the State,
the town is responsible for that water system. This statutory
provision encourages towns either to cooperate with the State or
solve their- own local water problems.
As the Connecticut Plan is implemented, most water supply
problems may be solved at the regional level. Once exclusive
service areas are established, individual water companies should
accept responsibility for new and existing water systems in their
exclusive service areas. The water company is then obligated to
provide service whenever it is required in its exclusive service
area.
Area-wide planning gives water suppliers the opportunity to
meet and discuss common problems. In addition, establishing the
area—wide water supply plan encourages water companies to plan,
rather than simply react to problems as they arise. It also en-
courages interconnections with existing systems where feasible.
The laws and regulations allowing the DPUC to order takeovers
of existing water companies complement the certificate program by
giving the State the power to deal with existing non-viable small
systems. One element of the process is that the DPUC is supposed
to allow the acquiring water company to recover all reasonable
28

-------
costs associated with a takeover. Water companies would be far
more resistant to forced takeovers if they were not going to
recover the costs of acquisition. The case studies show that the
program need not result in unreasonable increases in water rates.
Potential Problems
In this section we identify problems that may make it dif-
ficult to apply Connecticut’s program in other States.
First, the certificate results in delays. It takes a new
system between six months and two years to obtain a certificate.
Given the cost of capital, delays caused by the process may in-
crease project costs. A similar problem arises in the case of
takeovers. Companies that are taken over are generally chronic
violators of DPUC and DOHS orders. Once selected for takeover,
the joint hearing process is lengthy, as demonstrated by the
Lebanon case ctudy.
Second, the certificate process may encourage developers to
install individual wells that are not regulated by the State. We
have no data to confirm or refute whether the process does this.
It is not possible to relate historical data on the number of
private wells h ,ith regulatory changes, since many variables,
including the health of the housing market and site geology,
would affect the decision to sink an individual well. The certi-
ficate regulations, however, stipulate that individual wells are
preferable to potentially non—viable small systems.
Third, one developer argued that the certificate program
will decrease the availability of affordable housing. First, the
program directly increases the costs of each housing unit. Second,
in order to avoid the certificate requirements, developers may
choose to install individual residential wells. Since a fairly
large lot is needed for an individual well, this program may
ultimately decrease the availability of affordable housing. The
State’s position is that this process helps to ensure that home-
owners have an adequate and safe drinking water supply.
One potential problem with the Connecticut Plan that may not
be acceptable in other States is the cost of developing individual
and area-wide plans. The State provides $100,000 grants for
regions to hire consultants to assist them in developing their
coordinated plans. Even this level of funding may not be adequate
in all regions.
Another problem with the Connecticut Plan is that having
each individual and area—wide plan reviewed by four State’ agencies
and the communities within the regions delays plan approval.
Other States may wish to consider including cities and towns as
members of the WUCCs rather than giving them review authority.
29

-------
Cost and Effectiveness of the Connecticut Program
This section discusses the financial commitment made by the
State of Connecticut to its various programs for restricting the
creation of potentially non—viable water systems. The sections
also considers the results of those programs.
Certificate of Public Convenience and Necessity
In the fiscal impact statement for the certification statute
84-330, the DOHS indicated that they would require five new posi-
tions, or $131,000 annually. The DPUC indicated that it would
not need additional personnel to implement the legislation.
The Connecticut Plan
DOHS allccates $100,000 per year for the seven regional
WUCCs to obtain assistance from contractors. Exhibit 2.5 shows
the Water Resources Task Force’s estimated agency costs associated
with the Connecticut Plan. This estimate includes non—community
water systems. Non—community systems were not included in the
actual implementation, which decreased the burden.
DOllS
Exhibit 2.5
1 Principal Analyst/Engineer
2 Senior Analysts/Engineers
2 Analysts/Engineers
1 Administrative Assistant
1 Clerk/Typist
Data Processing (one time only)
Other Expenses (cars, training, supplies)
Total
DPUC
$30,000
52, 000
48,000
15,000
13,000
100,000
30. 000
2 Senior Utilities Engineers
1 Utilities Engineer
1 Clerk/typist
other expenses (cars, training
computer time, supplies)
$288,000
Total
$56,000
24,000
13, 000
10. 000
Source: Water Resources Task Force Final Report.
$103 000
30

-------
SummarY
It appears that Connecticut has established a comprehensive
and effective program for restricting the creation of potentially
non-viable small systems. Since the program was initiated, the
DOHS and DPUC have denied two certificates and ordered the takeover
of 22 non-viable small water systems. It is likely that the
certificate program has encouraged many other small systems to
combine with larger systems.
The Connecticut Plan may be an effective method of restricting
the creation of non—viable small systems. However, because the
enabling legislation is fairly recent, it is too early to judge
its success.
31

-------
CHAPTER 3: GEORGIA CASE STUDY
3.1 Introduction
Restricting the creation of potentially non-viable small
drinking water systems encompasses two problems. The first is
the development and operation of new——often privately owned—-
drinking water systems where previously there were none. The
second is non-viability, the inability of a system to provide
safe drinking water due to any combination of technical, manage-
rial, and financial shortcomings on the part of the system owners
or operators.
To an outside observer, the southeastern state of Georgia
appears to have the administrative tools necessary to implement a
program to restrict the creation of potentially non—viable
drinking water systems. Robert McCall ascribes the following
control procedures to the State:
— Specific laws, regulations, or policies to control
creation of small water systems;
— Discouragement of construction when it is possible to
hook up with another system; and
— Requirement that small systems view and evaluate region—
alization, consolidation, contract service or another
alternative prior to applying for a permit. 1
Aspects of Georgia’s Rules for Safe Drinking Water and their
implementation by the State’s drinking water program do fit the
three proliferation control methodologies McCall identified. The
most notable are Trust Indentures and the permitting process.
— Trust Indentures arrange for the continued operation of a
bankrupt or otherwise non—viable drinking water system.
Only private owners of public water systems that will
serve homeowners are required to provide Trust Inden-
tures.
— The permit approval process gives Georgia Drinking Water
Program officials an opportunity to encourage prospective
private owners of public water systems to consider
hooking up to nearby publicly owned systems.
‘Mccall, Robert G., “Guidance Manual: Institutional Alter-
natives for Small Water Systems,” prepared for the American Water
Works Association Research Foundation, 1986.

-------
Closer examination of the drinking water program, however,
indicates that Georgia officials have chosen to target the non-
viability rather than the creation of drinking water system.
Part of the reason for this stems from the character of the
administrative tools themselves.
Trust Indentures have proven to be ineffective; they
provide no guarantee that a trustee would be more financially or
technically capable of running a system than would the original
owner. Although the State can encourage interconnection of
proposed drinking water systems with existing publicly owned
ones, it cannot compel these linkages.
The Georgia Drinking Water Program instead addresses issues
underlying drinking water system non-viability. For example,
rather than deny permit applications for proposed systems whose
design is substandard, the State works with applicants to correct
technical problems to make the systems viable.
Such efforts, however, address only infrastructure problems;
they do not consider the managerial, technical or financial
competence of small system operators. (Georgia does require
training and certification of public water system operators, but
operators of groundwater systems serving 25 to 999 persons, are
trained on—the—job and must pass no certification tests.)
Without an effective program to restrict the creation of new
potentially non-viable systems, Georgia must grapple with the
problem of systems that have become non—viable. Many of these
systems are constructed without the State’s knowledge or
approval; they lack permits, and have never undergone the plan
and specification review the State uses to mitigate or remedy
design flaws that could lead to non-viability.
The State
Georgia is the largest State east of the Mississippi River
and has an area of 56,056 square miles. More than 6.1 million
people live in its 159 counties, making Georgia the nation’s
eleventh most populous state.
Some 36 percent of Georgians live in rural areas. The State
estimates that 4 percent of its residents get their drinking
water from systems serving fewer than 1,000 people. Eighteen
percent of the State’s residents are served by non—public water
systems. Approximately 89 percent of the State’s 1,500 PWSs’
serve fewer than 3,300 persons. The following is the number of
small PWS5 which have State permits to operate, grouped by type
and population served:
34

-------
Population Served
Public Water Su lv 501—3300
Community: 1102 294
Non-Transient, Non-Community: 344 56
Georgia’s safe drinking water rules define a PWS as “a
system for the provision of piped water for human consumption, if
such system has at least 15 service connections or regularly
serves an average of at least 25 individuals daily at least 60
days out of the year.” (This is essentially the same as the
federal Safe Drinking Water Act (SDWA) definition.] A PWS is
either a “community water system” or a “non—community water
system.”
Community water systems have at least 15 service connections
used by year—round residents or regularly serve at least 25 year—
round residents. Non—community systems generally serve the
transient public and can include hotels, motels, restaurants,
campgrounds, and service stations. Some schools, factories, and
churches may also be considered non—community water systems.
Currently, approximately 170 surface water and 2,500 ground-
water PWSS have permits to operate in the State, as shown below.
Public Water Systems Surface Water Ground Water
Community: 160 1413
Non—transient, Non—community: 13 401
Transient Non—community: 0 700
The Small Systems Problem
As is true in other States, small drinking water systems in
Georgia are the most frequent violators of drinking water stand-
ards. In FY 1987, 99.05 percent of the Georgia Public Water
Supply Systems that violated microbiological maximum contaminant
levels (MCL5) were small systems, as were 97.5 percent of the
PWSS that violated microbiological sampling requirements. (Small
35

-------
systems, however, account for 89 perc r.t of Georgia PWSS. 2 )
During that year, 15 percent of the State’s small systems vio-
lated Bacti MCLs and 25.67 percent posted microbiological sam-
pling violations.
By contrast, only 1.17 percent of the State’s large PWSs
violated microbiological MCL5 and 5.26 percent violated micro-
biological sampling requirements, according to the Federal
Reporting Data System (FRDS). (Exhibit 3.1 presents a summary of
Georgia water systems, violations, and systems in violation for
Fl 1987.) State Drinking Water Program officials say the numbers
of non—compliers and persistent violators of monitoring/reporting
and MCL requirements have been dropping since the PWS program
began.
Most small system problems are blamed on operators’ lack of
(1) knowledge about their legal responsibilities, (2) managerial
and technical expertise, and (3) finances to support their
systems’ operations. For example, Georgia officials say that
most small system MCL violations occur because a monitoring
sample was taken improperly and thus contaminated, or because im-
proper disinfection following pump repairs or other work intro-
duced coliform bacteria into the water. 3
Small PWSs in Georgia are almost all groundwater systems.
Groundwater PWS5 serving between 25 and 999 persons are required
by Georgia’s drinking water rules to have trained operators.
However, these operators get their training on the job; they
attend no classes and take no tests. Consequently, the
Environmental Protection Division must watch these operators
closely to ensure that they put their training into practice.
The high turnover of small system operators, many of them part—
timers to begin with, also necessitates frequent site visits.
Georgia often addresses small system problems through
enforcement. During the permit application process, developers
work with the State’s Environmental Protection Division (EPD)
engineers to design and build systems that meet State regula-
tions. This assures the Drinking Water Program that the PWS’s
initial infrastructure is sufficient to provide safe drinking
water. Problems may arise, however, due to poor operator perfor-
mance or improper maintenance. When that happens, the State must
take enforcement action.
Small PWS5 with no State permit to operate are also enforce-
ment problems. In many cases, they started out too small to be
regulated by the State, but over the years they have grown to
2 Federal Reporting Data System, Report 07, 1987.
3 lnterview with Georgia Drinking Water Program officials.
36

-------
Exhibit 3.1
Georgia Water Systems, Viotations and Systems In Violation
FY 1987
Population Served:
501-1,000 1,001-2,500
Source: Federal. Reporting Data System, Reports 7, 19A, 19B, 1987
Note: Percentages nay not add due to roisiding.
25-100 101-500
Total
Total
2,501-3,300 €3,300
‘3,300 TOTAL
La
Systems
622
483
132
115
35
1387
171
1558
39.9%
31.0%
8.5%
7.4%
2.2%
89%
11%
100%
Po iz i latlon
36,000
121,000
95,000
186,000
103,000
541,000
3,892,000
4,433,000
NCL ViolatIons
202
67.8%
58
19.4%
17
5.7%
13
4.3%
2
0.7%
292
98.0%
6
2.0%
298
100%
N/R ViolatIons
290
52.62
200
36.3%
26
4.7%
18
3.2%
5
0.9%
539
97.8%
12
2.2%
551
100%
Average NCL VIolations
0.32
0.12
0.12
0.11
0.05
0.21
0.03
0.19
per system/year
Average l4/R VIolations
0.46
0.41
0.19
0.15
0.14
0.38
0.07
0.35
per system/year
Systems with NCL VIolations
139
64.0%
46
21.1%
14
6.5%
11
5. 1%
2
0.9%
212
97.7%
5
2.3%
217
100%
Systems with M/R Violations
179
48.9%
131
35.7%
24
6.5%
17
4.6%
5
1.3%
356
97.3%
10
2.7%
366
100%

-------
meet the State’s (and SDWA’s) definitic n of a PWS. In some
cases, these privately owned systems were PWS5 all along, but
their builders simply ignored the State’s permit requirements.
Often poorly designed and built, these non-permitted PWSs fre-
quently come to the Drinking Water Program’s attention through
complaints about their operation. The program then moves to
bring them into compliance with the State’s Safe Drinking Water
Rules.
3.2 organization and Legislative Structure
Administration
The Water Resources Management Branch of the Georgia
Department of Natural Resource’s EPD administers the State’s
Public Water System Supervision (PWSS) Program. Known as the
Drinking Water Program, the PWSS has an Engineering Unit and a
Permitting and Compliance Unit. In addition, the EPD’s Program
Coordination Branch oversees the operation of community and non-
community groundwater systems through its four regional offices.
Surveillance of all surface water systems is the responsibility
of the Drinkinq Water Program in Atlanta. (Exhibit 3.2 shows the
organization of Georgia’s drinking water program within the State
Department of Natural Resources.) Georgia has had primary
enforcement responsibilities for all PWSs in the State since
August 1977.
The Drinking Water Program’s duties include reviewing plans,
specifications, and engineering reports pertaining to water
system construction, renovation, and modification. Program staff
also review permit applications and recommend whether the
Department of Natural Resources (DNR) director should issue or
deny permits to operate publicly or privately owned PWSs. The
Drinking Water Program also performs sanitary surveys of surface
water systems, conducts technical assistance visits to both
surface water and groundwater systems, and collects data for
reports to EPA.
The Program Coordination Branch’s four regional offices work
with the Drinking Water Program to:
— maintain inventories of community and non—community
groundwater systems,
— perform scheduled sanitary surveys,
— ensure that trained or certified operators are employed
by all public water systems, as the drinking water rules
require,
38

-------
Exhibit 3.2
Georgia Drinking Water Program
Department
of
Natural Resources
I I
Environmental Other DNR
Protection Division Divisions
____________________ I I
U
0
Program Coordination Water Resources Other Program
Branch Management Branch Branches
Four Regional Other Program Drinking Water Other Program
Offices Offices Program Offices
I I
Engineering Permitting and
Unit Compliance Unit

-------
— perform periodic and follow-ur inspections of water
systems, and
— provide operational and technical assistance to help PWSs
meet the State’s Rules for Safe Drinking Water (Chapter
391—3—5).
The regional offices are also involved with other environmental
programs such as wastewater and solid waste.
Legislation
Statutory authority for the Georgia Drinking Water Program
lies in the Georgia Safe Drinking Water Act of 1977, which tracks
the federal SDWA. In addition, Georgia’s Certification of Water
and Wastewater Treatment Plant Operators and Laboratory Analyst
Act, as amended, mandates the EPD to require in permits that a
PWS operator be certified or trained in accordance with the class
of water distribution system. The Act also requires the EPD to
enforce the operator certification requirements.
Rules
Revised in August 1983, the Rules for Safe Drinking Water
(Chapter 391—3—5) establish the policies, procedures, require-
ments, and standards necessary to implement the Georgia SDWA, and
to carry out the purposes and requirements of the federal SDWA.
Some of the rules——such as those mandating State review of water
system plans and specifications or barring cross—connections
between PWSs and non-permitted systems--predate the Georgia SDWA
drinking water program.
A unique rule in Georgia requires that privately owned PWS5
serving homeowners obtain a Trust Indenture to ensure continued
drinking water service. The State intends this requirement, Rule
391—3—5—.04 (3), to protect homeowners from service interruptions
due to bankruptcy of the PWS operator or other causes. Trust
Indentures are not required by the Georgia SDWA. They are an
example of the additional requirements the EPD Director can
impose to carry out the Georgia SDWA and are discussed in detail
below in Section 3.3.
Permits to operate PWSs are required by Rule 391-3-5-.l7.
The EPD issues permits for up to 10 years, and the DNR Director
can revoke, suspend, or modify a permit for cause. Permits may
include terms, conditions, and compliance schedules deemed
necessary by the Director to meet the requirements of the Georgia
and federal SDWAs.
Under Rule 391—3—5-.04, the EPD must approve the source of
supply for a PWS and its purification, storage, and distribution
methods before a system is constructed or substantially enlarged,
40

-------
renovated or repaired. EPD approval of routine maintenance is
not required, of course. This rule, 391-3-5—.04 (4), also
requires any person planning to own or operate a PWS to consider
connecting to a publicly owned PWS if:
- one is within 500 feet of the proposed privately owned
system,
- the publicly owned system can furnish drinking water to
the proposed private system at adequate pressure and
flow, and
— the private system developer meets the construction
requirements of the publicly owned system and the
requirements of the State’s Rules for Safe Drinking
Water.
Whenever it can, EPD encourages private applicants to tie into
existing municipally owned water systems, rather than construct
their own systems.
The rules cited above are the EPD Drinking Water Program’s
basic administrative tools for confronting the creation of non-
viable small drinking water systems. In addition, Drinking Water
Program officials say they have two others which give them some
leverage over PWS5. They are (1) the requirements for operator
certification and (2) a 1984 amendment to the Georgia SDWA
requiring privately-owned PWS5 that frequently violate contami-
nant or water supply standards to post performance bonds or
letters of credit up to $50,000 to help ensure compliance with
these requirements. Neither tool, however, addresses the problem
of new non-viable small systems.
Mechanics
Permits for all publicly and privately owned community water
systems are issued by the EPD Water Resources Management Branch’s
Drinking Water Program from its Atlanta office. The Drinking
Water Program handles surveillance of all PWSs with surface water
supplies. The four regional offices of the EPD Program Coordina-
tion Branch handle the permitting for all non-community systems.
The regional offices are also responsible for surveillance of all
groundwater systems.
Obtaining a permit to operate a PWS is a five-step process. 4
1. After obtaining planning and zoning approvals from local
government, a developer requests EPD permission to’ drill
a well. If the PWS is to be privately owned, the
4 lnterview with Georgia Drinking Water Program officials.
41

-------
applicant must also present letters from area publicly
owned systems stating that they will not serve the
proposed private PWS. If the private system will serve
homeowners, a Trust Indenture must also be provided.
2. EPD engineers review the report to ensure that the
project conforms with the specifications of the Safe
Drinking Water Rules. If the engineers give a favorable
recommendation, the EPD approves the applicant’s request
to drill a test well.
3. After drilling the test well, the applicant performs a
24—hour capacity test and draws samples for chemical,
radiological, and microbiological analysis, as required
by Rule 391-3—5-.06 (d). EPD reviews these test results,
plus well logs, to determine whether to approve the well
as a drinking water source. The applicant also submits
detailed system plans for review by EPD engineers.
4. Once the engineers approve the plans, and the proposed
water source is accepted, EPD notifies the public of its
intent to issue a permit to operate the PWS (Rule 391-3-
5-.17 (7)). At least 30 days are allowed for public
comment.
5. The permit to operate a PWS is drawn up and issued at the
end of the public comment period. The State does not
charge a permit application or issuance fee.
At least 45 days are required to complete this process, once
the plans and specifications of a proposed system are received in
Atlanta and found to be satisfactory. The average time is closer
to 90 days due to increased demands on EPD staff.
EPD officials estimated in their program grant five—year
plan that 325 engineering reports, plans, and specifications for
community water systems and 20 plans and specifications or non—
community systems would be approved during Fl l988. (Program
officials estimate 3.8 work—years are spent on plan reviews
annually.) From October 1, 1986 to June 30, 1987, the Division
approved 380 plans, specifications, and engineering reports for
community systems and 41 plans and sFecifications for non—
community water system construction. Because EPD engineers work
5 GeorcTia Public Water System Supervision Proaram Grant Five
Year Plan , 1987, 18.
____ 32.
42

-------
out system details with developfrs in the planning stage, permit
applications are rarely denied.
Although non-community PWS permits are the responsibility of
the Program Coordination Branch’s four regional offices, Drinking
Water Engineers are available directly through a “technical
channel” to discuss plans, specifications, cross—connections or
other problems. Policy questions, however, are handled strictly
through channels.
PWS permitting is a State function; however, PWS developers
must also address some local requirements. Some Georgia counties
regulate aspects of PWS design. For example, Oconee County, some
50 miles east of Atlanta, regulates the size of water mains to
ensure that private water systems can accommodate fire hydrants
if and when they are connected to publicly owned systems. Still,
county regulation of public water systems is spotty; Madison
County, northeast of Oconee, has no such regulations, and
Rockdale County, about 20 miles from Atlanta, is adopting the
water system regulations of its county seat, Conyers.
33 Implementation of Controls
Assessing the State’s Tools
The Georgia Drinking Water Program’s basic administrative
tools to restrict the creation of non—viable new small water
systems are the Trust Indenture and the permit process. Drinking
Water Branch officials say these mechanisms fall short of cur-
tailing the development of small PWS5 that turn out to be non-
viable.
In reality, the Trust Indenture is no guarantee of the
continued operation and maintenance of privately owned PWSS
because there is no way to force a trustee to run a PWS properly.
The permit process addresses only technical issues of system
design and construction; it does not guarantee that a small
system will be run properly or that the permit holder will have
the technical or managerial skills or the financial capacity
necessary to deliver safe drinking-water.
Although Drinking Water Program staff are undoubtedly
concerned about non—viable small system proliferation, they lack
creation—control tools like those found in the other States
reviewed in this study. Specifically, no comprehensive mechanism
exists in Georgia to (1) manage the State’s water supply, (2)
ensure full—cost financing of new systems or (3) make independent
judgments about the need for, and viability of, proposed systems.
T lnterview with Georgia Drinking Water Program officials.
43

-------
Consequently, rather than try to restrict creation proactively,
the State reacts to small system non-viability problems through
enforcement and technical assistance. (The permit process may,
however, delay the time when a small system becomes non—viable.)
permits to Operate PWSs
The permit approval process allows the Drinking Water
Program to influence the development of privately owned small
PWSs so they meet State technical standards. The Rules for Safe
Drinking Water include standards for drinking water wells,
springs, water treatment facilities, distribution systems,
storage tanks, disinfection, and operation.
EPD engineers’ plan review includes evaluating:
- the location and siting of the water system,
- the quantity and quality of the water supply source(s),
and
— the hydraulic design of the water system’s components
including water main size, material, and appurtenances.
The engineers can work with developers to solve design problems
so that proposed systems comply with State regulations. Once a
proposed system meets State standards, EPD will issue a permit.
The Georgia rules require every prospective PWS owner or
operator to consider tying into an existing government owned PWS,
if one is within 500 feet of the proposed private system, rather
than develop and operate a separate system. EPD officials wanted
to require these connections, but that notion was ruled out
during a legal review of the regulations in 1983. State lawyers
held that the EPD cannot require a PWS to accept a customer.
The Drinking Water Program has successfully encouraged some
privately owned PWSs to tie into public ones. However, they were
existing PWSs that had no permit when they came to the Drinking
Water Program’s attention. No statistics are available on how
often private systems are tied into public ones. 8
Trust Indentures
The Trust Indenture developed by the Georgia Attorney
General’s staff and used by EPD is intended to provide “an
acceptable legal basis for assuring uninterrupted service and to
provide relief for property owners in the event of suspension of
service or improper operation by the owner.” Service disruptions
44

-------
have been caused by owners shutting down the water system or
failing to repair leaks, pump failures, and other problems.
Under the Trust Indenture, a trustee promises to operate a
grantor’s PWS if the grantor fails to run the system properly or
is unable to operate it at all. In return, the trustee can
deduct a fee from the gross charges collected from each customer.
EPD prefers that a trustee be a governmental authority.
However, an established community utility, approved mortgagee, or
title company is also acceptable. Property owners served by the
water system may also form an association to act as trustee under
Rule 391—3-5-.04. If a trustee is neither a unit of local
government nor an approved mortgagee, the grantor must show EPD
that no conflict of interest exists between the grantor and the
trustee.
Georgia requires Trust Indentures only from privately owned
systems delivering drinking water to property owners. A Trust
Indenture is not necessary if the homeowners also own the water
system or if the PWS serves rented property such as mobile home
park lots. The State intends the Trust Indenture to protect
homeowners from drinking water cutoffs; it presumes renters cp
move if they lose, or are unhappy with, their drinking water.
Drinking Water Program officials, however, feel that Trust
Indentures are ineffective. State officials must go to court to
invoke a Trust Indenture, but few PWS problems are adjudicated,
so the Trust Indenture is rarely used. (Officials could recall
only one or two cases in which the Trust Indenture was enforced.
They were unable to locate the file for the most recent case.)
PWS owners or operators whose customers appear most in need
of the protection Trust Indentures offer have the most difficult
time in obtaining trustees; there is no incentive for anyone to
become a trustee. The only possible benefit to a trustee would
come from service fees, but generally the revenues from a finan-
cially troubled small water system do not cover operating ex-
penses, so no funds for trustee fees would be available. (Nor
can EPD set a price for water in the Trust Indenture that would
guarantee sufficient revenues.) 10
Drinking Water Program officials plan to recommend that the
Board of Natural Resources drop the Trust Indenture requirement.
They believe Trust Indentures do nothing to ensure the continuity
of operation and maintenance of privately owned PWSs.
9 lbid.
‘°Ibid.
45

-------
RegionaliZatiOn
Some Georgia counties are pursuing regionalization. For
example, the City of Conyers has worked with several developers
in Rockdale County to ensure that proposed PWS5 meet the city’s
technical standards, and the city has taken over their systems.
In early November, Conyers and Rockdale County are expected to
adopt a single set of water system regulations. This will give
developers one set of requirements to meet when installing water
systems in the county.
In the late 1960s, county officials authorized Conyers to
operate all the publicly owned water systems in Rockdale County.
The city owns and operates all the publicly owned drinking water
and sewer systems in Rockdale County. Conyers purchases water
from two adjacent counties, and maintains the State permits on
five wells that could be used in an emergency.
Conyers has taken over three private systems serving sub-
divisions in Rockdale County. In each case, city officials
worked with developers to ensure that the PWS5 met the city’s
standards. Once they did and the EPD had indicated that the
systems qualified for permits to operate, the developers deeded
their systems to Conyers, which obtained the State permits.
The first system that Conyers took over serves a 42—lot
subdivision called Chimney Ridge. Three homes are occupied and
four more are being built. The PWS’s well pumps more than 100
gallons per minute.
Conyers expects the Chimney Ridge subdivision to tie into
the city’s system within two years. The city’s 12-inch water
mains will be extended three miles at city expense.
The second water system deeded to Conyers is in a subdivi-
sion called Sierra View. The developer of that subdivision
improved the existing water system so that it surpasses State
regulations regarding pump size and water pressure. Only one
house is currently under construction in this subdivision.
Woodland Hills is the third subdivision whose water system has
been taken over by Conyers. No houses have yet been built there,
but the water system boasts five wells and a 5,000 gallon storage
booster.
Six certified operators oversee Conyers’ groundwater PWS5.
Fire hydrants have been installed in those subdivisions, but
they are valved off until the subdivision is tied into the city’s
system. Occasionally, homeowners on the well systems complain
about paying the same rates as homeowners on city mains, even
though the groundwater systems provide no fire protection. The
water department works with developers to ensure that subdivision
46

-------
residents realize they will have relatively low water pressure
and no fire hydrants before they buy their homes.
Conyers wants to eliminate drinking water wells throughout
Rockdale County because they are vulnerable to power outages and
other problems. Conyers is, however, encouraging homeowners to
drill wells for irrigation, lawn sprinkling, and similar uses.
Well water would be cheaper than metered water for such activi-
ties, and would be a way of avoiding bans on municipal water use
during droughts. 11
3.4 Case Btudies
Non-Permitted Systems
Permits are fundamental to the Georgia Drinking Water
Program. Without a permit application to alert them that a PWS
is being planned, Drinking Water Program officials have no way to
track PWS development. Consequently, many Georgia PWSs are
operating without permits. -
EPD often learns of such systems through complaints about
service. Sometimes, regional staff of the Program Coordination
Branch discover non—permitted systems on their own. The Drinking
Water Program has assembled an information package for Program
Coordination Branch staff to use in those cases. The packet
includes a form letter notifying the owner that the system
requires a permit, a permit application, and a memo that explains
what the owner must do to obtain approval of the well as a public
water system source.
The Drinking Water Program requires non-permitted systems to
comply with State drinking water rules; sometimes it encourages
their connection to a publicly owned system. Some cases are
resolved by the system owner, who turns a public water system
into a private one by reducing the number of connections per
well. Once a PWS is considered private, the EPD is powerless to
regulate its operation or to enforce its safe drinking water
rules. (The county health departments handle problems due to
poor water quality of non-public water systems, which are not
regulated by the State.)
There are approximately 200 active cases of non—permitted
systems in the Drinking Water Program’s files, and one person
works with these systems part time. 12 This section presents four
Interview with Conyers water superintendent.
12 lnterview with Georgia Drinking Water Program officials.
47

-------
examples of unpermitted systems whose status the Drinking Water
Program resolved.
Old Hickory Heights
This case is an example of a non—permitted, privately owned
public water system that was connected to a nearby publicly owned
and operated PWS.
In December 1986, the manager of Georgia’s Groundwater
Program was informed of an unpermitted Community Water System
serving 16 units at Old Hickory Heights in Carroll County,
Georgia. Shortly thereafter, the owner of the system was sent a
letter by the State saying that his system met the definition of
a PWS. As a result, the owner must obtain a permit to operate.
The owner never answered this letter, so the State sent
another, on June 15, 1987, warning him that he was still in
violation of Georgia’s Safe Drinking Water Act. The letter set
a deadline of July 15, 1987 for the owner to provide various
information to the DNR.
On July 16, 1987, the State received an application from the
owner for a permit to operate a PWS. Ten days later, the
Drinking Water Program informed him that the EPD still needed a
Raw Water Chemical Analysis and the Trust Deed. Six months
later, EPD received the Chemical Analysis and was informed that
the Trust Deed was being prepared.
In February 1988, an environmental engineer in the
Groundwater Program told the owner that Old Hickory Heights’
storage and distribution system was inadequate to serve its 16
units. Extensive services would be needed to accommodate addi-
tional units. As a result, the engineer recommended that the
owner connect his water system to the Carroll County Water System
and abandon his wells. The engineer asked for a response to this
recommendation by March 15, 1988.
The next day, the PWS owner told the Drinking Water Program
that Carroll County would not allow him to connect to their
system due to line size differences. Program staff then outlined
the owner’s alternatives:
- upgrading lines to Carroll County standards;
- drilling an additional well and upgrading storage;
— adding more storage, possibly without a new well.
The owner said he would investigate his options and respond.
48

-------
He did not respond. Three months later, in May 1988,
another letter was sent to the owner, this time from the chief of
the Water Resources Management Branch, asking him for a com-
pliance schedule for connecting to the Carroll County Water
System. The branch chief warned that if the owner failed to
respond by June 1, 1988, he would be “subject to civil penalties
of up to $5,000.”
Again, the owner did not respond, so the State sent him a
Consent Order with a fine of $5,000. Finally, at the end of
July, the owner of Old Hickory Heights Subdivision stepped in to
help the PWS owner bring the water system into compliance. The
subdivision owner assured the EPD that they will comply with the
regulations. He met with members of the Permitting and
Compliance Unit of the Georgia DNR on August 12, 1988 to discuss
his plans to connect with the Carroll County System. Soon there-
after, the Department received a compliance schedule.
It took a year and a half to bring this system into compli-
ance by tying in with the existing publicly owned PWS. In the
end, connecting to an existing system was easier than obtaining a
permit to operate a separate PWS.
Crum ton Mobile Home Park
This case study concerns a mobile home park that grew until
it was large enough to be considered a public water system and
therefore needed to obtain a permit to operate. Like the preced-
ing case, this one was resolved by hooking up the private system
to a public PWS.
In September 1977, the mobile home park (MHP) owners sub-
mitted an Application for a permit to operate a public water
system. At that time, its groundwater system served six mobile
homes and 13 people, so it did not warrant a permit. The EPD
notified the MHP owners of that fact and noted that a permit
would be necessary if the system became large enough to meet the
State’s definition of a PWS.
Ten years later, the EPD learned that the MHP water system
had grown and was now a PWS. EPD sent a letter informing the MHP
owners about what they must do to comply with State regulations
and obtain a permit to operate a PWS.
In June 1988, the EPD received a permit application.
Unfortunately, not all of the requirements had been fulfilled,
and Drinking Water Program staff told the MHP how to comp],ete the
application process.
In July, the MHP notified the State that it had decided to
connect with the nearby City of Carroliton Water System. The EPD
concurred with the decision and said that the MHP must disconnect
49

-------
its well. The well, if abandoned or not used for another accept-
able purpose, would have to be sealed and plugged in a manner
approved by the EPD.
The MHP owners decided to keep the well for their own use.
Crumpton Mobile Home Park was connected to the City of Carrollton
System on September 16, 1988.
W.N. Dollar System
This case study illustrates how water system owners can
avoid the responsibility of operating a public water system by
reducing the number of connections per well. The “loophole” here
originates in the definition of a PWS as having at least 15
service connections or regularly serving 25 people daily at least
60 days of the year.
An environmental specialist working for EPD’s Southwest
Regional Office had been trying for eight months to get the Port
City Day Care Center permitted as a non-community water system.
A nearby privately owned well supplied the water for the day care
center until it could drill its own. During April, May, and June
1987, the operator of the Port City Day Care Center sampled the
water from that private well, and seven water samples exceeded
the coliform bacteria MCL.
During a July 14, 1987 meeting with the private well owner
and the day care operator, the State environmental specialist
discovered that the well was technically a public water system
because it served 16 residential connections. The case was then
handed over to the EPD’s Drinking Water Program in Atlanta so it
could write a permtt for the PWS.
The Drinking Water Program began the permit process by
informing the well owner that he must apply for a permit to
operate his water system. The letter explicitly outlined what
needed to be done to comply.
The owner did not respond. Another letter was sent by the
Program saying that he was still violating Georgia’s SDWA. It
set a new deadline of October 26, 1987.
There was still no response, so the State sent a Consent
Order, including a $2,500 fine, on November 4. The well
owner was required to do the following by December 4, 1987, or
face further legal action:
— complete and return an application for a permit to
operate,
— submit a copy of a Trust Indenture,
50

-------
- submit the plans and specifications of the water system,
— provide information necessary for the State to approve
the well as a public water supply source, including raw
water quality data and a complete well construction data
sheet, and
— pay a $2,500 fine.
The EPD was concerned about the MCL violations that its Southwest
Regional Office had recorded for this water system.
By March 24, 1988, an Administrative Order (AO) was prepared
and sent by EPD to the system owner, who had failed to respond to
the Consent Order sent on November 4. The AO required him to
take the actions cited above, plus provide public notification
regarding the MCL and failure—to—monitor violations that occurred
at his system since April 1987. He was also ordered to maintain
and operate his system in compliance with Georgia’s rules. The
AO and a letter were sent to the Senior Assistant Attorney
General to inform him of the non—complying water system and its
MCL violations. The well owner made no response until June 1988,
when a meeting was planned to discuss the Administrative Order.
On June 30, 1988, the owner met with the Drinking Water
Program manager, an environmental specialist, and the Special
Assistant Attorney representing the EPD on this case. The
agreement made as a result of this meeting was that the owner
would close the system by having property owners drill their own
wells. The owner had to provide a letter from the Decatur County
Health Department approving the individual wells and septic
tanks, and a schedule of compliance was due at the Division by
August 1, 1988. By forcing some property owners to drill their
own wells, the owner could reduce the total number of units
served by his well system until his system was no longer con-
sidered a public water system (i.e., until it had fewer than 15
connections).
During this period, the owner was also involved in bank-
ruptcy proceedings. For this reason, and since he was fulfilling
the agreement made on June 30, the Division decided to drop the
Consent Order fine and not to proceed with the Administrative
Order. As of August 19, 1988, the system had only 11 service
connections serving 19 people, removing it from the State Drink-
ing Water Program’s jurisdiction.
This case took over a year to complete. In the end, a small
system was prevented from forming, but the quality of the water
supplied to the customers of the unregulated water system may not
necessarily be improved. (The county health department is now
responsible for dealing with any health problems due to poor
51

-------
water quality.) The State could not solve the problem of the MCL
violations observed in 1987 as long as the owner avoided regula-
tion.
The Port City Day Care Center is drilling its own well, and
an environmental specialist in the Southwest Regional Office is
again working to obtain a non—community water system permit for
the center. -
Kings Bay Mobile Home Park
This case study shows how a non—permitted PWS was brought
into compliance. Unlike the water systems in the first three
cases, this PWS obtained a permit.
The Kings Bay Mobile Home Park Water System was discovered
in early August 1987 during a routine PWS Sanitary Survey for
Community Groundwater Systems. The park’s system had 58 service
connections serving 50 people, enough to qualify as a public
water system.
State officials notified the PWS owner that she would have
to obtain a permit. She failed to comply with the EPD’s require-
ments on time, so the assistant director of the Department of
Natural Resources sent her a Proposed Consent Order including a
$2,500 fine. The maximum fine is $5,000.
In a long letter to the DNR, the owner explained why she and
her husband had not complied. She sent the Consent Order back to
the DNR with a counter-offer of $1,000. In this letter, the
owner claimed that she and her husband were “victims of circum-
stances” beyond their control.
Apparently, the MHP had existed since 1976 and was now one
of the largest in Camden County. The current mayor of St. Marys
was the original owner and developer of the park. He never
obtained a permit for the water system. The former St. Marys
city manager, who was also president of a community planning
company, bought the park from the mayor in October 1983. The new
owner also did not apply for a PWS permit. The county sanitar-
ian, who had been on the property several times in the past two
years during the installation of new septic tanks, never asked
about the water system or whether they had a permit, according to
the present owner.
The present owners bought the park in October 1985 and were
never informed that a permit was required for the water system.
In her letter the owner wrote, “It seems to me that among these
people (the mayor, a former city manager and land planner, our
attorneys, or the county sanitarian) at least one of them should
have known about and informed us of the need for a rm”
52

-------
Furthermore, the owner c1 imed that she and her husband had
upgraded the water system in 1986 to increase the water pressure
throughout the system. She states in her letter, “..• even
without knowing that this law was in effect, we greatly improved
the conditions within the park.”
These were some of the reasons the owner used to justify the
reduced fine of $1,000 which she proposed. The Division accepted
the smaller fine.
Five months later, the owner had completed all the permit
requirements, and a permit to operate a PWS was issued.
53

-------
CHAPTER 4: MARYLAND CASE STUDY
4.1 Introduction
The Annotated Code of Maryland provides the Maryland
Department of the Environment (MDE) and municipalities with author-
ity to regulate water systems. Although these laws fulfill many
functions, this chapter will focus on their use in controlling
the creation of new, potentially non—viable small water systems.
The Health—Environmental laws form the basis of Maryland’s com-
prehensive authority to oversee water systems and may contribute
to the State’s strong compliance record and low rate of small
system creation. The highlights of Maryland’s control program
are as follows:
— Reviews of New Systems . MDE requires submission of plans
by all proposed water systems and approves water system
design and construction. Title 9—206 allows MDE discre-
tionary authority to determine the scope of plans required.
MDE has implemented this law by requiring a financial
management plan and an operation and maintenance plan
from all proposed privately owned water systems. New
privately owned systems may also be required to hire a
certified water treatment superintendent and operator.
- Escrow Accounts . Title 9-2 and the Code of Maryland
Annotated and Revised (COMAR) 26.04.03 (DHMH 10.17.03)
authorizes MDE to require any financial assurances from new
privately owned systems it deems necessary to assure con-
tinued viability.
— Area-Wide Planning . Title 9-5 requires each county to
submit a plan for water service. The counties update
and MDE reviews these plans every two years. Plans include
service area agreements. and proposed financing for each
new water system. Planning for efficient present and
future water service is critical in reducing the demand
for new small water systems.
- Deterrent Effect of State Authority . Under Title 9-2, MDE
may order the appointment of a water system manager,
alterations to a water system, main extensions to provide
service, or construction of a new public water system when
operation is inefficient or endangers public health. The
costs associated with these MDE orders are incurred by
the person served with the order. Also, municipalities
may take over privately owned water systems by condemnation
or agreement. These State and county authorities may
encourage owners of proposed small systems to consider
thoroughly whether they can adequately operate a water
system and may discourage the creation of new systems
that lack adequate resources for continued viability.

-------
State Profile
Maryland is a relatively small State with an area of 9,837
square miles. This predominantly urban State has a population of
about 4.2 million people, of which only 7.2 percent reside in
rural areas. Although most of Maryland’s residents receive water
from large systems, more than 90 percent of the water systems in
Maryland serve populations of fewer than 3,300 people. During
1987, 92 percent of Maryland’s bacti Maximum Contaminant Level
(MCL) violations and 94 percent of its monitoring and reporting
violations occurred in this group. (See Exhibit 4.1).
Maryland is characterized by several large metropolitan
areas where the majority of its population is located. Population
density facilitates controls on the creation of new systems. It
is more difficult to resolve the problems of isolated water systems
that do not have a nearby system to which they can interconnect
or share facilities.
The Maryland Code of Regulations (COMAR) defines a public
water system (PWS) as a system having at least 15 connections or
regularly serving an average of 25 people daily at least 60 days
per year. Requirements for these systems are essentially identical
to the Federal Safe Drinking Water Act (SDWA). State construction
planning and permitting requirements apply to systems as small as
those serving two lots. A community water system in Maryland is
any PWS which serves at least two lots throughout the year. Non-
community water systems serve motels/hotels, medical facilities,
restaurants, schools, industrial p ,rts, and other facilities not
connected to a community water
History
Maryland is unique among the .Lates in this study because it
has been implementing controls on n systems long enough to
reduce dramatically the rate of incretse of non—viable systems.
In the late 1950s, an unanticipated increase in the development of
mobile home parks and apartments led to the sudden numerical
growth of small drinking water systems.
The State reacted to the growing nwnber of potentially non-
viable water systems by enacting Article 43 Section 387C of the
Annotated Code of Maryland in 1969. This legislation was the
original authority for the current stringent controls that Maryland
has placed on privately owned drinking water systems.
The State’s experience with small drinking water systems has
shown that there are four categories into which most small system
problems fall:
56

-------
ExhIbit 4.1
HaryLand Water Systems, VioLations and Systems In Violation
FY 1987
Source: FederaL Reportir Data System, Reports 7, 19A , 1%, 1987
Note: Percentages may not add due to rotaiding.
PopuLation Served:
.
Total
25-100 101-500 501-1,000 1,001-2,500
2,501-3,300
Total
(3,300
3,300 TOTAL
U I
Systems
219
36.7%
204
34.2%
46
7.7%
9.9%
1.8%
90.3%
9.7%
100%
Population
12,000
50,000
36,000
99,000
31,000
228,000
3,211,000
3,439,000
HCL VioLations
10
22.2%
17
37.7%
3
6.6%
12
26.6%
1
2.2%
43
95.5%
2
4.5%
45
100%
N/RViolatIorm
52
65.0%
18
22.5%
6
5.0%
3
3.7%
-
-
77
96.25%
3
3.75%
80
100%
Average MCL ViolatIons
per systeuvyear
0.04
0.08
0.06
0.20
0.09
0.07
0.03
0.07
Average IS/ft VioLations
per system/year
0.23
0.08
0.08
0.05
-
0.14
0.05
0.13
Systems with HCL Violatlans
9
31.0%
14
48.3%
2
6.8%
1
3.4%
-
-
26
89.65%
3
10.35%
29
100%
Systems with H/ft VioLations
28
58.3%
10
20.8%
4
8.3%
3
6.25%
-
-
45
93.75%
3
6.25%
48
100%

-------
— poor management,
— inadequate staff or funds for operation and maintenance
of facilities,
— lack of proper training, and
— inadequate rate base due to a small number of customers.
These problems eventually lead to noncompliance.
4.2 Organization and Legislative Authority
Administration
The Maryland Department of the Environment (MDE) has juris-
diction over drinking water issues. Departmental reorganization
in July 1987 consolidated these responsibilities from the Depart-
ment of Natural Resources (DNR) and the Department of Health and
Mental Hygiene (DHMH). Within MDE, the Water Management Adminis-
tration has two offices, the Water Supply Program Office and the
Water Quality Programs Office. (See Exhibit 4.2.) The Water
Supply Progr Office concentrates on protecting public health
and providing citizens with sufficient quantities of water. This
includes monitoring and development of construction standards.
The Water Quality Programs Office is responsible for system plan-
fling and permitting. MDE’s authority is described more fully in
the sections on statutory and regulatory authority.
Statutory Authority
Title 9 of the Health-Environmental Code governs public
water systems and contains the following subsections that relate
to our study.
Title 9-2, “Regulation by the State,” grants MDE broad author-
ity for regulating both the initial and continued operation of
public water systems. Title 9-2 allows MDE the authority to
compel proper water system operation from existing systems and to
require evidence from new system that they will remain viable
entities. These laws also authorize grants to counties for plan-
ning and authorize municipalities to raise funds to carry out MDE
orders to correct problems. Included in this title are laws
establishing the following:
58

-------
Exhibit 4.2
Maryland Drinking Water Program
Department of
the Environment
I I
Water Management Other
Administration Administrations
I ____________________________________________________________________ ____________________________________________________________________ _________________________________________________________________
______________ I I I
Cheeapeake Bay Water Water Engineering and Comm. Sewerage
& Residential
And Special Supply Quality Construction Sanitation
UI Project. Program Programs Program Program
‘0 Program
Water Supply I Water
Leolifly Insp.otten Qu.Iity PlannIst
Divt.Ion DI Iston
3p.CICI Wat.r Water Quality
Supply Program Monitoring
DivIelon Division
Project Standards &
Management Certification
Divi.ion Division
Watershed
Non—Point
Source Division

-------
- The Sanitary Facilities Fund finances the development of
water system plans by the counties and the Washington
Suburban Sanitary Commission. 1
- MDE has the duty to review the design and construction of
all public water systems and examine all existing public
water systems. In addition MDE is granted the authority
to “compel their (water system) operation in a manner
that will protect the public health and comfort, or order
their alteration, extension, or replacement by other
structures if the Secretary (of MDE) considers it to be
necessary.
- The submission to MDE of plans by all public water systems,
including financial, managerial and other information MDE
deems relevant, is required. 3
- XDE has the authority to require the appointment of an
approved manager if MDE finds that a water system is
inefficiently operated, a potential hazard or a nuisance. 4
— MDE has the authority to order alterations or extensions
of public water systems, and the authority to install a new
syst iu or plant as MDE finds necessary to ensure health. 5
- If MDE finds that the absence or inadequacy of a public
water system jeopardizes the health of a county or locale,
MDE may order installation or completion of a public
water system on a schedule. Upon this finding, MDE may
also require the installatioh of any devices, methods or
regulations it deems proper. 6
- Publicly owned water systems are granted the authority to
issue bonds, stocks or notes without prior legislative
approval or popular vote to fulfill a MDE order. No public
funds raised under this law may be expended without prior
1 The Annotated Code of Maryland, Health-Environmental Title
9—203, 1985 Cumulative Supplement, 80. (Note that in 1987, sub-
titles were renu ibered and 9-203 become 9-218.)
2 Annotated Code, Health-Environmental Title 9-204, 1982, 350.
3 op. cit. , Title 9—206, 352.
4 op. cit. , Title 9—207, 353.
cit. , Title 9—208, 354.
6 0p. cit. , Title 9—209, 355.
60

-------
approval of MDE. These bonds, stocks and notes are free
from State and local taxation. 7
Title 9-5, “County Plans,” requires the submission to MDE of
county plans for all public water systems. This area—wide planning
defines areas that will and will not require water service in the
next ten years and must describe how any proposed water systems
and their continued operation will be financed. MDE may approve,
disapprove or require changes in county plans. Furthermore,
Title 9-5 allows MDE to require installation of, or connection to
public water systems, or system design compatible with existing
public water systems to allow future interconnection. County
plans may be funded under Title 9-2, the Sanitary Facilities Fund. 8
Title 9-7, “Regulation by Municipalities,” grants municipali-
ties the authority to take over a failing, privately owned public
water system, with or without owner consent. 9
Regulatory Requirements
Maryland regulations that receive authority from The Health-
Environment Article (9) are s iinmarized below. These regulations
are in various stages of recodification following the 1987
Departmental reorganization, so both reference numbers have been
listed.
- COMAR 26.03.01 (DHMH 10.17.O1L “Planninu Water SuDD1y and
Sewerage Systems.” effective July. 1975 . These regulations
further describe the requirements of Title 9-5 for County
Water and Sewerage Plans. The regulations state that the
county plan must include an inventory of water system
problems, existing and planned water system boundaries, and
planned improvements to community systems. These regula-
tions also state that MDE may use the Sanitary Facilities
Fund to help counties finance the planning of water and
sewerage facilities including the preparation and revision
of county plans.
- 26.04.03 (DHMH l0.l7.03 “Water Su lv and Seweraae Systems
in the Subdivision of Land in Maryland.” effective March.
1972 . This regulation is intended to ensure that sub-
divisions will be served by an adequate community water
system or, in the absence of a community system, by an
adequate and safe system until a community system is made
7 0p. cit . Title 9—214, 361.
8 Title 9-505, 9-506, 9-509, 9-510, Annotated Code of Maryland ,
1987.
9 p. cit. , Title 9—705, 507.
61

-------
available. The chapter includes regulations for submitting
water system plans prior to permitting, including assur-
ances of financial and operational viability. MDE’s
authority to require financial assurances as it deems
necessary is the basis of the escrow account requirement
discussed below.
4.3 Implementation of Controls
Reviews of New Systems
Based on Title 9-2 of the Annotated Code, MDE has established
the following set of “Requirements for Proposed Privately Owned
Water Systems” that are sent to developers intending to apply for
permits to construct and operate a private community water system.
— The county must amend the comprehensive plan to include
the proposed system. If the county does not feel the new
system is necessary, it will not amend its plan and the
proposal will not proceed to the State level.
— The developer must obtain a water appropriation permit
from the DNR, Water Resources Administration.
— If groundwater is to be used, developers must obtain a
well construction permit from MDE, Water Management Admin-
istration.
— Before the system is installed, a State water construction
permit must be obtained from MDE, Water Quality Programs.
— The owner must submit a financial management plan (that
has been developed with the concurrence of county of f i—
cials) to the MDE, Water Supply Program, outlining esti-
mated operating costs and revenues.
— The owner must submit an operation and maintenance plan
(with the concurrence of county officials) to the Division
of Design Review.
These requirements help to ensure that potentially non—viable
small systems will not proliferate. They achieve a high degree
of control by instituting many levels of review and by combining
area-wide planning with permitting.
Escrow Accounts
In addition to the requirements outlined above, one of the
greatest constraints on the creation of new, potentially non-
viable small systems is the financial base that a privately owned
system must maintain to be allowed to operate. An agreement is
62

-------
made between county officials and the owner of the proposed water
system, which may require any r all of the following:
— Depositing sufficient funds in an escrow account to cover
repair or replace the highest—cost water treatment plant
unit.
— Establishing a separate escrow account with sufficient
funds to ensure successful initial operation and mainte-
nance. This requirement would normally expire only after
the system was self—supported by income.
— Establishing a sinking fund sufficient to replace the
system 20 years after construction. Funds for continued
support of this sinking fund are provided within the rate
structure.
The State has waived some of the requirements when private
systems are intended to become public since public systems are
exempted from the escrow requirement by MDE regulation (COMAR
26.04.03). Developers may not be required to maintain escrow
accounts or the sinking fund when county takeover is intended.
The various components and conditions (operation and maintenance,
financial planning, escrow account and sinking funding) are drawn
into a binding “public works agreement” between the county off i—
cials and the developer, owner, or builder of the new private
water system. Publicly owned facilities frequently draw up public
works agreements to establish the terms of water service to a
given location. However, publicly owned facilities are not subject
to the financial review and escrow accounts since State law grants
them the ability to raise revenue through fees and bonds.
County Planning
Title 9-5 and the Maryland Regulations, described in detail
above, establish the requirements for, and contents of, county
water and sewerage plans. Only the requirements for water systems
are discussed here. Each county plan must:
- be approved by MDE;
— provide for the development, extension and expansion of
water systems during a period of at least 10 years, and
— identify present and future water supply systems, construc-
tion and operating costs, and time schedules and methods
for financing the construction and operation of each
planned water system.
By requiring the county to delineate areas that will require
service from community water systems and areas where community
water systems must be constructed, the State facilitates orderly
and efficient water system development. Moreover, by requiring
63

-------
financial and operational planning for each proposed system, the
State is able to review systems for future viability. The county
plans must be consistent with the county or local comprehensive
plans that coordinate all development at the local level. The
combination of these two planning processes requires counties to
consider water system planning along with housing and commercial
development.
If a county does not submit or correct inadequacies of its
plan after being given notice, the State may refuse to issue any
permits for water system construction or alteration. The county
plan must be revised and approved by MDE at least once every two
years.
Authority Over Existing Systems
MDE has the authority to investigate existing water systems
to determine if they are operated efficiently and are meeting
State and Federal water quality standards. If MDE finds that a
water system is inefficiently operated and potentially threatens
public health, MDE may appoint a new manager, or order water system
alterations and extensions. MDE may appoint Maryland Environmental
Services (MES) to manage a poorly operated water system.
Currently, MES provides contract management and operation services
to approximately ten water systems, not owned by the State. 3 °
Also, MDE may order the construction of all or parts of a new
water system. Although State law does not specify that these
rules apply only to small systems, they provide MOE with the
means to correct many problems associated small system non—
viability. In addition, they may dissuade potential small system
owners who lack adequate resources from attempting to operate
without satellite management services.
Level of Effort and Effectiveness
Maryland has legislative, regulatory, and policy tools to
curb the creation of potentially non-viable small systems that
are conceived without adequate resources. The State effectively
controls small system problems by requiring that small system
development follow county planning guidelines while the State
reviews all construction and operating permits, water system
management, operation and maintenance plans, finances and rates.
There is also an opportunity for municipal, county, and State
officials to use their experience and knowledge of drinking water
systems to counsel developers against construction of new small
systems where alternatives are available.
Maryland State drinking water officials estimate that approx-
imately 12 new, small privately owned water systems are planned
10 MES primarily operates and manages State—owned water system
serving public facilities such as parks and prisons.
64

-------
each year. Only six to eight systems are approved. However,
three or four of the approved systems are initially privately
owned but are intended to be owned or managed by the county. The
other three or four remain independent, privately owned systems.
The level of effort applied to the management, planning and
control of non—viable small systems may best be estimated by
evaluating State and county staff time devoted to these issues.
State planning officials estimate that approximately 5 percent
of a staff of four engineers’ time is devoted to the planning of
small systems. This is approximately equivalent to ten person
weeks per year being devoted to small systems. An example of
cost at the local level can be drawn from Queen Anne’s County,
which is currently experiencing development pressures in previously
rural, agricultural areas. Three people——a planner, an engineer,
and a utility manager--spend approximately half their time to
maintain, review, or develop the drinking water system portion of
the county comprehensive planning efforts, review new water system
developments and resolve potential or actual disputes. In addi-
tion, the county has hired a consulting engineering company to
update the county water and sewage plan at a cost of $127,000.
County officials estimate that at least half of this cost will be
used for the water aspects of the plan.
Obstacles and potential Problems
Maryland administrators recognize that there are several
problems with their methods of controlling small drinking water
system creation. One that has causçd difficulty in the past is
interpretation of written documents. Public Works Agreements
between developers and county officials outline development prac-
tices including any creation of new water systems. In the case
of Queen’s Landing in Queen Anne’s County, the county and the
developer agreed to release the water system to the county “at a
mutually agreeable time.” The wording of this agreement was
contested by the developer, who was not prepared to turn over the
system when asked, citing that the time was not agreed upon by
him as the Public Works Agreement stated.
Maryland has also witnessed problems with developers changing
the proposed structure of a planned or existing water system to
avoid compliance with laws or regulations. A developer in
Worcester County attempted to divide a larger water system into
several small water systems to avoid obtaining a multi—use permit.
The developer was thwarted in this attempt by the county’s refusal,
with State concurrence, to approve occupancy permits if the system
were divided.
“Taking of Land” or infringement of individual property
rights is not an issue raised by small drinking water systems in
Maryland, at least not at the State level. The key element is
the statutory requirement for a county sewerage, drinking water,
65

-------
and solid waste management plan that is consistent with the
county or local development plan. Any issue that concerns a
property owner, developer or builder may be properly heard at
local zoning or planning hearings. The right of any owner to
develop his property must be considered at the local level.
Then, if incorporated into the county plan, a development must
provide a water supply which meets certain management, operational,
maintenance, financial, and other standards. The standards are
generally not specified at the State level, but are developed at
the county level to meet local requirements. Review and approval
of each new private water system at the State level allows the
county to incorporate controls in public works agreements which
may have the benefit of State experience with small systems prob-
lems.
4.4 Case Studies
Careful planning and financial control are two of Maryland’s
strongest tools in ensuring small system viability. Many poten-
tially non—viable small systems are conceived but never created
becausc officials immediately recognized their questionable viabil-
ity, the financial assurances MDE required cannot be met, and
alternative ans of providing viable water service are discovered
in the planning process.
Martin’s Crossroads/Cearfoss
The first case study, Martin’s Crossroads/Cearfoss, shows
how the planning process can be effdctive i-n preventing a non-
viable system from being created. A small drinking water system
was thwarted by the county at conception because of the strong
possibility that it would be non-viable. Although there are only
three or four new small systems created every year in Maryland,
many more, like Martin’s Crossroads/Cearfoss, are envisioned but
never get beyond planning.
Martin’s Crossroads and Cearfoss are located in a rural area
of Washington County. The county lies in the northwestern part
of the State, bordering both West Virginia and Pennsylvania. In
March and April 1981 an outbreak of Hepatitis A in the area
resulted in private well contamination. This outbreak triggered
investigations by the Washington County Health Department which
showed the wells were contaminated with petroleum products, strep-
tococci, enterovirus, and fecal coliform bacteria as well as
Hepatitis A virus. The non-hepatitis contamination was generally
attributed to failure of individual on—site sub—surface sewage
disposal systems. Coliform contamination from local farms was
ruled out since the fecal bacteria were shown to be of human
rather than animal origin. Because there was no public water
system available to the area at the time, residents relied solely
on private wells, and the threat to public health posed by con-
taminated private wells was significant. The severity of the
66

-------
problem is shown by the citation of Martin’s Crossroads/Cearfoss
as the first priority of the proposed 1983 revision to the
Washington County Water and Sewerage Plan.
Martin’s crossroads/Cearfoss has a history of well contamina-
tion. This chronic contamination episode led to calls for a
permanent solution to residents’ inability to obtain clean drinking
water. The State’s Department of Health and Mental Hygiene direc-
ted Washington County to make a public water system available to
Martin’s Crossroads/Cearfoss. County officials examined the pos-
sibility of drilling wells into a deeper aquifer to form a small
community drinking water system for the area. Because there was
a chance that the system could eventually become non—viable,
State and county officials concurred that hook—up to a nearby
system would be preferable.
Although hook-up was provided by the City of Hagerstown,
revenue for the project was provided by fees, Washington County
and the State Sanitary Facility Fund. Interconnection to an
existing system was chosen over installation of a new system for
two reasons. First, because of the history of severe contamina-
tion in the area, county officials had reason to believe that a
new small system would be non—viable. Second, hook—up to nearby
Hagerstowfl was economically feasible; cost estimates indicated
that users’ fees could be set at levels consistent with existing
rates at other places in the county.
queen’s Landina
This study shows how a problem, in implementing the Satellite
Support program was resolved but caused interim delays during the
transition from private to public ownership. Because of a legal
dispute over a satellite system agreement, county officials were
stalled in their efforts to ensure the viability of a new small
system.
Queen Anne’s County lies on the Eastern Shore of Maryland.
It is directly east of Anne Arundel County and the State’s capital,
Annapolis, across Chesapeake Bay. Approximately 30,000 people
live in this predominantly rural county. Miles of beach-front
property and hunting and fishing opportunities--combined with the
county’s proximity to Washington D.C., Annapolis, and Baltimore--
have made Queen Anne’s County a target for developers in recent
years. Every water system in the county currently falls into
EPA’s category of small drinking water systems. Two aquifers
supply all the drinking water. The Aquia aquifer is the most
heavily used because its counterpart, the Magothy aquifer, has a
high iron concentration which makes its water costly to treat.
The Aquia has a salt water intrusion problem which is worsened by
shallow wells that have traditionally been used by developers.
There are approximately 30—4 0 community system wells comprising
10-12 community systems in the county.
67

-------
Queen Anne’s County is currently experiencing a period of
rapid growth. Development of scattered areas is resulting in the
creation of small water systems. The county would like to control
growth and limit it to areas near existing population centers.
It wants to facilitate expansion of existing water systems, rather
than promote development of new- ones. Because of the condition
of the aquifers, county officials are concerned that small drinking
water systems that tap the Aquia or the Magothy are potentially
non—viable.
Queen’s Landing in Queen Anne’s County was served by a pri-
vately owned water system when originally developed in 1983. From
its inception, the water system was intended to be turned over to
Queen Anne’s County. The determination was made by county and
State officials that the system was not capable of sustained
independent operation. Several financial requirements for long—
term operation, such as the escrow account, were waived.
Developers wcre required to provide financial guarantees to replace
any improper work or materials that might become apparent within
the first nine months of operation. Since long—term operation was
foreseen to be in the hands of the county, all other financial
assurar . es were waived. A written agreement was drafted between
the county and the developers that “fee simple title” of the
water system zit Queen’s Landing would be “conveyed to. the County
at a mutually agreeable time.”
As the drinking water system at Queen’s Landing aged, county
officials began to doubt future viability. Because the financial
assurances, usually a county’s most effective method of ensuring
viability, were not put into place, county officials believed it
was important to have the system turned over to the county when
they deemed it necessary.
When the Bay View area planned to tie into the Queen’s Landing
water tower, Queen’s Landing developers expressed concern that
the water tower would be overburdened with both Queen’s Landing
and Bay View using it and that Queen’s Landing residents would be
unable to obtain properly treated drinking water. On these
grounds, Queen’s Landing developers refused to turn the water
system over to the county when requested to do so, citing that
they had not mutually agreed upon this time. Lawyers for the
developers also claimed that the developers and the county tacitly
agreed that the Queen’s Landing water system would not be turned
over to the county until construction was completed and most
residences were occupied. This was not the case at the time of
the request. Developers cited fears that turning the system over
at that time would result in an inadequate water supply for Queen’s
Landing as the 320 residences became occupied and hooked up to
the water system.
Queen Anne’s County Commissioners directed developers to
turn over the Queen’s Landing Treatment Plant and informed them
that failure to do so would be considered a breach of the public
68

-------
works agreement and could result in the county’s refusal to con-
tinue to provide sewer service to the area. The developers, upon
the advice of their lawyers, relinquished title of the water
system to the county.
The relaxation of financial guarantees is not unique to the
Queen’s Landing case. When a public works agreement has been
negotiated that stipulates the relinquishment of a water system
to the county at a specified time, MDE does not require deposit
of funds in escrow. Viability of a small system is still usually
ensured since the county assumes responsibility for the further
maintenance of the system. The Queen’s Landing case, however,
caused alarm for several reasons. First, county officials doubted
the developers could continue operation of the water system.
Second, there was a new and unexpected drain on the water tower
that made future provisions of sufficient water questionable.
Third, without the financial assurances, no long-term viability
could be guaranteed. Finally, the developer’s refusal to turn
over the water system was unanticipated.
ChesaDeake Harbour
The final case study, Chesapeake Harbour, demonstrates the
effectiveness of Maryland’s stringent requirements in preventing
the creation of systems with questionable viability. Faced with
an immediate fiscal requirement of at least $67,000 to be placed
in escrow, the Chesapeake Harbour developer was forced to
reconsider the financial viability of the water system.
The Village of Chesapeake Harbour is located in Anne Arundel
County adjacent to the City of Annapolis. Developed in 1983 and
1984, the subdivision was in an area of the county with no nearby
county water system. The developer approached the Annapolis City
Council about hooking up to the city water system, which was
located across the street from the development. The developer
and City Council members could not agree on the terms of hook—up
and the developer subsequently decided against it. The developer
then examined the feasibility of an independent privately owned
system. The State sent the developer a letter outlining the
requirements with which Chesapeake Harbour, Inc. must comply if it
chose to construct a system for the development. Following are
the financial and operational requirements listed in an unsigned
public works agreement between Anne Arundel County and Chesapeake
Harbour, Inc. Had the agreement been signed, developer would
have been required to:
— Construct the water system according to State specifica-
tions.
— Maintain and operate the system according to all applicable
State regulations.
69

-------
— Deposit $30,000 in escrow as the Water System Emergency
Reserve Fund. Additional deposits would have to be made
to keep up with inflation as measured by the Consumer
Price Index. The account would be used to pay for repairs
and improvements and would not be available for ordinary
operation and maintenance. If any money was withdrawn
from the account for repairs or improvements, the developer
would be required to restore it to the minimum balance
($30,000 adjusted for inflation).
— Create a $37,000 operation and maintenance fund prior to
placing the water system in operation. This amount is
intended to ensure initial start—up, operation and main-
tenance until the system becomes self supporting.
— Require each owner to pay a quarterly assessment to be
deposited into the operation and maintenance fund.
— Establish a “sinking fund” to which each homeowner
contributes. This water supply system reserve fund would
provide an amount sufficient to replace the system after
20 years.
- Present to Diflifi, within 30 days of the execution of the
agreement, a corporate surety bond or an irrevocable
letter of credit in the amount of $600,000 guaranteeing
the construction of the water supply system.
The developer determined that it was not possible to meet
these requirements and abandoned the idea of an individual system.
The firm approached the Annapolis City Council again to negotiate
hook—up to the city water system. The two parties made agree-
ments concerning costs, construction, and maintenance of water
lines, and Chesapeake Harbour was connected to the Annapolis
water system by a main extension.
This case illustrates the effectiveness of Maryland’s strin-
gent requirements in controlling the number of small systems that
are created, especially when there are nearby systems available
for interconnection. Because of the large financial commitment a
water system requires, new small systems are required to provide
at least minimum assurances of viability.
4.5 Application to Other States
Maryland began restricting the creation of small systems
nearly 20 years ago. In 1969, legislation put stringent controls
on small drinking water system development. Additional legislation
throughout this 20-year period has continued to provide the State
with one of its most effective control methods. The success of
Maryland’s methods is evidenced, at least in part, by the scarcity
70

-------
of new small privately owned systems. With only three or four
such systems forming annually, Maryland has fewer new small systems
per year than many counties in other States.
State Characteristics that Enhance Proaram Effectiveness
Maryland has several features that help to make its approach
effective. Since most of the methods have been discussed previ-
ously, they will only be summarized here.
- Urbanization . Maryland is predominantly urban with few
remote rural areas. Much of the population is centered
in cities such as Baltimore, Annapolis, Hagerstown,
Frederick, and near Washington, D.C. Connecting to city
systems reduces the need for small water systems.
- Reaionalization of Sewer Systems . A by—product of urban-
ization in many parts of Maryland has been the regionaliza—
tion of sewer systems. As sewer systems regionalize,
drinking water systems tend to do so as well, since there
is an overlap in the management and resources required
for each.
— unty and Local Government Involvement . Crucial to
Maryland’s program is its strong county and local govern-
ment involvement with publicly owned water facilities.
While State legislation may be the authority for many of
the State’s small drinking water system controls, the
legislation requires actual implementation by county and
local officials. State officials doubt that Maryland’s
program could be used effectively without strong county
and local government.
ADDlicabilitv of SDecific Proaram Elements
State officials believe that their methods could be useful
to other States trying to control the creation of new potentially
non—viable small water systems. While the details of their program
have been shaped by Maryland’s characteristics, the following
program elements may be useful to other States:
— Permit Process . To construct or operate a water system,
an owner must submit plans to, and obtain permits from,
the county. The two key permit requirements in controlling
creation are the MDE financial management, and opera-
tions/maintenance plans. Through this permit approval
process, a county can carefully monitor the evolution of
a water system and force the system’s owner to correct
any design and construction inadequacies by refusing
permits. Moreover, by reviewing financial, operational
and maintenance plans of proposed water systems, MDE
evaluates whether the system’s revenue can meet anticipated
71

-------
costs and whether the system will be professionally managed
and operated.
— State-County Cooperation . The State has final authority
to ensure that small drinking water systems comply with
SDWA standards; however, it has delegated some of this
authority to counties. An example of this is a county
water and sewerage plan. A county must make the plan and
address all the items stipulated by the State, but the
State has final authority to approve the plan. This
joint effort ensures that county plans will be comprehen-
sive enough to reduce significantly the number of problems
that might occur.
County Plannina . A county water and sewerage plan that
must be reviewed and approved by the State is required by
law. This review process allows experienced drinking
water officials to identify problems that may affect a
county’s water system in the future.
— Financial Assurances . The State requires financial assur-
ances from all new community water systems. An agreement
is negotiated between developers and county officials.
If thc water system is to be privately owned, requirements
include escrow funds for initial and continued operation
and maintenance, replacement of components, and a customer-
financed sinking fund for system replacement. Each type
of escrow requirement, other than the sinking fund, must
be deposited by the owner before construction, thus provid-
ing a form of insurance to co’Uer future costs of system
operation. If the proposed system is publicly owned, I4DE
requires counties to maintain adequate revenue through
assessments and bonds to ensure continued viability.
— Persuasive Power . Officials at the State, county, and
municipal levels use their knowledge and experience in
negotiations with developers to discourage construction
of new small privately owned systems. Officials believe
their long experience with small system non-viability
allows them to provide expert counseling and strong tech-
nical advice; this often results in developers being
convinced not to create new small systems.
According to the State Drinking Water Administrator,
Maryland’s approach to controlling non-viable small drinking
water system problems may not be as effective in States with dif-
ferent population distributions. Many of the program elements
require a system of strong county or municipal government which
may not be present in more rural, less metropolitan States.
Maryland has seen a trend toward urbanization in counties such as
Cecil, Howard, and Frederick. Because of Maryland’s urban nature,
opportunities for creation of new small drinking water systems
are primarily confined to seasonal recreational and rural areas.
72

-------
Suburban developments that might otherwise have developed independ-
ent private systems are often near existing systems and are
strongly encouraged to connect to them by county planning, finan-
cial incentives, and administrative requirements.
The regionalization of sewer systems also assists in keeping
the number of new small, particularly privately owned, drinking
water systems to a minimum. Most sewer systems in the State are
regionalized, especially around metropolitan areas. Because the
management and resources needed to operate sewerage and water
supply systems are similar, it is often practical and economical
to consolidate them under a single regional utility authority.
73

-------
ChAPTER 5: WASHINGTON CASE STUDY
5.1 Introduction
The Washington State Drinking Water Program has three com-
ponents that address restricting creation of new potentially
non—viable small water systems:
— the Reaulations of Public Water Supplies , Washington
Administrative Code (WAC) Chapter 248-54 (referred to as
the 2 48—54 Regulations), set standards for design, con-
struction, monitoring, finance, operation, and management
of water systems. Recent updates to these regulations
expand the State’s examination of proposed systems to
include tests of financial and operational viability;
— the Satellite SuDDort System , enables small systems to
transfer ownership or to seek assistance from large or
central water utilities in meeting the requirements of
the Safe Drinking Water Act (SDWA). This system provides
efficient alternatives in the management and operation of
small systems; and
- the Public Water System Coordination Act (PWSCA ) and its
Procedural Regulations (Chapter 248-56 WAC) establish a
planning process, reduces the demand for new potentially
non—viable small water sys ems.
This chapter will focus on how these elements restrict the
creation of new, potentially non—viable small water systems,
although each of these program elements contain aspects that
affect all water systems. Measures that affect existing systems
will be discussed only where necessary to explain the Washington
program.
By requiring comparable financial and managerial qualif i-
cations from small and large systems, the State intends to improve
the viability of small water systems. At the same time, State
officials promote the shared use of water facilities and satellite
support systems as alternatives to independent small system opera-
tion. By requiring county planning for future water system devel-
opment, the PWSCA reduces the likelihood that a potentially non-
viable system will be constructed. This planning reduces the
demand for new small systems and sets standards for new systems
that improve viability. In addition, the PWSCA and the Chapter
248—54 regulations help ensure that water systems are viable at
the time of construction by requiring water system plans or a
small systems management program. The PWSCA and the 248—54 Regula-
tions also help ensure the continued viability of new and existing
systems by requiring regular reviews and updates of water system
plans. The Satellite Support System may be used by either new or

-------
existing small water systems thatare unable to meet State and
Federal drinking water standards. The concept may also be imple-
mented by the counties, both inside and outside a PWSCA area,
when the counties determine that a small water system is unable
to provide adequate water service on its own.
Washington Proliferation Controls
The Regulations of Public Water SuDDlies
Washington revised its Regulations of Public Water Supplies
in 1970, 1973, 1983, and 1988 to create more comprehensive design,
financial, operational, and managerial controls of public water
systems. Many of these regulations apply to all public water
systems, but we will focus on how these regulations are applied
to new, potentially non—viable small water systems. Moreover,
those particular regulations aimed at small water systems will be
described in detail.
Because small water system participation and requirements
are limited under the PWSCA, in 1988 the Washington Department of
Social and Health Service (DSHS) adopted regulations for improving
the initial and continued viability of small water systems.
Recognizing that not all small water system problems can be over-
come through the PWSCA and that not all counties are likely to
institute the PWSCA, the DSHS has instituted financial, opera-
tional, and managerial requirements for all small water systems.
In particular, the State has identified the inadequate financial
base of many small water systems as a key area for State officials
to address. -
Satellite SuDPort Systems
The Satellite Support System (also known as the Satellite
System Management Concept) is an agreement whereby the large or
central utility performs direct, contract or support services for
small utilities. Using Direct Service , the utility assumes owner-
ship, operation, and maintenance responsibilities. Alternative—
ly, a large water utility may agree to furnish technical, opera-
tional or managerial services, known as Contract Service . Finally,
Support Service entails the provision of operator training, equip-
ment, supplies, and advice on a fee for service basis.
The Satellite Support System is promoted both formally and
informally by DSHS. Counties that have adopted the PWSCA are
required to assess the need for Satellite Support Systems. In
addition, counties that have not fully adopted the PWSCA have
implemented the Satellite Support System. Third, the Department
has sought to inform all water systems that Satellite Support
Systems may resolve the financial, operational, and managerial
responsibilities entailed in meeting State and Federal drinking
water standards.
76

-------
The PWSCA
In the 1970s, areas of Washington experienced rapid population
and new small system growth. In the absence of State or county
plans for water system development, these new systems created
overlapping service areas and duplicated facilities as they com-
peted for customers.
In 1977, Washington adopted a program to remedy this problem.
The PWSCA creates a planning process which regulates water system
development. Specifically, the PWSCA authorizes counties to
create plans that can:
— demarcate present and future water system service areas,
in which water utilities are responsible for providing
service as needed;
- establish minimum design and fire flow standards;
— plan future water system development;
— develop procedures for authorizing new water systems;
- develop shared or joint use of facilities; and
- develop a Satellite Support System to provide management,
operations or maintenance assistance to small systems.
These controls are described in greater detail in Section 5.3.
State Profile
The broad scope of Washington’s programs offers a variety of
solutions to resolve problems of geography, population density,
differing political attitudes toward regulation, water quality,
and water availability. To understand how Washington has developed
its program to restrict the creation of potentially non-viable
water systems, it is necessary first to understand the demographic
and physical characteristics of the State.
Washington has an area of 66,522 square miles and a population
of 4.5 million. Although only 19 percent of the population live
in rural areas, this is the second highest percentage of the
four States studied in this project. Washington’s population
density, 72 persons per square mile, is the lowest of the four
States.
The western part of the State contains the major centers of
commercial activity, with large urban and suburban populations in
the areas surrounding Seattle, Tacoma, Everett, and Bellingham.
There are also significant rural populations, large expanses of
relatively unpopulated parklands in the Olympic and Cascade
Mountains, and other heavily forested areas. Most residents of
77

-------
western Washington are served by surface drinking water sources,
but both ground and surface sources of high quality are plentiful.
Few urban centers exist in the eastern portion of the State,
which is mainly rural with large desert areas. The City of Spokane
is the largest urban center in eastern Washington. Spokane County
is one of the few areas in the United States where the primary
drinking water source is designated as a “Sole Source Aquifer” by
EPA. This designation is a strong incentive for the local govern-
ment to develop a water resource management program protecting
the water supply for future generations.
Characteristics of Water Systems
According to the 1987 Federal Reporting Data System (FRDS),
Washington has 2,355 community water systems. As shown in Exhibit
5.1, the vast majority (94 percent) are classified as small (i.e.,
serving 25 to 3300 persons). The most distinctive feature of
the Washington State inventory of community water systems, however,
is the percentage of systems that are defined by FRDS as very
small, i.e., serving fewer than 500 persons. These systems repre-
sent 82 percent of Washington State’s community water systems,
the highest percentage of the four States in this study.
Washington’s definition of public water systems (PWSs) differs
from EPA’S. As shown below, Washington has four classes of PWSs,
defined primarily by the number of connections.
Washington Classifications of Public Water Systems
Class Number of Connections
1 >100
2 10—99
3 25 — 299 (transitory)
4 2—9
Source: DSHS
All classes except Class 3 have permanent connections. Class
3 systems serve transitory populations of 25 or more on any one
day. In Washington, small public water systems are generally
defined as those systems having between 2 and 1,000 connections.
This is roughly equivalent to the EPA definition. One thousand
connections is approximately the same as a service population of
3,300, but the inclusion of systems with as few as two connections
adds many systems excluded by the EPA definition. More than 60
percent of Washington’s PWSs are in Class 4.
78

-------
ExhIbit 5.1
Washiliton Water Systems, Violations and Systems In ViolatIon
FT 1%?
Popilatlon Served:
25•100 101-500 501-1,000 1.001.2,500
2,501-3,300
Total
d,300
Total
3,300 TOTAL
1,169 756 131 131 20 2 207 V .8 2,355
49.62 32.12 5.6* 5.6% 0.8% 93.72 6.3% 100%
Population 64,000 161,000 94,000 221,000 58.000 598,000 3,195,000 3,793,000
IICLV(otat ions 383 249 52 37 9 730 25 755
50.72 32.92 6.8% 4.92 1.22 96.7% 3.3% 100%
N / I VioLations 1553 626 112 87 14 2,392 68 2,460
63.32 25.42 4.52 3.52 042 97.22 2.8% 100%
Average NCL Violations 0.32 0.32 0.39 0.28 0.45 0.33 0.16 0.32
per systeWysar
Av.rag. N/N VIolations 1.32 0.82 0.85 0.66 0.7 1.08 0.45 1.04
per syatemfysar
Systems with MCI. VIolations 236 161 32 21 7 157 15 172
50.0% 34.1% 6.72 4.4% 1.4% 96.92 3.1% 100%
Systems with NIR Violations 563 278 44 43 8 936 45 981
57.3% 28.3% 4.42 4.3% 0.82 95.4% 4.6% 100%
Source: Federal Reporting Data System, Reports 7, 19A, 198, 1987
Note: Percentages amy nst add .ie to rourding.

-------
The predominant source of water varies with size of system
in Washington, as it does in many other States. Large systems
primarily depend on surface water sources while small systems
depend on groundwater sources. Sixty—nine percent of all ground-
water systems serve fewer than 100 connections, while only 13
percent of Class 1 systems (thoie with 100 or more permanent
connections) are groundwater systems. Since Washington has a
generally abundant supply of high q iarity groundwater, most of
these groundwater sources require ].-ittle or no treatment.
Type of ownership also varies with system size. Over half
of the Class 1 systems are ub1icly owned, while more than ninety
percent of smaller systems are privately owned.
The Problem of Rapid Growth -
During the rapid growth of suburban areas in the 1970s,
there was a dramatic increase in the number -of new small systems.
The chart below documents the explosion in the number of small
systems. The number of Class 1 (100 or more connections) systems
grew from 419 to 556 between 1970 and 1981. During the same
eleven—year period, the number of smaller systems between 2 and
99 connections increased from 2114 to 7685, an annual increase of
nearly 24 percent.
This proliferation was alarming for several reasons. First,
the owners of the-syst ms, often homeowners’ associations or sole
proprietorships, did not have the experience or financial capabili-
ty to maintain their systems successf .i1ly. -Second, the systems
were not adequately prepared for the management and capital invest-
ment challenges associated with rapid expansion. Yet many of
these systems were trying to expand and were aggressively competing
fot new customers. Third, uncoordinated and unplanned system
expansion resulted in crossing service lines and unnecessary
facility duplication. “It was the wild west!,” one State official
said. -
Washington State planning off’icials were concerned not only
about uncoordinated water system development, but also that many
of the new small systems lacked the financial and management
capability to provide safe drinking water reliably. Washington
identified several limitations on the viability of small systems.
State officials concluded that small systems were more likely
than large systems to violate water quality standards.
A DSHS study in’ 987 indiäated that the small system viability
concerns were well—founded. 1 The study noted that Class 2 and 4
systems with thé bacti monitoring requirement have a much lower
1 Small Water System Problems: An Assessment , DSHS, February
1988.
80

-------
rate of compliance. The study attributed this lower compliance
rate to the following problems which are more prevalent in small
systems:
— lack of defined ownership and management responsibilities,
— lack of financing options for privately owned systems,
- probable lack of financial viability for utilities with
fewer than 500 ratepayers,
- inability or unwillingness to design and construct small
water systems according to professional engineering stan-
dards, and
- lack of qualified operators.
System Growth Prior to the PWSCA
Year Class 1 Class 2 Total
1970 419 <100 2,114 2,533
1973 493 716 2,331 3,585
1975 454 1,196 2,661 4,311
1977 520 1,732 2,476 5,712
Note:
Class 3 systems not included because they do not serve
permanent connections.
Source:
DSHS, Environmental Health Program, Technical Services
Section
5.2 Organizational Structure of State Agencies Regulating Drinking
Water
Exhibit 5.2 shows the organizational structure of agencies
regulating drinking water.
The SDWA is implemented by the Office of Environmental Health
Programs, part of the State’s Department of Social and Health
Services (DSHS). The drinking water section is responsible for
SDWA primacy, certification of operators, and the planning and
administration of the drinking water program.
83.

-------
Exhibit 5.2
Washington
Department of
Social and Health
Servioes
Division of
Health
Office of
Environmental
Health Programs
Responsibility
for Public
Department
of
Ecology
Wastewater and
Groundwater Programs
Water
Systems
Governor
0
Other Environmental
Programs
Drinking Water Quantity
Issues; Allocation of
Water Rights
Drinking Wbter
Section
Southweat
Drinking Weter
Op.rttion.
Northw• it
Drinking Weter
Operetion .
Baitern
Drinking Water
Operations

-------
DSHS district field offices in Olympia, Seattle, and Spokane
are responsible for maintainir g water quality, approving plans,
and developing criteria for new and existing systems. The Olympia
office covers 12 counties in the southwestern part of the State.
The Seattle office is responsible for eight counties in northwest
Washington. Nineteen counties in eastern Washington are regulated
by the Spokane office.
The Department of Ecology (DOE) has responsibility for other
environmental programs, including waste water and groundwater
programs. DOE also is responsible for drinking water quantity
issues, particularly the allocation of water rights.
The Utilities and Transportation Commission is responsible
for setting rates of privately owned water systems. They do not
have any special provisions for regulating small water systems.
5.3 Implementation of Controls
The Reaulation of Public Water SuDDlies
The Revised Code of Washington (RCW 43.20 and RCW 34.04)
authorizes the following regulations. Public Water Supplies (WAC
248—54) sets standards for design, construction, monitoring,
management and operations, and finance. The regulations also
define the role of the local public health officials in relation
to DSHS and define the method of enforcing of these rules. The
purpose of these regulations is to protect consumers using public
water supplies by requiring public water systems to be viable and
reliable entities.
The 248—54 Regulations include provisions that are partic-
ularly important for restricting the creation of new, potentially
non—viable small water systems.
First, the regulations establish the framework for local and
State administration of the regulations pertaining to public
water systems. State and local health officers designate the
systems for which DSHS and the local health officers are responsi-
ble. Local health officials are governed by these regulations
and the decisions of the DSHS.
Second, the regulations may be enforced by the issuance of
letters, compliance schedules, DSHS orders, DSHS stop work orders,
and the imposition of civil penalties up to $5,000 per day. The
power to impose penalties was passed in 1988 as RCW 70.ll9A.
Civil penalties may only be imposed in public health emergencies
and in cases of chronic violations.
83

-------
The 248-54 Regulations are summarized below according to
type:
Water System Plans
Plans are required of all water systems in PWSCA areas, all
water systems serving more than 1,000 service connections, and
any public water systems experiencing problems or any new public
water system as determined by DSHS. These plans are typically
required of large systems even in nori—PWSCA areas. The regulations
allow the planning requirements to be scaled down according to
the size of the system. This regulation is useful in restricting
the creation of potentially non—viable small water systems because
it requires large water systems to provide service within their
designated water service area. The current and future water
service areas delineated in the water system plans are considered
by DSHS to be obligations to provide service. By providing service
in an area, existing water systems decrease the potential for new
non—viable water systems to be created.
Prol ect Reoorts and Construction Documents
Project reports must be submitted to DSHS for written approval
before the installation of any new water system, expansion of an
existing water system or construction of system improvements. By
requiring planning of all systems, regardless of whether they
were -required to submit a water system plan, the project report
helps to ensure that a viable water system is constructed. The
planning must include an operations program, engineering calcula-
tions, long—term management plans, a description of how the system
will be operated and maintained over time, and an environmental
impact statement.
Source Ai roval
This requirement involves a hydrogeologic assessment and
water quality testing described below under Water Quality. These
tests are designed to determine whether the source can meet the
long—term needs of the system.
Des ian of Public Water Systems
These regulations include design standards, source protection,
lead pipe restrictions, distribution system and disinfection
requirements, and treatment design. These uniform standards help
to ensure that new water systems are viable from an engineering
perspective when built.
Water quality
Here, the monitoring requirements for all public water systems
are specified and the method of enforcing Maximum Contaminant
Level (MCL) standards are set forth.
84

-------
Water System Operations
Three regulations governing water system operation directly
prevent the creation of new potentially non—viable small systems:
operator certification, the small system management program, and
reliability.
Operator certification regulations require certification of
all operators of systems serving 100 service connections regardless
of the source or serving at least 25 persons from a surface water
source.
A Small Water System Management Program is required of each
system not required to file a water system plan. The purpose of
this regulation is to “assure the water system is properly and
reliably managed and operated, and continues to exist as a func-
tional and viable entity” 2 Although final guidelines for devel-
oping these programs have not been issued, DSHS engineers review
and comment on the small system management program when approving
new small systems, small system expansion, or when an existing
system has problems related to inadequate management and opera-
tions. Required information about the management, finance, and
operations of the small system is described in the DSHS Planning
Handbook. A Guide for Preparing Water System Plans , which will be
modified to address the specific problems of the potential non-
viability of small systems. These guidelines will be completed
in December 1989. The following topics wifl be covered:
Financial Program : The financial program is intended to
facilitate financing of anticipated facility improvements
required to operate the system. Expanding systems must to
show how they will finance the improvements necessary to
service a larger area. The water system is required to list
revenue and expenses of operation and maintenance, facility
replacement funds, and appropriations for major improvements.
Private small water systems are more dependent on rates for
their revenue. Therefore, the annual rates and the availabil-
ity of other revenue sources such as fees or loans will
determine whether the system can adequately finance necessary
maintenance, management, and operations of the facility.
DSHS officials are considering requiring small systems to
post a bond to cover future expenses.
Operations Program : Water systems are required to identify
all persons responsible for normal operations, preventive
maintenance, troubleshooting, monitoring, emergency response,
response to complaints, and budget formulation. Furthermore,
water systems are required to have plans for system operation
2 WAC 248—54-196, DSHS, Office of Environmental Health Pro-
grams, May, 1988.
85

-------
and control, water quality monitoring, emergency response,
and cross—connection contamination control.
The regulation entitled “Reliability” applies to any new
proposed water system or expansion. It requires that “systems be
constructed, operated, and maintained to protect against failures
of the power supply, treatment process, equipment, or structure
with appropriate back-up facilities.” 3 Furthermore, the regulation
requires all water systems to have 24-hour phone availability to
customers and to respond quickly to customer complaints.
The Satellite Support System
The Satellite Support System is predicated on the following
statutes that allow various organizations to fund, construct,
operate and contract with other entities to provide water service.
Each of the following may provide satellite support to a small
system:
— RCW 36.94, County Services Act authorizes county water
systems.
— RCW 35 authorizes Municipalities and Metropolitan Municipal
Corpcrations to run water systems.
— RCW 57 allows for the establishment of Water Districts
with the powers of third class cities and towns.
— RCW 54 authorizes Public Utility Districts (PUD) to own
and operate water systems wibh the same powers as
municipalities.
— RCW 24.01 authorizes non—profit corporations to construct,
purchase or receive property to establish a water system.
— RCW 23.86 authorizes cooperative associations of five or
more persons to own and operate water systems.
— RCW 80.28 authorizes private companies to own, control,
operate or manage water systems for hire. The companies
authorized by this law must serve more than 60 customers
and have an annual gross revenue of at least $60 per
customer.
3 WAC 248-54—201, DSHS, Office of Environmental Health Pro-
grams, May, 1988.
86

-------
DSHS recommends municipal corporations to provide satellite
support because of their financing capabilities. 4 Currently,
several counties are involved in the Satellite Support System.
These counties are Jefferson, Skagit, Pierce, Kitsap, Thurston,
Clark, Skamania, Chelan, Cowlitz, Snohomish, Klickitat, Stevens,
Pend Oreille, and Spokane. Using publicly owned systems as
Satellite Managers offers three principal advantages. Publicly
owned systems are eligible for State Municipal Grants. They can
tax property, and they may issue bonds. 5 Counties, metropolitan
municipal corporations, municipalities, water districts, and
public utility districts are all publicly owned operations.
The Washington Public Water System Coordination Act
History
Before the adoption of the Public Water System Coordination
Act (PWSCA) was adopted, water system creation and expansion were
approved with a minimum of State and local planning, control or
coordination. Despite the widespread recognition of the State’s
water service planning problems, the PWSCA faced strong opposition
from legislators and water utilities. Washington had no history
of State—wide land use planning or growth management, and many
people opposed a law that would require counties to undertake
planning. Existing water utilities opposed the proposed law on
the grounds that it would restrict free enterprise. Opponents
defeated the bill three times. In response to the reservations
about the legislation, a compromise bill was drafted that was
supported by utilities, legislators, and county off icials. 6
The compromise gave the counties greater authority to imple-
ment the Act. Although DSHS has the authority to require imple-
mentation or to direct the outcome of the process, they have
never done so. The Act states that DSHS, appropriate local plan-
ning agencies, and water systems shall study geographical areas
where water supply problems such as uncoordinated planning, inad-
equate water quality, or unreliable service appear to exist.
The Act states that only the DSHS or county government may initiate
a study to determine the existence of problems with water quality
and quantity, or water service planning. Authority over the
4 DSHS, Office of Environmental Health Programs, “Satellite
Support System: A Means to Assure the Proper Management and
Operation of Small Public Water Supplies Under the SDWA,” May 1977.
5 DSHS, “Satellite Support Systems,” March 1982 and the “Kitsap
County Public Utility District Satellite System Study,” 1982.
6 Nan Humphrey, “State of Washington Water Supply Initiatives,”
16, based on Humphrey’s communication with Consultant Robert Wubberia.
87

-------
planning process and the content of the plan, however, rests
exclusively with the counties, subject to limited review by the
DSHS.
ComDonents of the PWSCA
The result of the PWSCA process is the promulgation of Coor-
dinated Water System Plans (CWSP5) for defined areas, called
Critical Water Supply Service Areas (CWSSAs). The plans consist
of the following elements to be implemented in CWSSAs:
- coordination of land use and utility planning,
— designation of future service areas,
— creation of service area., agreements for individual water
systems,
— definition of minimum area—wide water system design and
fire flow standards,
— development of procedures for authorizing new water sys-
tems, and
— assessment of the possibilities for regional Use of water
facilities by separate water companies and satellite
management operations.
Re ulatorv Authority
There are three sets of pertinent regulations and guidance
documents that pertain to the PWSCA:
- Water System Coordination Act Procedural Regulations (WAC
248—56): These establish county authority for defining
geographical areas (CWSSAs) and are used to develop a
Coordinated Water System. Plan (CWSP).
— Details of PWSCA elements are explained in a guide issued
by DSHS: The PWSCA Handbook. A Guide for Pre arina Water
System Plans .
— Regulations for Resolving Water Service Area Conflicts
(WAC 248—59) provide a process for resolving service area
conflicts between systems located in a CWSSA.
DescriDtion of the PWSCA
The Coordinated Water System Plan (CWSP) is designed to
assist water systems, counties, and DSHS in resolving area—wide
water problems and to provide a long—term program to respond to
area growth. Either a county or DSHS may initiate CWSP develop-
ment. The first step is the preparation of a preliminary
88

-------
assessment which identifies problems associated with water quality,
unreliable service, or lack of coordinated planning. Either the
county or the State may declare a Critical Water Supply Service
Area (CWSSA) to identify the general region in which the program
will be implemented. A Water Utility Coordinating Committee
(WUCC) is appointed to recommend specific CWSSA external boundaries
and to prepare the CWSP, both of which are approved by the county.
The WUCC must include representatives from the county legis-
lative agency, county planning agency, county health agency,
water system utilities and DSHS. All water systems with more
than 50 service connections must be invited. DSHS or the county
may appoint other agencies, systems, or interested parties as
nonvoting members. After the WUCC is appointed, the county may
receive State grant funding to complete the plan. Once external
boundaries have been approved by the county, all proposed water
systems or water system expansions within the boundaries must
meet the standards and adhere to the policies developed by the
WUCC. If the plan is approved, all new water systems must be
developed in accordance with the plan.
The Coordinated Water System Plan consists of two parts:
(1) Individual Water System Plans, and (2) an Area—wide Supplement.
The Individual Plan, prepared by each water system in the
CWSSA, addresses the system’s present and future service areas.
Service area designation provides a mechanism for water utilities
to identify their respective areas, based upon coordination and
cooperation, and adequately plan for future needs.
The details of the plan depend on the number of service
connections. Systems serving more than 1,000 connections must
complete a detailed plan. An abbreviated plan covering all basic
requirements must be submitted by systems having between 100 and
1,000 connections. Systems serving fewer than 100 connections
must complete a brief questionnaire and fill out the Water Facility
Inventory form. Privately owned systems are not required to
complete a plan if they have no intention of expanding and were
in existence before September 21, 1977. However, they are required
to designate their future service areas in the Area—wide Supple-
ment .
Exclusive service areas are initially established by nego-
tiation between systems. When a previously undeveloped site
requires water service, the water system with its exclusive service
area encompassing the site is required to provide service. The
penalty for not providing service is the loss of portions of one’s
exclusive service area. Since purveyors usually decide to provide
the required service, rather than lose a section of their service
7 DSHS, Water Supply Section, PWSCA Handbook , July 1984, 12.
89

-------
area, establishment of service areas helps to restrict the creatior,
of new systems.
The Area—wide Supplement addresses water system issues that
affect the entire region. In the context of this broad policy
document, the WUCC can propose additional programs that may help
to restrict the creation of non—viable small systems and address
the prob lóms of existing ones. Topics to be considered in the
supplement include: service area agreements, minimum design
standards, potential use of satellite support systems, jointly
used facilities, and fire flow standards.
— Service Area Agreements are written pacts among the exis-
ting water systems, approved by the county and DSHS to
provide water service to a defined area within the CWSSA.
Service area agreements allow water utilities to identify
their respective areas and plan for the future. This
eliminates competition, duplication, and inefficient
extensions of facilities.
— Minimum Desian Standards for new systems and extensions to
existing systems are intended to make future system exten-
sions easier by ensuring compatibility. They also require
developers to build the same specifications. This may
result in lower operating, maintenance, and replacement
costs. Minimum fire flow requirements usually result in
expensive six- to eight-inch distribution lines. This
additional cost removes the incentive to build a small
system. In addition, State and county governments must
be assured that professional engineering standards are
incorporated. This requirement tends to improve viability.
— Satellite SuDDort Systems offer small systems that lack
revenue and technical expertise a method for ensuring
reliability, quantity, and quality of the water supply.
Under the satellite system, responsibility is transferred,
through ownership or contract, from the owner of a small
system to another organization capable of providing ade-
quate service. 8 The larger entity assumes responsibility
for operation and maintenance of one or more small water
systems. The small system, however, need not be owned
by the management entity. In theory, there should be
reductions in operation and management costs since the
management entity can achieve economies of scale. 9
8 Supplement to Status Report, November 1975 on the State’s
Drinking Water Program, DSHS, May 1977.
9 Studies in three counties undertaken to analyze the concept
of Satellite Management indicated a general rate increase after
being brought up to the required standards. The analysts argued,
however, that rate increases could have been even larger without
90

-------
Satellite systems may be used in conjunction with service
areas to provide water to areas which may not be scheduled
for immediate connection to an existing system. The use
of satellite systems in this instance allows the satellite
manager to provide efficient management and operational
services on an interim basis to systems that lack the
necessary technical and financial resources. One private
-purveyor said that he considered satellite management the
most cost-effective portion of the Act. 1 °
- Joint Use of Facilities is an arrangement whereby indivi-
dual water systems having quantity or quality problems
agree to share other systems’ facilities. Often, par-
ticipation in the WUCC process reveals previously unrecog-
nized opportunities. The most common arrangement is the
physical interconnection or “intertie” of two systems.
Utilities may also share water sources, reservoirs, or
storage tanks. This process of sharing facilities has
minimized costs for many systems and improved water ser-
vice.
— Fire Flow Performance Standards often determine whether
an existing system’s expansion proposal or a new system
development will be approved. All systems having over
1,000 connections and all systems within a CWSSA must
meet minimum fire flow and capacity requirements. Fire
flow standards can be used to control non—viable systems
because all proposed systems that do not meet the standards
are not approved. In some instances, these inadequate
systems are upgraded to meet minimum standards or are
taken over by an existing system that already meets the
standards.
Additional issues that should be addressed in the Area-wide
Supplement are:
- CWSP compatibility with land use plans/policy,
— development of future source plans, and
- the continuing role of the WUCC.
The detailed steps of the CWSP development process are shown in
Exhibit 5.3.
satellite management. See DSHS, “Satellite Support Systems”, March
1982, 11.
10 lnterview with John Robischon, President of South Sound
Utilities.
91

-------
Exhibit 5.3
THE COORDINATION
PROCESS
RESPONSIBLE ENTITY
ACTION TIMING
PLANNING AGENCY
PURVEYORS
DSHS
---------
---------
---
wUCC —
COUNTY
WUCC DIRECTS — —
COUNTY — — — — —
INITIATE ACTION
6 Months
4,
6 M ’nths
4,
1’
24 Months
DSHS
DSHS — Department of Social and Health Services
CWSSA — Critical Water Supply Service Area
WUCC — Water Utility Coordinating Con mittee
*publjc Involvement
I
COUNTY
OR DSHS
[ LOCAL
COUNTY
OR DSHS
COUNTY
OR DSHS
REVIEW p jj*(6O DAYS)
RESOLVE CONFLICTS (60 DAYS)
j -
92

-------
State Grant Availability
In 1972, Washington passed Referendum 27, incorporated into
the Revised Washington Code as RCW 43.838, which established a
Municipal Water Supply Funding Program of $50 million. In 1980,
Referendum 38 granted this Funding Program $75 million. As the
title suggests, this grant money is available only to publicly
owned water systems. Washington law prohibits privately owned
water systems from receiving public funds.
The Municipal Water Supply Funding Program provided assistance
in implementing the PWSCA and the Satellite Support System.
However, as of 1988, available funds have been nearly depleted
and there are no pending referendums or legislation to provide
additional funding.
The PWSCA: In Practice
Two aspects of the PWSCA are important controls on the crea-
tion of potentially non-viable new small systems. In addition
to requiring counties and existing systems to plan for future
water needs, the PWSCA sets standards for new system creation.
All new water systems must be developed in accordance with the
plan.
An important aspect of the Act is that it creates a framework
in which the 39 county governments, working with interested util-
ities, can conduct area—wide water system planning. The Act
does not require any uniform plannir g methods or design standards
for the State as a whole. This authority is left to the counties
and local committees. State, and sometimes county, officials
serve on these committees as technical advisors. The drawbacks
of Washington’s approach, however, are evident in the fact that
although more than 18 counties have started the process, only 14
have continued the formal planning effort beyond the initial
assessment. 11 Thus, large sections of the State have chosen not
to exercise the authority that would help reduce the demand for new
small water systems. Exhibit 5.4 illustrates the portions of the
State that have implemented the PWSCA.
State officials do not believe that full implementation of
the PWSCA is necessary in the remaining parts of the State.
Instead, they believe that the remaining counties would benefit
11 The following counties are in various stages of developing
a plan: Skagit, San Juan, Island, Jefferson, Snohomish, King,
Pierce, Thurston, Pacific, Clark, Grant, Walla Walla, Spokane,
and Kitsap. Yakima, Benton, Franklin, and Stevens are using
elements of the PWSCA. Chelan and Kittitas are considering assess-
ment. Whatcom County considered PWSCA implementation, but decided
against it.
93

-------
Exltibit 5.4
Washington Counties Using The Public
Water System Coordination Act
0
Developing a Plan
Using Elements
Considering Assessment

-------
from implementing the satellite and small systems management
programs. Counties may also establish exclusive service areas
without full implementation of the PWSCA.
The PWSCA allows local and State officials to initiate the
declaration of a CWSSA that begins the implementation of the
program. In practice, the process has always been initiated at
the local level, though the State may have had significant influ-
ence. Since passage of the Act in 1977, 14 of the 39 counties
have invoked CWSSA5. Three of these counties have multiple CWSSAs:
Spokane (4), King (4), and Walla Walla (2). At least four addi-
tional counties have considered initial assessments. Three of
these conducted an initial assessment and decided not to invoke
a CWSSA or to continue the process. Two of these counties are
using satellite management; the third has established exclusive
service areas.
The PWSCA has very few hard and fast requirements. Instead,
it is a structure or set of guidelines within which the planning
process can take place. Since the plans are developed at the
local level, they vary considerably in their content and adminis-
tration. Counties may assume different roles in the process. For
example, in Thurston County public and privately owned water
systems carry out the program with county and State oversight.
Thurston County has outlined a review process to be conducted by
all affected parties when considering WUCC recommendations.
Three cities in the county have adopted minimum design standards
within their water districts. In contrast, Kitsap County Public
Utilities District was designated as lead planning agency as well
as owner and operator, or satellite,manager, of its various water
systems.
Nine counties have gone beyond the preliminary stages of the
PWSCA process and have completed CWSPs. The remaining five that
have declared CWSSAs expect to complete plans by January 1991.
The first county to implement the Act fully was Spokane County,
where four CWSSAs were invoked in 1980 and a plan was approved in
March 1982. The Spokane County five-year review is currently in
process. Five more counties completed plans in the next three
years. Three of them are in eastern Washington, one is north of
Seattle, and one is in the southeastern region. Four of these
counties--Clark, Grant, Skagit, and Walla Walla—-have county-wide
plans. In these counties, there has been virtually no increase
in the number of systems serving between 10 and 1,000 connections.
In three of these counties, control has limited growth of Class 4
systems to fewer than 10 new systems per year.
Problems in Implementation
One concern of officials in western States where water is
scarce is that attempts to control creation might involve sensitive
water rights issues. By controlling the creation of new water
systems, the State would be controlling development; and by con—
95

-------
trolling development, the State may be interfering with water
rights that may be associated with property ownership. We raised
this concern with officials in eastern Washington. Their reaction
was that scarcity of water seemed to be a good argument in favor
of controlling system development. Furthermore, during the prepa-
ration of the Coordinated Water System Plan under PWSCA, county
planners in Washington have begun to discuss the concept of area—
wide water rights. This concept is particularly useful in imple-
mentation of intertie agreements that are essential to the PWSCA
planning process.
A second concern is the lack of state—wide implementation.
The PWSCA emphasizes local initiative. This fosters cooperation
between the county and State governments in areas that initiate
the program. The drawback of this approach, however, is that
some counties may decide not to participate. In the 10 years
since implementation, only 14 of 39 counties have chosen to con-
tinue the process past the initial assessment phase. Three other
counties applied elements of the PWSCA, but chose to do it without
the State support that comes from full implementation. Assuming
that planning prevents some creation of potentially non—viable
small systems, then the residents of 25 counties have been denied
the benefits of this program.
Benefits of the PWSCA
The primary benefit of the Act should be reduction in the
rate of non—viable water system creation. 12 The Urban Institute
reviewed data on creation in 1985 and concluded that because of
its limited implementation, “the program has-fallen short of its
ambitious goals of stemming the proliferation of new systems.
Small systems have continued to grow at rates exceeding population
increases statewide, although their growth rate might have been
greater in the absence of the legislation.” 3
Since the planning process has been implemented in only 14
counties, statewide data on new water systems are inappropriate
for this study. The data available from counties that have imple-
mented plans, however, are quite instructive.
2 The reader will note that the PWSCA does not directly
address the issue of water systems viability. Rather, it is
directed at the control of proliferation of systems and the eff i-
cient provision of water service. Proliferation of small systems
is seen to be inconsistent with the efficient, planned development
of water systems in coordination with regional land use plans.
Also, a recent DSHS study has concluded that controlling prolifera-
tion of small systems is an important part of the State’s approach
to dealing with the “small systems problem.” See DSHS, Small
Water Systems Problems: An Assessment , February 1988, p. 20.
- 3 Humphrey, op. cit., p. 38.
96

-------
— Fewer than ten new Class 2, 3, and 4 systems have been
permitted in the Thurston County CWSSA in the last three
years. Local officials believe that 100 to 200 systems
would have formed if the CWSP were not implemented.
— Spokane County officials have said that “no new systems
with inadequate design” can be started in the county.
State data indicate no increase in systems having between
10 and 1,000 connections.
- Virtually no new water systems having between 10 to 1,000
connections have been built in Clark, Grant, Skagit, and
Walla Walla counties since plans were implemented.
Also, DSHS recently concluded that the PWSCA “has proven effective
in slowing down the creation of small water systems by encouraging
existing utilities within a specified area to coordinate their
existing and future service area requirements.” 14
The next section of this report presents case histories of
the implementation of the Act. These illustrate the key concepts
of the planning process. They also demonstrate the effectiveness
of specific actions taken by counties to restrict creation of
non—viable s tems.
5.4 Case Studies
Thurston County
Thurston County has 150,000 people and approximately 700
water systems. There are three cities in Thurston County: Lacey,
Tumwater, and the State capital, Olympia. The majority of the
population lives in the northern part of the county. Each county
water system, except the three city systems, has fewer than 1,000
service connections. In general, high quality groundwater is
readily available within the Thurston urban area.
The Thurston County CWSP, approved in early 1986, resulted
from the emergence of Thurston County as one of the fastest growing
urban areas in Washington. From 1970 to 1980 the population of
the Olympia/L.acey/Tumwater urban area grew from 62,600 to 97,000,
an increase of 54 percent.
In the North Thurston County planning area, there were 267
water systems; 27 of these had more than 50 service connections
and 240 served between 2 and 50 connections. The three cities of
Olympia, Lacey, and Tumwater served more than 65 percent of the
14 DSHS, p. cit., p. 20.
97

-------
population. The rest of the population was served by independent
water systems or individual wells.’ 5
Issues
Prior to adopting its plan, the county exercised no control
over the growth and development Of water systems within the urban
area. As a result, many systems had undersized mains and no fire
hydrants, and were poorly constructed. Substantial public invest-
ment would have been required to bring these systems up to city
standards for fire protection and general water service. Lack of
minimum design and fire flow standards was one of the major reasons
the county invoked the PWSCA. 16
The cities of Lacey, Tumwater, and Olympia, the largest
purveyors in Thurston County, pressed for the development of a
county water plan due to their concerns about several develop-
ments:
— the announced intention of 13 large water systems to
expand, which raised the prospect of overlapping service
areas, and
- the failure of many systems within the CWSSA to meet the
county’s urban water system standards or to offer fire
protection. The existence of substandard systems would
impede the expansion of the large municipal systems and
hinder the consolidation of small systems with large ones.
The cities’ desire to be able to’integrate small systems
into their own was sufficient to cause them to deny service to
residents outside city limits in the absence of a county-wide
plan. 17 They successfully demanded that the plan require devel-
opers within the cities’ future service areas to waive their
right to protest annexation by the city.
Lack of water system design and development standards was
also a major issue. The three cities had developed voluntary
standards and a coordination process. General service area bound-
aries had previously been established, and the cities had agreed
to compatible (but not identical) standards for pipe sizing, fire
hydrant placement, and other water system design elements. These
standards were applied to all developments connected to their
systems.
15 ”Thurston County Coordinated Water System Plan: Area-wide
Supplement,” January 1986.
16 Ibjd.
17 private communication with. John. Robischon, President, South
Sound Utility
98

-------
Plan Development
The plan adopted by Thurston County covers only 60 percent
of the county’s area. The boundary of the planning area encom-
passes the existing and planned urban area and some other areas
that required immediate system-coordination. The land within the
boundary was divided into 85 service areas. Competition among
purveyors over service area boundaries was intense. When the
plan was approved, 12 systems, including the three cities, had
service area conflicts. After two years of negotiations, seven
service areas remain to be adjudicated, and some utilities have
said that they do not plan to sign the final agreements. The
county maintains that the agreements will be legal nonetheless,
because the public participation provisions of the WUCC process
were observed.’ 8
Two major goals of the county plan were to discourage the
creation of small systems and to coordinate the orderly growth of
existing systems. To accomplish these goals, a utility system
review process was adopted. The plan incorporated the county’s
health and fire standards. Three different sets of minimum design
standards were adopted, corresponding to the areas coordinated by
each of the thiree cities. By requiring all systems in the CWSSA
to comply with minimum standards, the plan can be used to curb
small—system creation. Potential small system development and
extension plans unable to meet the fire flow or design standards
-do not receive county approval. The use of these controls is
illustrated in the Tomsinski Duplexes and Eagle Crest cases below.
The county plan adopted the State’s procedure for author-
izing new water systems. A purveyor must comply with requests
for water from sections within its service area, or those sections
will be removed from the purveyor’s service area. “There have
only been two or three cases where a purveyor did not support new
systems or expansion in his service area,” one county official
said. The effects of this provision are illustrated in the Glen
Johnson and Tomsinski Duplexes cases.
Level of Effort and Result
Thurston County received State grant funding to support the
development of the county plan. The purveyors, not the county,
bear most of the daily responsibility and expense of the plan.
The county only spends a small portion of its time administering
the program. A county official estimated that administering the
plan currently requires less than 1/10 of a full—time person.
‘ 8 Private communication with Philip Brinker, Thurston County
Senior Environmental Health Specialist.
99

-------
The county recognizes that the initial cost of establishing
water systems under the county standards is slightly higher than
it would be under the DSHS minimum requirements. However, county
staff believe that the long-term public cost will be substantial-
ly less because future rehabilitation and replacement will be
avoided. 19
Since the approval of the North Thurston external boundary
in 1985, county officials believe that the plan has prevented the
development of between 100 and 200 new systems. In particular,
fewer than ten Class 2, 3, and 4 systems have been approved within
the CWSSA since the plan was adopted.
The State’s data (see Exhibit 5.5) indicate that the county’s
rate of increase for systems having 1,000 or fewer connections
decreased from 29 per year (in 1975 to 1985) to 22 per year (after
1985). The county administrator has indicated that the apparent
trip .ing of the rate of increase of Class 2 systems may be spe-
cious, resulting from earlier under—reporting. Although the
overall rate of increase has diminished since 1985, it is not
possible to ascribe this effect solely to the institution of the
CWSSA, because 40 percent of the county lies outside the CWSSA
boundaries.
Glen Johnson Water System. Thurston County
This case illustrates the use of the PWSCA planning process
to modify a water system development that was inconsistent with
the county’s CWSP, thereby preventing’the creation of a potentially
non—viable small system. The county approved the extension on an
interim basis, but required the system owner to upgrade the system
and later hook up to an existing system. The case also illustrates
the importance of defining exclusive service areas. In this
case, the existence of such a boundary forced the existing purveyor
to provide the requested service, rather than lose that section
of its service area.
Glen Johnson is a privately owned system, built in 1940,
with three service connections. In September 1986, the owner of
Glen Johnson sought approval from Thurston County to extend his
water system to serve two commercial buildings. He had not
previously filed an individual plan in the Thurston County CWSP;
the area served by Glen Johnson was part of the City of Tumwater’s
service area.
The owner of Glen Johnson was willing to upgrade his system
and interconnect with the city’s system, at city expense. He
therefore presented such a proposal to the City of Tumwater.
19 p. cit., Supplement.
100

-------
Exhibit 5.5
Rate of Increase of Small Systems in Thurston County*
Rate of Rate of
# of # of Increase, # of Increase, # of
PWSs PWSs 1975—1985 PWSs 1985—1988 PWSs
Water Systems 11/70 4/75 ( #/vr) 11/85 ( #/vr 6/88
Class 1 >1000 3 3 3 3
Class 1 7 11 1.5 27 2.4 33
Class 2 97 150 4.0 192 6.0 207
Class 4 *** 170 24.6 428 12.4 459
EPA Small 101 158 5.5 216 8.4 237
Systems * *
Notes :
* Data are ror the total county, including the area outside
the CWSSA.
** EPA Small Systems includes all system having 10 — 1000
connections. It is calculated by adding the systems in
Classes 1, and 2, and then subtracting those Class 1 systems
that have more than 1000 connections.
*** County records combined Class 4 systems and Class 2
systems in 1970.
Although the Glen Johnson property was within Tumwater’s
future service area, Tumwater had no immediate plans or funding
to expand service to this area. Tumwater agreed to provide water,
but only if Glen Johnson would pay for the interconnection. An
alternative suggested by the county was to obtain satellite ser-
vices from Trails End Utility, a neighboring system that had
indicated its willingness to manage Glen Johnson. The applicant
rejected both options, claiming that the effect of the county’s
water plan was to take his property and water rights.
In June 1987, the county agreed to allow Glen Johnson to
extend its system to the two commercial buildings. However, the
county provided that: (1) Glen Johnson would be brought up to
county design standards; and (2) after five years, the City of
Tumwater would assume operation and maintenance of the Glen Johnson
system, at which time the City would install the interconnection
at its own expense.
101

-------
Eagle Crest. Thurston County -
The following case illustrates how minimum design and fire
flow standards can be used to eliminate unsatisfactory system
extension plans. The Beachcrest Water Company requested approval
from the county to extend their system from 101 to 154 connec-
tions to serve the new Eagle Crest development. The county did
not approve expansion because minimum fire flow standards were
not met. However, after Beachcrest was bought by the City of
Lacey, the county approved the extension of the city’s system to
include the Eagle Crest development, with the stipulation that
fire flow performance would be ensured through an intertie with
the city system.
The Beachcrest Company, including the Eagle Crest develop-
ment, was bought by the City of Lacey in December 1986. Like the
City of Tumwater, the City of Lacey had defined a large future
service area. However, unlike Tujnwater, Lacey had developed an
aggressive expansion program. During 1986, The City of Lacey
purchased ten systems; this greatly increased its service area.
The city proposed a plan to improve the Eagle Crest expansion
fire flow service through an intertie with the city system by
October 1987. Until an intertie with the city’s system was com-
pleted, the City of Lacey, after extending the existing Beachcrest
system to include the Eagle Crest development, would continue to
operate the Beachcrest system without upgrading the fire flow.
The City of Lacey requested a variance to the county’s fire
flow requirements. The variance would allow it to operate the
Beachcrest system, without upgrading ‘it, until October 1987 when
the system would be connected to the city system. The county
granted the variance provided that a bond was posted to ensure
that fire flow would be achieved if Lacey was not able to intertie
by October.
Tomsinski Duplexes. Thurston County
This case illustrates the use of minimum design and fire
flow standards and interconnection to restrict the creation of new,
potentially non-viable small systems.
Prior to 1986, the applicant met with the city of Lacey
regarding water service to property that the applicant was planning
to purchase. At that time, the city indicated that this property
was outside its current or future service area.
As a result of acquiring the Beachcrest Water Company in
December 1986, the City of Lacey assumed responsibility for pro-
viding service to the Tomsinski property. The city sent the
applicant a letter stating they could serve the property if the
applicant installed an eight—inch line extending 1,000 feet to
the city’s mains.
102

-------
After purchasing the land, the applicant learned that addi-
tional improvements would have to be made to support minimum fire
flow performance. After negotiating with the county and the
owner, the city decided to provide the requested service. The
city agreed to install the 1,000 feet of line extending to the
city’s water mains, if the applicant completed the fire flow
improvements.
Kitsat , County
Kitsap County, a largely rural county and a population of
approximately 170,000, has experienced rapid growth over the last
ten years. This growth is partially due to an expansion of the
submarine base at Bangor. In June 1988, there were a total of
823 water systems, only nine of which served more than 1,000
connections.
Similar in area, population and recent growth rate to Thurston
County, Kitsap County used a different planning approach which
included the expansion of a PUD. One factor that influenced
Kitsap’s decision was that the largest purveyors (cities such as
Bremerton and Port Orchard, and private purveyors such as the
Annapolis Water District in Port Orchard) were not in competition
for customera They were separated geographically or they .already
served populations within well-defined boundaries established by
agreement or court decision. Water quality and quantity were
therefore mainly rural issues at the county level. Kitsap County
therefore designed its plan around a county-wide PUD that would
establish satellite relationships with those local water systems
that it did not own.
The Kitsap County Public Utility District #1 (PUD), formed
in 1962, started with one water system serving 260 people. It
currently owns ten systems and serves 2,600 people. In April
1979 after a rapid growth in population on Bainbridge Island,
county and PUD officials developed guidelines for establishing
satellite systems throughout the county. At the urging of the
PUD and the DSHS, a county—wide assessment was conducted. A
CWSSA was adopted in 1987. The boundaries of the CWSSA coincide
with those of the county, excluding the submarine base. The
county designated the PUD as lead agent in the planning process.
Since the county’s planning process was instituted in 1987,
it is too early to determine whether the rate of increase in
small systems has slowed. Nevertheless, two important applica-
tions of the State PWSCA are illustrated by cases in Kitsap County:
(1) the development of a satellite management program under the
aegis of the county PUD (the Bainbridge Island case) and (2) the
use of grant funding and local tax revenues to develop sources
and to acquire and improve problem systems (the Waggoner Wells
case).
103

-------
Bainbridae Island. Kitsap County
The Bainbridge Island case illustrates how a satellite program
was implemented to restrict and regulate small system growth. The
PUD will provide interim satellite services until the developments
and improvements needed to ensure reliable water service have
been completed.
In April 1979, a PWSCA preliminary assessment was initiated
by Kitsap County officials. The assessment concluded that there
was an exceptionally large number of Class 4 systems in the county.
Many of these small systems were developed within the previous five
years, as a result of larger systems’ inability to serve many
areas beyond their existing service lines. 20 Most of these systems
were poorly designed, inadequately run, and lacked monitoring or
sampling procedures. While there appeared to be no significant
water quality problems, dry wells and insufficient water service
were of increasing concern both to Bainbridge Island residents
and to county drinking water officials.
In response to the problem of small—system growth, the county
developed a two—phased action plan. In phase one, a set of guide-
lines was developed for satellite system development in the county.
Phase two, which has three subphases (immediate, short—range, and
long-range), applies only to Bainbridge Island. It provides a
mechanism for controlling and regulating small, non—viable systems
and establishes a schedule for the construction and development
of water systems necessary to ensure reliable and adequate future
service.
In the immediate phase, a satellite assistance program was
established. New project review procedures and an emergency
rationing program for systems having a history of water shortages
were also established. The PUD operated as a satellite manager,
providing operation and management services, technical assistance,
and operator training. During the short-range phase from 1985-
1988, shared reservoirs and transmission lines utilizing existing
sources were constructed. During the long—range phase, beginning
in five years, the county plans for water lines connecting new
sources to shared reservoir sites and major interties to provide
intra—subarea links. “The Bainbridge Island satellite management
activities could be applied in any part of the country,” the PUD
director said.
Waggoner Wells. Kitsa County
This case illustrates the PUD’s use of grant funding to
provide satellite services. In exchange for assuming ownership,
20 Kitsap County Public Utility District Number 1, Satellite
Study. Phase Two: Bainbridae Island , April 23, 1983.
104

-------
the PUD will operate a satellite system until service lines can
be extended to include the area
The Kitsap County PUD negotiated a “license to enter and
acquire a well site” with the owner of a subdivision. The PUD
offered to operate and maintain the new system in return for
ownership and water rights. The PUD used grant funding to acquire
and complete construction of the new system. The PUD construction
included drilling a new well to replace the owner’s original
well, which was designed to service five connections. The new
well was capable of serving as many as 10 times the original
number of connections. By increasing capability, the new system
may extend its service area. The PUD will operate the system as
a satellite until the PUD’s service lines reach it.
Stevens County
This case study demonstrates that satellite programs can be
effectively implemented without invoking the PWSCA. The impor-
tant requirements are an institutional structure within the county
that will support a satellite program, technical experts, and
sufficient revenue to support necessary improvements.
Stevens County, with a population of about 30,000, is primar-
ily rural with a few small urban centers. Although a preliminary
assessment was conducted as the first step of the planning procesA,
county officials decided that there was no need to invoke a CWSSA
or to proceed with the development of a county water plan.
The Stevens County PUD, formed in 1936, took over the elec-
trical systems previously owned by the Rural Electrification
Association. In the late 1950$, the Washington Water Power (WWP)
bought the PUD’s facilities. The PUD was disbanded, but the PUD
fund from the WWP remained undistributed. In the mid-l970s the
PUD was given a new charter that included the responsibility to
provide safe drinking water to the people in Stevens County. The
PUD owned three water systems serving 300 people by 1982, and
acquired seven more systems in 1987. The PUD also developed a
satellite program with one system in northern Spokane County.
The PUD provided operation and maintenance, but not management,
services to this system. Since the owner would not make the
necessary improvements, the PUD no longer supports this system.
The PUD also became a satellite owner/manager of three other
small, inadequate systems in northern Spokane County. The State
regional office played a key role in both of these inter-county
arrangements. The Stevens County PUD now owns an estimated 17
systems serving 1,800 people.
Having established satellite programs with small, privately
owned systems, the PUD is now trying to determine the most effec-
tive way to use the satellite program to provide operational and
management support to small, incorporated towns in Stevens County.
105

-------
Spokane County
The case of Spokane County illustrates an application of the
water system planning process where the county was able to divide
planning areas to reduce small suburban area concerns with future
annexation. The County accomplished a relatively complex planning
process ma short time by supporting and adopting an interim
plan. The State aided the county by partially funding the planning
effort, facilitated decision making, and required delinquent util-
ities to support the planning effort.
Spokane County is a rapidly growing county with most suburban
development surrounding a single central city. County population
is about 360,000. It is a desert county; water is generally not
plentiful. In January 1978, an Interim Management Report for
county utility service was published. It fulfilled the require-
ments of a preliminary assessment in accordance with the newly
enacted State PWSCA. The report concluded that although water
quality was generally satisfactory, smaller systems had problems
providing reliable service. Also, there was an overall lack of
administrative policy and procedures to coordinate water utility
service required for future growth. 21 There were more than 150
Class 1, 2 & 4 public water systems in the county, an increase
from only 84 systems in 1975.
Also in 1978, the EPA designated the Spokane Aquifer a Sole
Source Aquifer. Since this was the source of drinking water for
the City of Spokane and nearly 90 percent of the county population,
there was a strong impetus to protect the aquifer and to develop
coordinated water and sewage system plans. Since then, the Spokane
River has been developed as an alternate source. In October
1978, the county commissioners established four separate CWSSA5,
encompassing about 50 percent of the county land area. These
also included about 90 percent of the population and more than 95
percent of the county’ s water systems.
Four CWSSA5 were selected to acknowledge and protect separate
area needs and interests. One of the issues was annexation by
the City of Spokane. The county therefore designated the city as
one CWSSA, adding small future service areas to the north and to
the south. The remaining CWSSA5 were assigned to the rapidly
developing suburban areas to the north, east, and west. Acknowledg-
ing the city’s strong central role, the county appointed city
representation to the three other WUCC5. A WLJCC steering committee
was appointed to insure coordinated planning between the four
areas. Within the separate CWSSA5, nine small cities around
Spokane established their own exclusive service areas, assuaging
fears of future annexation by Spokane.
21 Spokane County CWSP, March 1982.
106

-------
Although four separate groups conducted the planning in
their respective areas, a single set of minimum design standards
was established and a single Interim CWSP was adopted by the
county in February 1980. With service area boundaries, minimum
standards and interim system review procedures established, new
water system development and expansion could proceed. An addi-
tional phase of planning continued to:
— finalize service area conflict disputes,
— complete and evaluate individual water system plans,
— evaluate current and identify potential shared or joint
use facilities,
— structure a program of satellite water system assistance
to be operated by the county, and
- integrate the CWSP with the Comprehensive Wastewater
Management Plan that had been concurrently developed by
joint city and county efforts.
A final CWSP was published in March 1982. The State played
a relatively strong role in the Spokane water system planning
process. Grant funding of $172,136 was matched by the county to
support the planning process. In addition to funding support and
its normal role as facilitator and technical advisor, DSHS:
— issued letters to utilities delinquent in the development
of their individual plans,
— adopted a policy of not approving water system construction
permits unless the proposing utility had an approved
water system plan, and
— adjudicated one or more service area conflicts.
The CWSP is currently undergoing the periodic review and
update process. Changes that are being considered include:
— establishing an expanded External Boundary,
— addition of Stevens County PUD as a purveyor to support
inadequate systems in Northern Spokane County,
— increasing fire flow standards in many rural areas, and
— renegotiating service areas, plans for interconnection
and basin use plans for one CWSSA.
107

-------
Results
County health and planning officials are pleased with the
results of these planning efforts. There are currently about 360
water systems in the county. The rate of increase by class of
system is shown in Exhibit 5.6.
Exhibit 5.6
Rate of Increase of Small Systems in Spokane County*
Rate of Rate of
Increase Ihcrease
1975—1985 1985—1988
Systems 11/70 4/75 11/85 6/88 (#/yr.) (#/yr.)
Class 1 >1000 — 10 13 13 <1 0
Classl 32 38 58 55 2 —l
Class2 40 32 78 81 5 1
Class 4 — 14 190 221 18 12
EPA Small
Systems** — 60 123 123 6 0
Notes :
*Data are for the total county, including the area outside
the CWSSAS.
**EPA Small Systems include all systems having 10-1000 con-
nections. This number is calculated by adding the systems
in Classes 1 and 2, and then subtracting those Class 1
systems that have more than 1000 connections.
The number of small systems with 10 to 1000 connections,
roughly the size that the EPA defines as small, has not changed
n the last three years. County administrators indicate that almost
all of the new systems permitted by the county are outside of the
CWSSA5. The few that formed within the CWSSA5 are outside existing
or future service areas. No new systems are allowed to develop
that are of inadequate design or incapable of continued viability,
according to county officials.
108

-------
Few problems concerning water system development and service
have been encountered since the plan was adopted. County admin-
istrators mentioned only two. Occasionally, the county receives
complaints from a developer indicating that purveyors require
expensive connection fees (e.g. $800 per hookup). However, these
are always successfully negotiated and do not hinder development
according to county plans. Some developers circumvent the system
by developing individual wells. However, zoning and sewage plan-
ning reqU irexnents allow this only on five—acre or larger lots.
These wells typically have poorer quality water than the larger
community systems. These circumvention strategies are thus not
normally successful on a continuing basis.
Connecticut—Washington ComDarison
Connecticut modeled its plan after Washington’s. However,
Connecticut b’ oadened the scope of its program. There are three
major areas in which the Connecticut and Washington planning
processes differ:
1. The programs do not deal with existing systems in the
same way. Connecticut gave the State the authority to
order the takeover of a failing water system. Washington
did not.
2. In Connecticut there is more State involvement and no
county involvement. DOHS was granted the authority for
dividing the State into seven management areas, each
with their own WUCC. Therefore, no areas of the State
are left without water management plans. In contrast,
Washington used existing county boundaries as their units
in the water system planning. In Washington, the State has
not required that each county institute a WUCC, and the
entire county does not have to be included in the planning
area.
3. The composition of the .WUCCs are very different in the
two States. The Connecticut WUCCs consist of all existing
water systems that serve more than 25 people. In
Washington the WUCC is appointed and is usually composed
of county legislators, members of the county planning
agency, county health agency, and owners or operators of
water systems with more than 50 service connections.
5.5 Application to Other States
Washington’s program for restricting the creation of new
potentially non-viable small water systems has three components
that may be useful to other States. The 248-54 Regulations,
particularly the Small Systems Management Program, may be applied
at the time of permitting to ensure that systems can meet both
109

-------
normal and emergency operating expenses and responsibilities.
The Satellite Support System concept is a useful and flexible
tool for ensuring reliable water service in even the most remote
areas. The PWSCA is an effective way of preventing potentially
non—viable small systems by implementing efficient water service
development and expansion.
State Characteristics that Affect Proaram Structure or
Effectiveness
Several characteristics of Washington State influenced the
development and implementation of the PWSCA. These are:
— An emphasis on local decision-making. The program was
delegated to counties and local committees.
— Diversity in political structure. The WUCC5 are dif-
ferent in each county and can be influenced by strong
county government, city government, or utilities.
Delegation of decision-making allows each county to adapt
the planning process to its unique structure.
— Diversity in water system characteristics. Systems vary
widely in terms of water quality, water quantity, source,
size, and type of ownership.
— Population. Washington is the most sparsely populated
State of the four study States. In addition, the counties
vary significantly in terms gf population density.
ADDlicabilitv of Siecific Proaram Elements
The extreme flexibility of the Washington water system plan-
ning process allows other States to model implementation strategies
on Washington’s program. After modifying tools to fit a State’s
characteristics, some of Washington’s tools and options that
might be effective in restricting creation or the future viability
of new systems are:
— Public Water System Regulations . The 248-54 Regulations
require new and existing systems to comply with State
standards for technical, financial, operational, and mana-
gerial viability. Periodic reviews of systems are required
to ensure continued viability.
— Satellite Su ort System . The methods of application of
the satellite programs vary widely within the State. The
satellite manager may assume ownership or provide services
under contract. Satellite systems may be instituted with
or without PWSCA implementation. Services may include
management, operations, or maintenance.
110

-------
- Water Utility Coordinating Committee . While the State
administers the PWSCA, the county government and water
utilities are given significant decision making authority.
A committee of local elected officials and water system
managers is formed to prepare the coordinated water system
plan. The committee’s continued role in developing the
plan helps to ensure that all decision makers and water
purveyors will follow the standards established by the
plan. By involving the larger purveyors in the planning
process, creation of new systems is discouraged. The
State cases illustrate:
-- designation of the PUD as lead agent in the planning
process,
—— appointment of a WUCC steering committee, subcom-
mittees, and inter—community liaison to ensure
coordinated planning,
-- city representation on WUCC5 of adjacent CWSSAs
because of the city’s strong central role.
— State local government and community cooperation . Al-
though the State partially funds and facilitates the
planning process and then reviews and approves the contents
of the plan, the County and local representatives have
the authority to implement and direct the outcome of the
PWSCA. Cooperation of the participants is essential to
ensure adherence to the plan.,
— Exclusive current and future service areas . Service area
designation allows water purveyors to identify their
respective areas and plan for the future. Water systems
must provide service to all current and future development
within their service area or lose that section of their
service area. Service area agreements eliminate competi-
tion, duplication, and inefficient extensions of facilit-
ies. After service area agreements are established, new
systems will form only if the existing water system cannot
or will not provide the requested service. If service
cannot be negotiated with the water system designated to
serve the area, an adj acent water system may expand to
provide service or a satellite management program can be
established.
- Intra-reaional comDatibilitv of Dians . The PWSCA requires
compatibility among plans in two ways. First, within a
region, water utility plans must be compatible with county
land use plans. Coordination of water and land use plans
ensures that adequate water supplies will be available to
support the planned land development. Second, individual
system plans must be compatible with the plans of adjacent
111

-------
purveyors. Coordinaticn among neighboring systems dis-
courages conflict and maximizes the potential for joint
use or shared facilities.
112

-------
cHAPI’ER 6: CONCLUS IONS
In this chapter, we compare and evaluate the four States
described in the previous chapters. Programs aimed at controlling
the creation of non—viable small systems are evaluated as com-
posites, and then their elements are evaluated separately. This
distinction is important because specific program elements may be
useful even though there are problems with the program’s overall
effectiveness.
6.1 Summary of the Four States
Connecticut
Connecticut’s program consists of three main components,
each of which is based on State statutes. First, in its
Certificate of Public Convenience and Necessity process, the
State requires all new or expanding water systems serving between
25 and 1,000 people to obtain a permit. Before approving a new
system, the State first determines whether an interconnection or
satellite system is feasible. If so, the system is not allowed
to operate independently. If the State determines that there is
a need for a new water system or for a system expansion, the
State requires the proposed system to prove its financial, manage-
rial, and technical viability. Failure to provide such proof can
result in denial of a certificate to operate independently or to
proceed with expansion.
The second aspect of Connecticut’s program is the “Connecticut
Plan.” This is an area—wide planning mechanism that requires
existing water systems to detail their current and future service
areas and capabilities. It also requires a regional body, the
Water Utility Coordinating Committee (WUCC), to coordinate these
individual plans and delineate exclusive service areas within each
region.
Finally, the State statutes grant the Department of Public
Utility Control (DPUC) and the Department of Health Services
(DOHS) the authority to order a system to act as a receiver or to
acquire an existing water system that has repeatedly violated State
drinking water regulations and that has not responded to an admin-
istrative order.
Geora i a
Georgia has three requirements that might be used to dis-
courage the creation of non—viable small systems. First, new
small systems are required to consider connecting to nearby
publicly owned water systems. Second, water systems must seek
permits before construction, at which point the State will provide
technical assistance to ensure that new systems are constructed

-------
according to certified standards. (The permitting process is not
used to restrict the creation of all new, potentially non—viable
systems as in Connecticut, Maryland, and Washington.) Third, the
State requires a Trust Indenture from privately owned systems
serving homeowners as a form of insurance in case of future system
problems.
Georgia encourages interconnections with existing systems by
requiring the prospective owner or operator to consider tying
into an existing publicly owned water system if one is available
within 500 feet. This rule does not require an actual intercon-
nection. Instead, it requires consideration of the feasibility
of such a connection. The State has no rule requiring considera-
tion of an interconnection with a nearby privately owned water
system.
The Trust Indenture establishes a trustee .for each privately
owned system that serves property owners. The trustee promises
to operate the system if the system fails. However, the Trust
Indenture is rarely invoked because that requires court action.
State officials believe that the Trust is not useful.
Maryland
Maryland’s small system creation control program consists of:
- financial, operational, and technical reviews of new pri-
vately owned systems,
— county comprehensive plans,
- a requirement that privately owned systems hold funds in
escrow for operating and maintenance expenses and system
replacement, and
— authority to order new management, system alterations,
extensions, or construction of new facilities, as
Maryland Department of Environment (MDE) finds necessary.
The permitting process allows the State and the counties to
restrict the creation of new small systems. The process consists
of a technical review and a financial and management review with
both county and State involvement.
Each Maryland county must prepare a comprehensive plan. The
county plan consists of an inventory of the current systems in
the county, their current service areas, and a plan for future
service areas two, five, and ten years in the future. The planning
process encourages interconnections with existing systems rather
• than the creation of new small water systems.
114

-------
Maryland also requires new small water systems to ensure that
they will have an adequate financial base during their operational
life. County and State officials may require the deposit of funds
in escrow for future use. Agreements to do so are incorporated
into the county plans.
Washington
Washington has developed the following mechanisms to control
the creation of new, potentially non—viable small systems:
— Area-wide planning to define water systems’ present and
future service areas, and establishment of county design
standards that incorporate State engineering standards;
— Comprehensive State requirements for new small systems,
including finance and operation reviews; and
— Regional use of facilities and satellite management or
ownership arrangements.
Area—wide planning reduces the demand for new small systems,
and county standards serve as an additional test of viability that
proposed systems must meet. The planning and permitting of pro-
posed systems ensure that operational and financial viability
will be evaluated prior to construction. In addition, satellite
operations and shared facilities are important means of making
resources available to potentially non—viable small systems.
6.2 Comparison of the State Progr ’n
The SDWA establishes, as its primary objective, the elimina-
tion of violations of MCLs and of monitoring and reporting regula-
tions. In contrast, many States have statutory frameworks that
emphasize a comprehensive public health approach to drinking
water. It is in the latter context that the States we examined
have chosen to curtail the creation of small systems that may pose
problems in the future.
All four States review new small water systems through their
permitting processes. Of the four, Georgia uses its requirements
in the least restrictive manner. Connecticut, Maryland, and
Washington use their requirements to place heavy burdens of proof
of viability on proposed systems. Connecticut and Washington
have requirements specifically for new small systems (the
Certificate and Small Systems Management Program respectively).
Maryland has separate requirements for privately owned systems,
which are often small.
Connecticut, Maryland, and Washington have instituted area—
wide planning to ensure greater efficiency in water system develop-
ment and to encourage interconnections and satellite management.
115

-------
All areas of Connecticut and Maryland are required to institute
water system planning. Connecticut’s area—wide planning committees
are overseen by the State, whereas Maryland’s are overseen by both
the counties and the State. Washington does not require all
counties to institute planning.
The four States studied in this report have devised a wide
array of policies for controlling the creation of potentially
non—viable small water systems. A description of the strengths,
weakness, and potential pitfalls of these State programs may be
useful to other States interested in developing their own controls.
Connecticut
All three of Connecticut’s programs described in Chapter 2
are based on the authority given to DPUC and DONS through legis-
lation. Without these laws and the consensus that was necessary
to pass these laws, the State would not have had the opportunity
to develop its comprehensive program.
Connecticut has defined a viable small water system in terms
of the criteria a proposed water system must meet to receive a
construction permit. Connecticut requires owners to employ staff
with financial, managerial and technical skills. The applicant
must:
— indicate a party responsible for the system’s operation,
— demonstrate a full—time commitment to running the water
company,
— require proof of technical, financial, and managerial
competence, and
— present plans for dealing with routine problems and emer-
gencies.
Periodic evaluations of systems’ financial and managerial viability
are accomplished through management audits performed by DPUC.
Georaia
As described in Chapter 3, Georgia’s effort to restrict the
creation of non—viable small water systems has limited effec-
tiveness because of its lack of authority. First, the Trust
Indenture program does not ensure that the water system will be
adequately financed or maintained. Second, Trust Indentures are
required only of certain privately owned water systems. Third,
there is no incentive for a viable water company to become the
trustee for a potentially non—viable small system because doing
so could be very costly for the trustee.
116

-------
The second major part of Georgia’s program is the use of the
permitting process to control potentially non—viable small systems.
However, this program is limited by the fact that it only re-
commends that new private systems hook up to nearby public ones.
The State cannot compel interconnection. State efforts to address
potential non-viability through the permit process only ensure
that the system is adequately designed and constructed. They do
not ensure that the owners possess the financial, technical, and
managerial skills necessary to operate a water system. Moreover,
the permitting process may be circumvented. The State has not
developed a process to monitor or to have the counties monitor
the creation of water systems. This could be accomplished by
linking building or expansion permits to water system permits.
Maryland
Maryland has developed the use of the permitting process and
the county comprehensive plan in its efforts to control small
system creation. The county plan is equivalent to the area—wide
planning process in Connecticut. All areas of the State must
institute planning.
Maryland’s reviews of proposed systems during the permitting
process are similar to those of Connecticut and Washington. All
three evaluate the financial, managerial, and operational qualif-
ications of proposed system owners to ensure viability. Maryland
differs from these two States in that Maryland law aims its finan-
cial requirements at privately owned systems. And Maryland
requires privately owned systems to place funds in escrow for
future operations, alterations, and replacement.
Washington
The permitting requirements of proposed systems allow the
State to evaluate systems before installation. The small system
management program, required at the time of permitting, is an
especially effective tool in restricting the creation of poten-
tially non-viable small systems. 1 It is similar to Connecticut’s
Certificate of Public Convenience and Necessity in that it reviews
the financial and managerial qualifications of all proposed small
system owners and it requires periodic updates.
Washington’s PWSCA gives counties a way to control the devel-
opment of potentially non—viable water systems. The program is
designed to improve water quality and water service by planning
for the development of new water systems, developing compatible
design standards so that future interconnections are possible,
establishing future service area agreements, and promoting the
sharing of facilities by adjacent water systems.
1 The State expects to have implementation guidelines for
this regulation in December 1989.
117

-------
State officials in Washington, in contrast to their counter-
parts in Connecticut, do not have the authority to decide service
area boundaries if there is a dispute. Because the State lets
the counties choose whether to implement the program, those county
governments opposed to the idea of planning are free not to do
so. Nevertheless, in those counties that have developed coordi-
nated water system plans, the creation of new water systems is pro-
hibited unless the State determines that existing systems cannot
provide service. Washington’s program reflects the unresolved
question of whether favoring large water systems is fair or eff i—
dent. 2
The Satellite Support System program offers another solution
to the problems of non—viable small systems. Washington counties
that have not adopted the PWSCA may encourage satellite arrange-
ments for either ownership or contractual management and operation.
However, this program may be difficult to implement, if it is not
initiated in conjunction with planning. Companies seeking satel-
lite services may not know whom to contact for such service.
Therefore, well—known water systems may become flooded with
requests, while other systems capable of providing service would
not be approached.
6 • 3 Effectiveness of the State Programs
Connecticut has seen a decline in the annual number of appli-
cations for new small systems since the Connecticut programs were
adopted. In 1986 and 1987, the State received 50 requests for
new water systems. In 1988, the State received 42 such requests.
Approximately 12 certificates are granted each year. 3 In the
other cases, systems proceed with an interconnection, adopt a
satellite management agreement, or withdraw their applications.
State administrators also report they have seen a net decline in
the number of small water systems because of voluntary and involun-
tary acquisitions, and inventory modification.
Washington has experienced constant growth in the number of
small systems serving fewer than 25 customers. This most likely
reflects the fact that only 18 out of 39 counties have adopted the
PWSCA planning process. When those counties participating in the
process are examined individually, it appears that the rate of
increase in small systems has slowed. In particular, among the
seven counties that have had plans since 1986 or earlier, the
rate of change varies from a decrease of one system per year to a
maximum increase of three systems per year. The Spokane County
2 Kasprak, The Washington Public Water System Coordination
Act,” Connecticut Office of Legislative Research, January 1984, 16.
3 Only two certificates have been denied since the 1984 passage
of the legislation.
118

-------
Utilities Department commonly_received 20-30 applications per
year prior to the adoption of the water system management plan in
1982. Since 1985, however, the number of systems serving between
ten and 1000 customers has not increased. 4
In Maryland, only six to eight new small systems are created
each year, and the State receives only 12 new—system applications
annually.. This low rate of small system creation may contribute
to the high compliance rate in Maryland. 5
In the States studied, the effectiveness of creation control
programs depends on the State taking an active role in deciding
whether a new water system should be created. Connecticut,
Maryland, and Washington take such roles. These States not only
regulate the quality of drinking water but also determine whether
there is a need for the service; whether a new system will provide
the service efficiently; and whether an existing system could
provide service more efficiently. In effect, •these States have
adopted the principle that water systems are similar to other
public services (like electric or natural gas companies, or hos-
pitals) that must demonstrate a need before creating new infra-
structure. State controls may include intervention in all aspects
of a system’s operations, up to and including system acquisition.
This principlc is demonstrated in Connecticut, where the DPUC is
authorized by statute to evaluate public service companies, includ-
ing water systems, to determine that there is a “clear public
need for the service proposed or provided (and] that the public
service company shall be fully competent to provide efficient and
adequate service to the public in that such company is technically,
financially, and managerially expert and efficient.” (CGS Section
16—19e).
6.4 Problems
At the outset of this study we anticipated three problems
that might result from State programs to control the creation of
potentially non—viable systems. The first was opposition from
property owners, who might argue that limits on the creation of
new water systems would restrict land development, thereby depriv-
ing them of the maximum use of their property. The second problem
was the possibility that efforts to control creation might become
4 Kasprak, 12. Kasprak interview with the Director of the
Spokane County Utilities Department.
5 Maryland’s average number of violations is considerably
lower than that of the nation as a whole, according to FRDS 19A,
FY 1987. The average number of violations per system in Maryland
is 0.07 for MCL violations and 0.13 for M/R violations. In con-
trast, the national average number of violations per system is
0.16 for MCL violations and 0.68 for M/R violations.
119

-------
an obstacle to the provision oi safe drinking water to isolated
rural communities. Third, if State control programs generate
substantial opposition, there might be a tendency to evade those
programs by operating systems outside the State regulatory struc-
ture.
In fact, with the possible exception of Georgia, respondents
in the States examined in this study reported that these problems
were less significant than we had anticipated. However, a new
problem emerged that we had not foreseen: small system complaints
about State policies that appeared to favor aggressive growth of
larger municipal or investor—owned utilities. Each of these
issues is discussed in greater detail below.
Rights of Property Owners and DeveloDers
Concern about the impact of State control programs on property
owners and developers has been heightened by a recent U.S. Supreme
Court ruling that a particular application of California flood
control district regulations constitutes a “taking” of private
property without just compensation. 6 This and other recent court
decisions have raised the question of whether such fundamental
State actions as licensing or permitting, which might be applied
to water systems, constitute “takings” if they deny owners the
maximum use of their property.
This issue was not a major concern of property owners or
developers in the study States. (In the one case we observed
that when a developer objected to co9nty controls on the grounds
of interference with his property rights, the issue was settled by
negotiation.) In large part, this was caused by the fact that the
State control programs did not impose categorical bans on new
systems. The programs in Washington, Connecticut, and Maryland,
for example, simply tried to influence the direction of new devel-
opment and ensure that new water systems met minimum standards.
This allayed the fears of most property owners. Developers were
concerned, however, about potential delays in beginning construc-
tion while waiting for the outcomes of the planning process.
Safe Water for Rural PoDulations
Both the National Rural Water Association (NRWA) and the Rural
Community Assistance Program (RCAP) have been concerned about the
tendency of control programs to target all small systems, without
distinguishing between the viable and the non-viable. The NRWA,
for example, agrees that there may be merit in a planning process
for the exploration of alternatives (e.g., hookup to existing
systems) prior to the construction of new small systems. NRWA
representatives remind us, however, that many small systems are
6 See First English Evangelical Lutheran Church of Glendale
V. County of Los Angeles
120

-------
well operated, and that people in ruial areas deserve safe drinking
water. This last issue is of particular concern to the RCAP
representatives serving the Southeast. They feel that programs
to restrict creation of non—viable systems might be used by States
to prevent the development of systems to serve the rural poor.
In their opinion, a new small system that does not meet all
standards may be superior to no system at all.
Evasion
If the control programs are too onerous for property owners
or for rural populations, either group could evade the program
by: (1) dividing a public water supply into smaller units that
would be exempt from the State’s regulatory authority, or (2)
developing a public water supply without a permit. Unpermitted
systems were problem in Georgia, but it is not clear whether
this was in response to State programs. There was no firm evidence
of evasion in any of the other study States, although officials
in one Washington county expressed suspicions that it was occurr-
ing.
Favoring Larae Publicly Owned Systems
Washington’s program was criticized for favoring large
publicly owned water systems over smaller ones in the development
of future water service areas. First, small systems having fewer
than 50 service connections are not represented on the planning
committees. Since the counties play a large role in directing
the planning process, it has been argued that they may be given
first choice of areas in which they want to-expand. The publicly
owned water systems could therefore be granted the most profitable
service areas. 7
Connecticut, when studying Washington’ s program, identified
this potential problem and sought to overcome it by allowing all
regulated water systems to become members of the area—wide planning
committees. Second, Connecticut’s program is designed to encourage
expansion and increased use of satellite agreements by all systems
having the capacity to expand their service. Third, although the
water systems on the planning committee are responsible for deter-
mining future water service areas, the State reserves the right
to intervene if they cannot agree on an equitable allocation.
6.5 The Federal and State Roles
Programs to control the creation of potentially non—viable
drinking water systems are best developed at the State and local
levels of government. As shown in this report, these programs
often are part of broader State—wide policies concerning land use
7 Kasprak, 14f.
121

-------
planning, economic development, and natural resources management.
If they are concerned about the creation of new potentially non-
viable water systems, States should consider legislation and/or
regulations that would enable them to establish control programs.
EPA’S interest in this issue is best served through two
types of activities. First, working with the States, EPA should
encourage. the dissemination of information about successful control
programs. Many States are eager to develop such programs, and
EPA can assist that development by facilitating exchange of infor-
mation among the States. Second, EPA can develop a strategy
favoring development of programs to control creation of non—viable
systems. Once such a strategy is established, EPA Regional Offices
can work with States to encourage development of such programs.
122

-------