&EPA
United States
Environmental Protection
Agency
2006 Community Water
System Survey
Volume I:
Overview
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Cover Photo: The Gaffney Board of Public Works Water Tower, Gaffney, South Carolina
The Gaffney Board of Public Works Water Tower, or "Peachoid" as it is known, stands 135 feet tall and
holds one million gallons of water. The tank was commissioned to be built in 1980. Contractors took
five months to design and mold the steel. A seven-ton, 60-feet long leaf was applied to one side. Peter
Freudenburg, an artist specializing in super-graphics and murals spent hours inspecting real peaches to
use as a model to paint the tank. Fifty gallons of paint in twenty colors were required to complete the
project. EPA wishes to thank the Board for participating in this survey, for allowing us to acknowledge
this fact and for providing us with the cover photo.
Photo by Kim Partner of the Gaffney Board of Public Works
Office of Water (4606M)
EPA815-R-09-001
February 2009
www.epa.gov/safewater
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2006 Community Water
System Survey
Volume I: Overview
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Contents
Executive Summary v
Trends and Key Findings v
Study Purpose vii
Survey Methodology vii
1. Introduction 1
Background 1
Data Presentation 2
Intended Uses of CWS Survey Data 3
Regulatory Development Analyses 3
Policy Development Analyses 4
Regulatory Implementation Analyses 4
Compliance Analyses 5
Organization of the Report 5
2. Overview of System Operations and Finance 7
Water System Profiles 7
Water Source and System Ownership 7
Water System Size, Customers, and Deliveries 9
Treatment, Storage, and Distribution 13
Water Treatment 14
Treatment Practices of Systems 15
Treatment Practices and Objectives of Treatment Plants 15
Treatment Residual Management by Systems 18
Storage 18
Distribution Networks 19
Financial Summary 19
Summary of Revenue and Expenses 20
Capital Spending 28
Presenting Data on Capital Investment 29
Conclusions 36
3. New Topics and Trends 37
Topics New to the Survey 37
Technology 37
Security 37
Labor 39
Storage 39
Pressure Zones 40
Flushing 41
Small System Revenue 42
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Contents (continued)
Trends 43
Trends in Industry Structure and Operating Characteristics 43
Trends in Financial Characteristics 45
Trends in Capital Investment 48
Trends in Sources of Funds for Capital Investment for Publicly Owned Systems:
the Growth of the Drinking Water State Revolving Fund 50
Glossary 53
Acronyms 57
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Acknowledgments
Many dedicated owners, operators, and managers of community water systems made this survey possible.
We would like to thank the 1,314 water systems representatives who devoted their valuable time to searching
through records and completing our questionnaires. Thanks also to James Taft of the Association of State
Drinking Water Administrators and to Erica Brown of the Association of Metropolitan Water Agencies for
encouraging the participation of their members who were sampled for this survey.
This survey was managed for EPA by Brian C. Rourke of EPA's Office of Ground Water and Drinking
Water.
The Cadmus Group, Inc. was the prime contractor for this project, which was managed for them by
Richard Krop, a principal with the company.
Community Water System Survey Report: Volume I iii
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Executive Summary
Trends and Key Findings
Most of the characteristics of community water systems (CWSs) are unchanged from 1976, when the first
CWS Survey was conducted. Although most systems serve fewer than 10,000 customers and the majority of systems
that serve fewer than 500 are privately owned, most people still get their water from large, publicly owned systems.
Nevertheless, there have been important changes since the first survey. They include an increase in the percentage
of systems that treat their water and an overall improvement in water system financial performance. Key findings of
the 2006 Survey are the following:
• The number of CWSs declined by 6 percent between 2000 and 2006. This change is the largest decrease in the
number of systems that we have ever seen from one survey to the next. The largest decline is among private
systems serving 100 or fewer persons (a drop of more than 2,000 systems, or 17 percent) and among systems
serving between 101 and 500 persons (a drop of more than 1,300 systems, or 12 percent). On the other hand,
the number of systems serving more than 10,000 persons increased by 13 percent. (See page 44 of this Volume
as well as Table 1 in Volume II. Volume II, Tables 2-5 provide additional details on the number of systems in
the country.)
• Water systems that receive their water primarily from purchased sources have increased 9 percent from 7,979
in 2000 to 8,670 in 2006. These systems have grown from 15 percent of total systems to 18 percent. The
increase is particularly noticeable in systems serving fewer than 500 persons. Their numbers have grown from
2,248 to 3,021, or from 7.7 percent of systems in this size category to 11.3 percent. The increase is largest in
purchased water systems serving 100 persons or less; their numbers having grown from 69 systems to 764.
This change may explain part of the decrease in the number of small private systems. (See page 44 and Table
1 in Volume II.)
• When compared to the 5-year period prior to the 2000 CWS Survey, there has been an increase in the percentage
of publicly owned systems making major capital investments in the 5 years preceding this survey. The number
of privately owned systems making major capital investments, however, has declined. While the 2000 CWS
Survey reported almost 54 percent of all systems made such investments, the current survey found that fewer
than 44 percent did so between 2001 and 2006. (See pages 28 and 49 and Tables 86 and 87 of Volume II of this
survey, and Tables 69 and 70 of Volume II of the 2000 CWS Survey.)
• When asked to group total capital expenditures over the past 5 years into three areas, systems responded
that costs related to expanding their systems accounted for 53 percent of the total, while major repairs and
replacement accounted for 37 percent and regulatory compliance costs, 10 percent. (See page 30. Also see
Table 101 in Volume II.)
• The proportion of capital investment in treatment has declined over the past 5 years, accounting for only 14
percent of the average system's total capital investments. (See page 30, page 49, and Volume II, Table 94 for
further details.) This compares with 25 percent of total capital investment spent by the average system on
treatment as reported in the 2000 CWS Survey. (See Table 74, Volume II of the 2000 CWS Survey, which
shows average capital investment by type in thousands of dollars.)
• The largest share of total national investment continues to go toward distribution mains and transmission
lines, accounting for 44.9 percent of all capital expenses for publicly owned systems and 56.8 percent of such
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expenses for privately owned systems. (See page 31 and Table 97 in Volume II.) This proportion is similar
to that reported in the 2000 CWS Survey when 46.7 percent of capital expenditures made by publicly owned
systems and 53.3 percent made by privately owned systems went for distribution and transmission lines. (See
page 49 and Volume II Table 97 for further detail and Table 75, Volume II of the 2000 CWS Survey. Table 75
in the 2000 report shows the results by water source rather than ownership.)
• Storage capacity accounted for 13.3 percent of the total investment, on average. (See page 49 and Volume
II, Table 94 for further details.) This percentage is virtually unchanged from that reported in 2000. (Similar
information may also be found in Volume II, Tables 83-92.)
• More than 61 percent of the systems that made capital improvements over the past 5 years invested in their
transmission and distribution systems. (See Volume II, Table 90. Tables 86-96 in Volume II provide additional
information on capital investments.) However, the amount of pipe replaced as a percentage of the length of
existing pipe did not rise significantly between 2000 and 2006. (See page 45 and Volume II, Tables 48 and 49
for additional information on pipe.)
• The percentage of systems in most size categories that operated at a loss increased between 2000 and 2006.
A substantial portion of systems in most size categories continue to have costs that exceed revenues. (See the
discussion on pages 45-50 and Volume II, Table 81 for further details. Information on revenue and expenses
may also be found in Volume II, Tables 58-82.)
• Most systems, whether public or private, rely on current revenue for at least a portion of their major capital
expenses. Sixty-five percent of systems use current revenue, which funded 32 percent of capital investment
nationally. This is down slightly from 75 percent in 2000, when current revenue made up 39 percent investment
nationally. (See pages 31 through 35 and Tables 102 and 104 in Volume II as well as Tables 79 and 81 in
Volume II of the 2000 Survey.)
• Although most of the money for capital spending comes from current revenue and other sources, the Drinking
Water State Revolving Fund (DWSRF) has become an important source of funds since it began over 10 years
ago. Approximately 19 percent of publicly owned systems relied on DWSRF loans to finance at least a portion
of their capital improvements, which is up from 10 percent in 2000. (See page 50 and Volume II, Table 102
for more details, and Table 79 in the 2000 Survey.) Nationally, 11 percent of all capital investment for publicly
owned systems was financed through DWSRF loans, up from 4 percent in 2000. (See page 50, and Volume II,
Table 105 for additional details. Information on capital investments may also be found in Volume II, Tables
86-103. Also see Table 81 in Volume II of the 2000 report.) On average, 13 percent of public systems' capital
expenditures were funded by DWSRF loans, up from 7 percent in 2000. (See pages 34 and 50 and Volume II,
Table 104, and Table 80 of Volume II of the 2000 report.)
• The percentage of small systems that do not provide some sort of treatment has continued to decrease for
most size categories. This trend began in 1976 and is consistent with the Safe Drinking Water Act's (SDWA's)
emphasis on water quality monitoring and treatment. Since the 1986 survey, virtually all of the larger water
systems have supplied treatment. (See page 44 and Volume II, Table 15 for more details.)
• Increasing block rate structures reduce costs for customers who consume the least amount of water. Only 11
percent of systems serving 500 or fewer customers use this type of rate, slightly more than the 7 percent that
used it in 2000. Small systems are much more likely to use uniform rates or to charge a flat fee for water.
Larger systems are more likely to use increasing block rates; 27 percent of systems serving more than 100,000
persons use these rates. (See pages 22-24 and 48 for further detail. More information on residential and non-
residential rate structures can be found in Volume II, Tables 71 and 72.)
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• Between 2000 and 2006, the number of points at which water enters the distribution network (entry points)
decreased slightly in every size category except ground water systems serving more than 100,000 persons.
(See page 45 and Volume II, Table 13 for more details.)
• Additional topics added to the 2006 CWS Survey included technology, security, labor, storage, pressure zones,
and flushing. (See Chapter 3 for additional details.) While few water systems cited EPA as their preferred
source of security information, a substantial percentage attends EPA security training or uses EPA Security
Technology Product Guides. (See page 37 and Volume II, Tables 54 and 55 for more details.)
Study Purpose
The U.S. Environmental Protection Agency (EPA) conducted the 2006 CWS Survey to obtain data to support
its development and evaluation of drinking water regulations. EPA developed the survey database to provide critical
data to support regulatory development and implementation. The Agency plans to use the data for regulatory, policy,
implementation, and compliance analyses.
Regulatory Development Analyses. EPA must satisfy the requirements of various statutes and regulations for
analyses of proposed regulations under the SDWA. The survey's data on water system operations and finances are
critical to the preparation of these analyses.
Policy Development Analyses. The survey collected financial and operational data on the full range of water
systems to support a variety of policy and guidance initiatives. EPA also uses the data to respond to requests for
information on the water supply industry from Congress, other federal agencies, and the public.
Regulatory Implementation Analyses. The survey data, along with data from the Drinking Water
Infrastructure Needs Survey, can be used to assess the financial capacity of water systems in general and small
systems in particular.
Compliance Analyses. EPA may use the survey data to develop profiles of the operational and financial
characteristics of different types of water systems, which can be compared to the Agency's database of compliance
records in the Safe Drinking Water Information System (SDWIS).
The objective of these analyses would be to identify the characteristics of systems that may lead to future
compliance problems. (The data from the survey will not be used in any enforcement actions.)
Survey Methodology
This is the sixth CWS Survey. EPA previously collected data in 1976, 1982, 1986, 1995, and 2000. As with
past surveys, the Agency collected information on the most important operational and financial characteristics of
community water systems. EPA took steps to improve response rates, ensure accurate responses, and reduce the
burden of the survey on systems, especially small systems serving 3,300 or fewer persons. EPA sent water system
experts from The Cadmus Group, Inc. and three other companies to collect data from small systems. It mailed the
survey to medium and large systems, made available a spreadsheet and Web-based version of the questionnaire, and
provided extensive assistance through e-mail and a toll-free telephone hot line.
EPA started the 2006 Survey in the summer of 2005 with the development of preliminary questionnaires and
a sampling plan. The survey was designed to collect data for the year 2006. Full-scale data collection occurred from
June to December 2007. The overall response rate was 59 percent; 95 percent of small systems selected participated
in the survey.
Community Water System Survey Report: Volume I vii
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viii Community Water System Survey Report: Volume I
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1. Introduction
The U.S. Environmental Protection Agency
(EPA) defines a community water system (CWS) as
a public water system that serves at least 15 service
connections used by year-round residents or regularly
serves at least 25 year-round residents. CWSs provide
water to more than 280 million persons in the United
States. They are a tremendously diverse group. CWSs
range from very small, privately owned systems whose
primary business is not supplying drinking water (e.g..
mobile home parks) to very large publicly owned
systems that serve millions of customers.
Gaffney, South Carolina's one million gallon
water tank, featured on the cover of this report,
is emblematic of the diversity of water systems.
Commissioned by the Gaffney Board of Public Works
and built with funds from the Appalachian Regional
Commission and the South Carolina Appalachian
Council of Governments, the Peachoid is far from a
typical water tower. Yet distinguishing—and at times
unusual—features are to be found in water systems
throughout the country. Because EPA is charged with
protecting the water quality of the nearly 50,000
systems, the challenge of this report is to describe
water systems according to certain basic characteristics
while still recognizing their incredible diversity.
The 2006 CWS Survey was part of EPA's
ongoing effort to periodically collect information on
the financial and operating characteristics of the public
water supply industry in order to support the regulatory
development process. EPA will use the information
from this survey principally to prepare Economic
Analyses (EAs) in support of new regulations and to
analyze economic and operating factors that affect
national drinking water quality. Other uses for the data
are described below.
This report is comprised of two volumes. Volume
I, the Overview, provides perspective on the industry
by extrapolating the survey data to present a national
picture of water systems. It presents the data by system
size, ownership, and source of water. It also compares
the 2006 data to similar data from the CWS Surveys
Storage tank.
of 2000, 1995, 1986, 1982, and 1976. Volume II, the
Detailed Report, summarizes the survey findings in a
series of tables that display national estimates of water
system characteristics with particular application to
regulatory development. Volume II also provides
a detailed methodology and copies of the survey
instruments.
Background
The CWS Survey collected operating and
financial information from a representative sample
of community water systems. To reduce the burden
on small systems, data from systems serving 3,300
or fewer persons were collected during site visits by
water system professionals. Systems serving more than
3,300 persons (medium and large systems) were asked
to respond to a Web-based electronic questionnaire
or to fill out a traditional paper survey. Water system
professionals were assigned to help each system
respond to the survey questions. A toll-free telephone
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Chapter 1: Introduction
number and an e-mail address also were provided to
the systems for technical support.
Work on the survey began in the summer of 2005
with a series of planning sessions to determine which
information to collect and how to collect it. Versions
of the questionnaire were developed for systems of
different sizes. For example, systems that serve more
than 500,000 persons were asked additional questions
about concentrations of unregulated contaminants in
their raw and finished water. Similarly, questions that
would not apply to very large systems were excluded
from their version of the questionnaire. The draft
questionnaires were tested in June 2006 to gauge
respondents' reactions. A full-scale pilot test followed
in February 2007. Two clusters of small systems were
selected for site visits and questionnaires were sent to a
random sample of 40 medium and large systems.
The 2006 Survey collected some information
that had not been collected in the past, such as detailed
data on distribution systems and on storage capacity
and practices. New data on water security issues were
collected. The survey also gathered information on
system access to computers and the Internet.
The survey sample was drawn from the
approximately 50,000 community water systems in the
50 states and the District of Columbia in the federal
version of the Safe Drinking Water Information System
(SDWIS/Fed). The survey used a stratified random
sample design to ensure the sample was representative,
and the sample was stratified to increase the efficiency
of estimates based on it. Systems were grouped based
on the populations they serve and their sources of water.
(Details of the sampling plan are provided in Volume
II.) A survey sample of 2,210 systems was selected,
including all systems serving populations of 100,000
or more. To limit travel costs, systems serving up to
3,300 persons were selected in geographic clusters in a
two-stage design.
Full-scale data collection was conducted from
June to December of 2007. Site visitors were sent to
approximately 600 small systems and questionnaires
were sent to approximately 1,610 medium and large
systems. Approximately 59 percent of the sampled
systems responded to the survey. The table below
summarizes the final status of the systems in the
sample. Each completed questionnaire was subject to a
thorough review by senior water system experts before
being processed for data entry.
Data Presentation
Both volumes of the CWS Survey report present
tabulations of the data collected by the CWS Survey.
Volume I is intended to provide a broad overview of
the data collected. Volume II shows the information
in greater detail. Therefore, there are differences in
how the data are displayed. In Volume II, numbers are
shown to more significant digits than in Volume I. For
example, estimates in Volume II are rounded to tenths
of a percent, while in Volume I they are rounded to
whole percentages. In both volumes, details may not
sum to totals due to rounding. In Volume II, the data
are generally presented according to eight service
categories denoted by the size of the population served,
either directly (i.e., retail customers), or through the
sale of water to other public water suppliers (i.e.,
wholesale customers). The detailed size categories
Final Status of Systems Selected in 2006 CWS Survey
Sample selected
Inactive systems
Refusals and invalid
responses
Received
Response rate
Population Served
<500
362
7
13
340
94%
501-3,300
238
1
5
231
97%
3,301-
10,000
389
2
50
154
40%
10,001-
100,000
646
5
85
292
45%
More Than
100,000
575
2
66
297
52%
Total
2,210
17
219
1,314
59%
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Chapter 1: Introduction
are the same as those used to stratify the sample and
allow for detailed analyses and estimates within known
confidence intervals. The size categories are:
• 100 or fewer
• 101-500
• 501-3,300
• 3,301-10,000
• 10,001-50,000
• 50,001-100,000
• 100,001-500,000
• More than 500,000
Systems serving up to 10,000 persons are
considered small. Volume I presents data by fewer size
categories to better illustrate certain characteristics
and facilitate comparisons among categories. The
categories used in Volume I are:
• 500 or fewer
• 501-3,300
• 3,301-10,000
• 10,001-100,000
• More than 100,000
These size categories support the Agency's
various analytic requirements, as discussed below.
Data on treatment plants also are presented by their
average daily production, in millions of gallons, and
are particularly useful for analyses of plant operations.
These data are shown by seven size categories:
• 0.01 millions of gallons per day (MGD) or
fewer
• 0.01-0.10 MGD
• 0.1-1.0 MGD
• 1-10 MGD
• 10-100 MGD
• More than 100 MGD
Data also are presented according to ownership
(public or private) and primary water source. Systems
are classified based on their primary source: ground
water, surface water, or purchased water. For example,
a system is classified as a ground water system if it gets
more of its water from ground water sources than from
surface sources or by purchasing it. Because systems
can have three sources of water, some may receive less
than half their water from their primary source.
Many of the tables in Volume II present the
95-percent confidence intervals for each cell. As
discussed in Volume II, the confidence intervals are
relatively large in some cases, due to the diversity of
CWSs. Although characterizing the level of precision
is difficult due to the large number of estimates
provided and the diversity of water systems, the sample
generally met the precision targets of the sampling
plan. For example, the confidence interval for estimates
of average revenue and expenses for all systems of all
sizes is approximately ±10 percent of the average
(see Tables 62 and 79 in Volume II). The estimated
confidence interval for the proportion of all systems
of all sizes providing treatment is approximately ±
5 percentage points. (See Table 15 in Volume II. See
Volume II for a detailed description of the sampling
plan and precision targets.1)
Intended Uses of CWS Survey Data
The primary purpose of the 2006 CWS Survey
is to provide the Agency with critical data to support
its regulatory development and implementation efforts.
EPA conducted the 2006 CWS Survey to determine
the current baseline of operational and financial
characteristics of the water supply industry, last
established by the 2000 CWS Survey. By comparing
the results of this survey with the 2000 Survey, changes
in water industry operations and expenses since 2000
can be measured.
Regulatory Development Analyses
Before establishing new regulations, the Agency
must satisfy the analytic requirements of various
statutes and regulations, including:
• Executive Order 12866.
• Paperwork Reduction Act (PRA).
• Regulatory Flexibility Act (RFA).
• Small Business Regulatory Enforcement
Fairness Act (SBREFA).
• Unfunded Mandates Reform Act (UMRA).
1 The data presented in Volumes I and II are tabulated
in Stata. The calculations are carried out in a series of programs
known as "do files." EPA has these programs on file and will make
them available upon request.
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Chapter 1: Introduction
EPA is required by SDWAto specify best available
technologies (BATs) for the removal of drinking water
contaminants and must consider technologies that can
be afforded by different classes (i.e., sizes) of water
systems. Data from the CWS Survey will be useful
when identifying BATs for the removal of contaminants.
conducting affordability analyses, and developing
affordability criteria. The survey data will be used
in a national-level affordability criteria document. In
addition, the Agency must prepare EAs that detail the
national costs and benefits of all proposed regulatory
actions and alternatives under consideration. In general,
the CWS Survey data provide baseline information that
is critical to the preparation of the EAs.
Without an accurate baseline, changes due to
regulations cannot be measured. Analyses such as
these support EPA's estimates of the cost of complying
with new regulations. Toward this end, survey data will
be used in the development of other tools and models
needed for regulatory analyses.
The CWS Survey also collected data on
production capacity, system storage capacity, pipe,
population served, connections, and treatment facilities
to support the development of SDWA burden estimates
in Information Collection Requests (ICRs). The RFA
and SBREFA require the Agency to demonstrate
that SDWA regulations do not impose unreasonable
economic and financial burdens on small businesses or
governments. The analyses required by the RFA and
SBREFA can be supported by many of the same CWS
Survey data elements as the EA and ICR analyses.
Policy Development Analyses
The diverse water systems in the CWS Survey
database provide financial and operational data that
EPA can use to support various initiatives to develop
policies and guidance for states and public water systems
concerning the implementation and enforcement of
drinking water regulations. These policy initiatives can
involve, for example, defining financial affordability
(i.e., ability to pay).
The Agency is continually engaged in efforts
to provide summaries and reports on the status of
regulatory and policy development and implementation.
In addition, the Agency is from time to time required
to prepare program-level ICRs to document the burden
imposed on states, the water industry, and federal
agencies in implementing SDWA regulations. The
Agency also receives requests from Congress, federal
agencies, and the public for information on the water
supply industry. The 2006 CWS Survey provides up-
to-date information on the water industry to satisfy
these efforts.
Regulatory Implementation Analyses
A critical issue for EPA to address under the
1996 SDWA Amendments is whether the drinking
water industry—especially small systems—have
the technical and financial capacity to comply with
SDWA regulations over a sustained period. Small
water systems face financial problems, and larger
systems have potentially serious financial concerns
as regulatory compliance and infrastructure repair
and replacement drive operating costs higher. As a
result, the Agency is helping states and water suppliers
build the necessary technical and financial capacity.
Congress has provided money to assist the states,
and EPA is building additional capacity through the
Drinking Water State Revolving Fund for public water
systems. Data from the CWS Survey data and from
the Drinking Water Infrastructure Needs Survey and
Assessment can be used to assess the water industry's
ability to finance infrastructure investments.
Compliance Analyses
Another possible use of the CWS Survey database
is to support the development of operational and
financial profiles for different types of water systems
that can be statistically correlated with the Agency's
compliance records in SDWIS. The objective of such
analyses is to identify the operational and financial
characteristics that may lead to future compliance
problems. EPA can then develop guidance to target
systems that may exhibit these characteristics. (While
the survey data will support analyses of compliance
issues, they will not be used in any enforcement action.)
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Chapter 1: Introduction
Organization of the Report
This report comprises two volumes. Volume I
presents an overview of the data and the key findings
of the survey. It is composed of an Executive Summary.
which summarizes the key findings and highlights of
the survey results, and three chapters:
• Chapter 1. Introduction. Chapter 1
describes the background, purpose, survey
methodology, and intended uses of the data
collected and the organization of the report.
• Chapter 2. Overview of System Operations
and Finances. Chapter 2 provides a summary
of basic water industry demographics and
operational and financial characteristics of the
industry.
• Chapter 3. New Topics and Trends. This
chapter discusses the principal findings of
the new topics that were addressed by the
2006 CWS Survey. It also summarizes the
operational and financial survey findings and
compares them to the 2000, 1995, 1986, 1982,
and 1976 Surveys.
Volume II presents a detailed summary of the data
collected in the CWS Survey. No narrative descriptions
accompany these tabulations. The results are divided
between operating and financial characteristics. The
order of presentation generally corresponds to the
order and organization of the survey questionnaire.
The tables on system operation generally track the
movement of water through the system, presenting
data on source, then treatment, storage, distribution,
and security issues. The financial tables present data
on revenue, billing rates and structure, expenses, and
capital expenditures.
Volume II also describes in detail the survey
methodology. It provides information on sample design
and weighting, the small system site visits, other data
collection methods, and quality assurance. Copies of
the survey questionnaires are supplied in an appendix.
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2. Overview of System Operations and
Finance
The 2006 CWS Survey collected operational and
financial data for a representative, but diverse, group of
water systems. The systems rely on various sources of
water, use a number of treatment practices, and serve
populations of various sizes and customer classes. They
face a variety of financial challenges. This chapter
presents an overview of the operations and finances
of these systems, providing a broad description of the
water industry. Using data from the sample, industry
totals are presented in order to establish themes and
patterns that will be explored in greater detail in
Chapter 3.
Water System Profiles
Community water systems are public water
systems that supply water to the same population
year-round. They comprise approximately one third
of all public water systems in the U.S. and serve the
vast majority of the population. The survey estimates
that there are 49,133 community water systems in the
50 states and the District of Columbia. (See Table 1
in Volume II for additional details on the estimated
number of CWSs.) Because community water systems
provide the most exposure to risks from contaminants
A mountain point intake.
An open reservoir.
(although not necessarily the highest concentrations
of contaminants), they are the primary focus of public
health regulations. The tables that follow, and the data
reported in Volume II, deal only with community water
systems.
Water Source and System Ownership
A diverse set of water systems make up the water
industry in the United States. The industry includes
publicly owned systems, privately owned for-profit and
not-for-profit systems, and systems that provide water
only as an ancillary function of their primary business.
It includes systems serving as few as 25 persons and
relying largely on ground water, to large wholesalers
that provide treated surface water to several million
customers.
There are many ways to classify water systems.
EPA regulatory analyses categorize systems by
their source of water, ownership, and size of service
population. Source water characteristics are used in
EPA analyses to account for operational configurations,
potential sources of contamination, regulatory
requirements, and costs associated with different
water quality conditions. The Agency takes water
system ownership into account when estimating the
potential cost impacts of drinking water regulations.
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Chapter 2: Overview of System Operations and Finance
Publicly and privately owned systems differ in rate
structures, sources of funds for capital improvements,
sources of water, and size of service population. The
size of the population served by a system affects not
only the quantity of water needed but also production
requirements, treatment practices, operations, and
financial capacity. Water production tends to involve
large fixed costs, so water systems typically exhibit
economies of scale. Thus, the unit cost of providing
water declines as system size increases.
Nearly 75 percent of the nation's CWSs rely
primarily on ground water. Almost 9 percent rely
Community Water Systems by Primary Water Source
Percentage of Water from Each Source
Surface
primarily on surface water, while the remaining
18 percent purchases finished, partially treated, or
untreated water.
While three-quarters of the systems in the country
rely on ground water, nearly 48 percent of all water
produced by systems comes from surface sources,
including flowing streams, lakes and reservoirs, and
ground water under the direct influence of surface
water (GWUDI). Approximately 60 percent of surface
water comes from lakes or reservoirs. An additional 37
percent comes from flowing streams, and 3 percent is
GWUDI.
More than 23 percent of water is purchased, and
94 percent of the purchased water comes from surface
sources. The vast majority of purchased water is
finished water. The remaining 29 percent of the water
produced by systems comes from ground water sources.
Ground Streams Purchased
Lakes ^^H GWUDI
That water is drawn from more than 112,000 wells that
feed into approximately 61,000 entry points to the
nation's distribution networks. (See Volume II, Table
2 for more details on the number of systems by water
source, Tables 7 through 10 for average daily flows by
water source, and Table 13 for related information on
the average number of entry points per system.)
CWSs are evenly split between public and
private ownership. The overwhelming majority of
publicly owned systems are the property of towns,
cities, counties, or other forms of local government. Of
the 49 percent of systems that are privately owned, 22
percent are run as for-profit businesses and 38 percent
are not-for-profit entities. Approximately 40 percent
of privately owned systems—nearly 20 percent of all
systems—are ancillary systems (i.e., systems whose
primary business is not water supply but that provide
Water Systems by Ownership
Public
Private
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Percentage of Private Community Water Systems, by Type
System Ownership by Population Served
Private for-Profit
Ancillary
Private Not-for-Profit
<501 501- 3,301-
3,300 10,000
^m Public j^m
• Private Not-for-Profit
10,001- >100,000
100,000
Private for-Profit
Ancillary
System Ownership by Primary Water Source
Ground Surface
Public
Private Not-for-Profit
Purchased
Private for-Profit
Ancillary
water as an integral part of their principal business).
These ancillary systems tend to serve small populations,
produce smaller quantities of water, and often do not
bill customers separately for water. (See Tables 4 and
5 in Volume II for further details on system ownership.
As discussed later, system size is at least as important
as ownership in describing operating characteristics.)
Most systems that rely mainly on surface or
purchased water are publicly owned. Publicly owned
systems also are more likely to rely primarily on
purchased or surface sources than ground water
sources. (See Volume II, Tables 3 and 5 for detail on
number of systems by water source.) Ancillary and
private not-for-profit systems make up the majority
of systems serving 500 or fewer persons. In contrast,
only a very small percentage of the largest systems are
ancillary or not-for-profit systems.
Water System Size, Customers,
and Deliveries
According to the survey, CWSs directly serve
more than 280 million individuals and over 80 million
residential customer connections—an average of
about 3.4 persons per residential connection. (The
number of persons served per connection may be
higher than reported by the U.S. Census because
residential connections sometimes serve multiple
households, but census data are reported for individual
households only.) Because 91 percent of connections
are residential, the number of connections correlates
with the size of the population served. The balance of
the connections is commercial, industrial, and other
nonresidential connections. (See Volume II Tables 56
and 57 for details on the typical service connection
profile for and population served by systems.)
The previous section described the sources of
water on which systems rely. This section describes
how water is produced and delivered to customers.
Systems often will use different terms to describe
each step. For this report, water withdrawals refer to
all water withdrawn from ground water and surface
water sources. Water production refers to water that
is treated at a system's treatment facilities or plants.
Water deliveries, which are discussed in this section,
are water that is sold and delivered to customers or that
is unaccounted for. Unaccounted for water includes
system losses and water used for uncompensated
purposes such as firefighting.
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Systems, Connections, and Population
58
<501
Systems
501- 3,301-
3,300 10,000
Population Served
^^^B Connections
10,001-
100,000
>100,000
Population
Although the vast majority of water systems
are relatively small, most individuals get their water
from large systems. Systems that serve 3,300 or fewer
persons account for 82 percent of all water systems,
but provide water to only 11 percent of all service
connections. On the other hand, systems serving more
than 100,000 persons account for a little more than
1 percent of all CWSs, yet they provide water to 46
percent of the customer connections. (See Volume II,
Table 5 for details on the number of systems in each
size category. For related information about average
water withdrawals by system size and primary source
of water, see Volume II Tables 7-10.) And because
publicly owned systems tend to be larger, most people
get their water from publicly owned systems. In fact,
many of the differences in water deliveries between
publicly and privately owned systems are likely due
to scale, rather than ownership, since the majority of
Total Water Delivered by Ownership
small systems are privately owned. (This is not true
of all operating characteristics, however. As discussed
later, there are many differences between public
and private systems of the same size with regard
to pipe replacement, capital investment, and other
characteristics.) Many systems sell water wholesale to
other public water suppliers. Some systems both buy
and sell water. Wholesale deliveries account for more
than 47 percent of all water delivered.2 The remaining
deliveries are for residential and nonresidential retail
customers. Residential customers account for 69
percent of retail water deliveries, and nonresidential
customers account for the balance. (See Table 11 in
Volume II for related information on average retail
water deliveries.)
Residential customers account for the vast
majority of all retail connections. While only 7 percent
of connections serve nonresidential customers, each
nonresidential customer receives far more water than
does each residential customer. In fact, nonresidential
customers consume more than 30 percent of the water
delivered to retail customers. (See Volume II Table
12 as well as later in this section for further details on
average deliveries per connection by customer class.)
Total retail deliveries by all CWSs are
approximately 38 billion gallons per day—14 trillion
gallons per year—including unaccounted for water.
Large systems deliver most of the water. Since most
large water systems are publicly owned, it is not
surprising that publicly owned systems deliver much
of the nation's retail drinking water. In fact, public
systems of all sizes and sources account for 85 percent
of all retail water deliveries.
The essential functions of a water system are the
production and delivery of drinking water. Some CWSs
have very sophisticated plants designed to treat several
Public
Private Not-for-Profit
Private for-Profit
Ancillary
2 This value does not equal the proportion of purchased
water presented earlier. The two numbers reflect different types
of responses. One is based on purchases of wholesale water by
systems, while the other is based on deliveries of wholesale water
by systems. These numbers will not be equal due to unaccounted
for water and the fact that this is a sample of systems. In other
words, some systems that sell water wholesale to systems in the
sample may not be in the sample. Similarly, some systems that
purchase water wholesale from systems in the sample that reported
wholesale deliveries may not themselves be in the sample.
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Retail Connections
Residential Nonresidential
Retail Deliveries (Excludes Wholesale Deliveries)
Residential
Nonresidential
million gallons of surface water each day. Others have
only one or two wells, provide little or no treatment,
and serve small populations. Still other systems
purchase all of their water from large wholesalers that
sell no water directly to consumers.
This report uses the following terms to describe
water treatment. A system's average daily production
is the average amount of finished water produced daily
by all of its treatment plants. System design capacity
is the maximum amount of finished water that all a
system's treatment plants taken together are designed
to produce daily when operating at capacity. Peak
daily flow is the maximum amount of finished water
produced by a system's plants on a single day during a
12-month reporting period.
The table on the following page summarizes
the treatment production and finished water storage
capacities of primarily ground water and primarily
surface water systems. Surface water systems tend to
have larger average daily flows and peak demands, as
measured by average daily production and peak daily
production. Surface systems tend to be larger, but even
compared to ground water systems of equivalent size,
surface systems tend to treat more water, which reflects
the fact that surface water is always treated while not
all ground water is treated. (See Volume II, Tables
7-10 for related information on average daily flow for
systems by size and source of water.)
An important difference among water systems
is the extent to which they have excess capacity. With
excess capacity, a system can accommodate fluctuations
in demand, planned growth, and firefighting needs. One
measure of excess capacity is the ratio of system design
capacity to peak daily flow, which is inversely related to
system size. That fact could indicate that larger systems
tend to be more efficient or that they have more stable
demand. Conversely, it could simply reflect that in a
small system, a relatively small change in demand can
require a significant change in production. The same
fluctuation in demand for a larger system would not
result in such a large proportional change.
The results of the past surveys indicate that
the treatment and storage requirements associated
with ground water and surface water affect the ratio
of design-to-peak treatment capacity. This result is
confirmed in the 2006 data. Ground water systems tend
to have larger design-to-peak ratios than small surface
water systems. Ground water systems generally rely on
additional pumping and treatment capacity to meet peak
demands. Surface water systems, on the other hand,
generally use more complex treatment techniques and
tend to rely on storage to meet peak demands. The ratio
for large ground water systems, which tend to have
more sophisticated and capital-intensive treatment
processes and more storage, is similar to the ratio for
large surface water systems.
The decline in the ratio of design-to-peak treatment
capacity as the service population increases is reflected
in the storage capacity of systems. On average, small
ground water systems have less than 75,000 gallons
of storage; in contrast, the average large ground water
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Chapter 2: Overview of System Operations and Finance
Summary of System Production, Deliveries, and Storage
Population Served
<501
501-3,300
3,301-
10,000
10,001-
100,000
> 100,000
Primarily ground water
Average daily production (gallons)
Design capacity (gallons)
Peak daily production (gallons)
Average ratio of design to peak
capacity
Finished water storage capacity
(gallons)
Average daily deliveries, excluding
unaccounted for water (gallons)
Average ratio of unaccounted for
water to total daily deliveries
21,118
177,371
47,299
5.7
72,756
20,231
0.05
138,572
776,687
314,152
3.1
470,970
122,042
0.09
746,026
2,130,543
1,416,734
1.6
963,505
643,359
0.10
3,120,594
7,900,726
5,978,608
1.3
4,090,698
2,722,469
0.10
33,295,058
75,463,525
56,844,615
1.2
23,266,323
29,529,433
0.09
Primarily surface water
Average daily production (gallons)
Design capacity (gallons)
Peak daily production (gallons)
Average ratio of design to peak
capacity
Finished water storage capacity
(gallons)
Average daily deliveries, excluding
unaccounted for water (gallons)
Average ratio of unaccounted for
water to total daily deliveries
30,572
146,807
68,679
2.9
413,665
27,421
0.10
237,804
866,530
451,076
2.1
526,044
222,470
0.13
1,002,420
2,748,295
1,692,247
1.7
1,664,389
899,020
0.15
4,651,544
10,715,276
7,459,213
1.5
5,680,280
3,952,522
0.11
56,631,910
121,423,768
92,289,108
1.4
43,096,379
48,431,566
0.09
To compare average daily production, design capacity, peak daily production, finished water storage, and daily deliveries,
only systems that provided complete information on each metric are included in this table. Therefore, the estimates
provided here may not be the same as corresponding tables in Volume II that used all available data. Please note that the
average of the ratios is not equal to the ratio of the averages.
system serving more than 100,000 persons have
over 23 million gallons of storage. Storage capacity
increases similarly among surface water systems. The
ratio of storage to design capacity does not vary much
with system size, with one exception: Systems serving
500 or fewer persons tend to have more storage given
their design capacity than larger systems do. To some
extent, there may be a floor on the minimum amount of
storage that systems maintain. (See Volume II, Table
20 for related details at the treatment plant level rather
than system level, and Table 45 for details about system
storage capacity).
Another measure of a system's operations is the
percentage of water it produces that actually gets to its
customers. Approximately 13 percent of total water
produced by the average system is unaccounted for
water. Weighted by the volume of water delivered by
systems, less than 7 percent of total water produced
is unaccounted for water. Some of this water is
uncompensated usage—for example, a system may be
required to provide water for fire protection without
direct compensation. (While not paid directly for this
water, the system may incorporate these costs into its
rates.) This water use is inherent in running a water
system. System leaks and other losses, on the other
hand, are a source of inefficiencies because they do not
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Ratio of Peak to Average Daily Production, by
Ownership
Population
Served
<100
101-500
501-3,300
3,301-10,000
10,001-50,000
50,001-100,000
100,001-500,000
> 500, 000
Publicly Owned
Systems
Mean
2.75
2.47
2.28
1.86
2.09
1.69
1.72
1.62
Median
2.02
2.00
2.00
1.75
1.74
1.61
1.58
1.58
Privately Owned
Systems
Mean
2.61
2.13
2.04
1.76
1.45
1.60
1.36
1.47
Median
1.67
1.72
1.98
1.62
1.38
1.37
1.30
1.39
provide added value. (Table 11 in Volume II provides
additional details on unaccounted for water.)
The table above provides another way to measure
system operations: comparing the average ratio of peak
daily production to average daily production. Smaller
systems tend to have larger ratios than larger systems.
which could indicate that smaller systems plan for
larger demand fluctuations relative to the amount of
water they produce than do larger systems. Changes in
consumption by a few customers can have a relatively
large impact on a small system. A big system with
larger and more predictable commercial and industrial
demand may see less variation. In fact, systems that
have higher percentages of non-residential customers
are likely to have smaller peak-to-average-daily-
production ratios. (See Table 20 in Volume II for
additional details on capacity at the plant level.)
Smaller systems are more likely to
primarily serve residential customers, as shown
in the table to the right. On average, 96 percent of
water deliveries in systems serving 100 or fewer
persons are to residential customers; very small
systems almost exclusively serve residential
customers.
More than half the systems serving up to
500 persons provide water only to residential
customers. Commercial, industrial, and other
customers become more significant part
of the customer base as water system size
increases. Publicly owned systems serving
more than 500,000 persons actually sell most
of their water to other water systems and non-
residential customers. (See Table 11 in Volume
II for additional information on average water
deliveries to each type of customer.)
The mean annual delivery per residential
connection for systems of all sizes is
approximately 96,000 gallons. Annual deliveries
per residential connection tend to increase with
system size. There is considerable variation in
the quantity of water delivered per residential
connection, even among systems of similar sizes.
The mean in each size category is often driven
by a handful of systems that have very high
deliveries per connection. The median system
annually delivers approximately 77,000 gallons per
residential connection. (See Volume II, Table 12 for
further details on the mean annual water delivered by
customer class.)
Treatment, Storage, and
Distribution
The 2006 CWS Survey collected detailed
information on system operations from source to
tap. These data will enable the Agency to identify
operational differences among systems and develop an
up-to-date characterization of water systems throughout
the industry. The survey collected operational data
on the quantities of water produced by source for
Residential Deliveries as Percentage of Total
Deliveries
Population
Served
<100
101-500
501-3,300
3,301-10,000
10,001-50,000
50,001-100,000
100,001-500,000
> 500, 000
Publicly Owned
Systems
Mean
91%
87%
78%
61%
63%
61%
53%
43%
Median
99%
97%
86%
58%
65%
64%
52%
42%
Privately Owned
Systems
Mean
97%
96%
88%
73%
66%
39%
40%
49%
Median
100%
100%
94%
76%
74%
38%
37%
50%
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Chapter 2: Overview of System Operations and Finance
An old wood stave pipe next to a current working pipe.
Annual Water Delivered per Residential
Connection (Gallons)
Population Served
<100
101-500
501-3,300
3,301-10,000
10,001-50,000
50,001-100,000
100,001-500,000
> 500, 000
All
Mean
97,939
94,475
96,953
87,227
88,492
111,670
114,585
129,124
95,623
Median
70,759
73,782
82,291
81,387
76,798
101,538
104,898
103,770
76,943
each entry point to the distribution system, including
capacity information by well, intake, and points of
purchase; treatment objectives and practices; treatment
facility capacity; treatment residual management; and
storage and distribution capacity. Detailed schematics
of treatment plants or facilities and the systems were
collected as well. Water treatment is often complex,
and the schematics provide detailed information about
the operation of the facilities in the sample.
Water Treatment
A system treats water in one or more plants
or facilities. For this report, a treatment plant or
facility is any location where the water system takes
steps to improve the quality of the water. It includes
standard plants that are clearly recognized as treatment
facilities, such as conventional nitration plants. It also
includes smaller facilities that may not be considered
treatment plants in other contexts; for example, a
chemical feed on a well that adds chlorine to the water
is considered a treatment plant in this report. There is
one exception to the general rule that each point where
a system makes changes to the water is a treatment
facility. Systems may boost disinfection or adjust pH
within their distribution system, but these sites are not
counted as treatment facilities. (So, a chemical feed
within the distribution network was not counted as a
treatment plant.) The terms plant and facility are used
interchangeably throughout this report.
Sixty-nine percent of all water systems treat
some or all of their water. This group includes systems
that purchase all of their water, most of which purchase
finished water. Only 3 percent of systems that purchase
all of their water provide additional treatment.
Therefore, if we exclude systems that purchase 100
percent of their water, the overall percentage of systems
that treat increases. Eighty-three percent of systems that
have their own sources of water (or do not purchase
all of their water) provide some treatment from simple
disinfection to complex filtration processes, as shown
in the following table. (See Volume II, Table 15 for
an overview by primary source.) Most of the systems
that do not treat water are ground water systems; of
the systems that do not provide treatment and do not
purchase all of their water, 98 percent rely solely on
ground water and the other 2 percent are primarily
ground water systems that also purchase some water.
Percentage of Systems Treating Water
of Those That Do Not Purchase 1 00%
of Water
100% Ground Water Systems
100% Surface Water
Mixed Source Systems
All Systems
80.2%
100.0%
96.2%
83.0%
As seen in the following table, the number
of entry points increases with system size because
larger systems tend to have more sources than smaller
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systems. Ground water systems tend to have more entry
points than surface water systems, since each well may
feed directly into the distribution system. In fact, some
large ground water systems in the sample had several
hundred entry points. (See Table 13 in Volume II for
additional details on the number of entry points per
system.)
Average Number of Entry Points per System
Population
Served
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
Primarily
Ground Water
Systems
Mean
1.2
1.7
2.2
4.2
14.7
Median
1.0
1.0
2.0
3.0
6.0
Primarily
Surface Water
Systems
Mean
1.1
1.2
1.2
1.5
2.6
Median
1.0
1.0
1.0
1.0
2.0
Treatment Practices of Systems
Water systems use many different practices to
achieve their treatment objectives, including chemical
addition, coagulation/flocculation, settling and
sedimentation, nitration, membranes, and softening.
To characterize the treatment practices, each plant in
the sample was assigned to one of several treatment
trains ranging from relatively simple to very complex.
On average, small systems that rely solely on
ground water sources have 1.1 treatment facilities. This
increases to 2.1 facilities for systems serving 3,301 to
10,000 persons, and to 10 facilities for systems serving
more than 100,000 persons. Systems relying solely on
surface water, by contrast, tend to have fewer plants on
average. Small surface systems average a little more
than one plant per system, since they tend to have one
surface water intake. Surface water systems serving
more than 100,000 persons have 1.6 plants on average.
Some surface water systems have as many as 7 plants,
while some ground water systems have more than 200.
(See Table 17 in Volume II.)
As systems become larger, the treatment practices
they use tend to become more complex. Approximately
50 percent of the small ground water systems that treat
some or all of their water simply disinfect and do
not provide any additional treatment. Larger ground
water systems are more likely to use other chemicals,
disinfectants, and some forms of nitration in addition
to simple disinfection. They also are much more likely
to use softening techniques, including cation exchange.
Approximately 25 percent of surface water systems
that serve up to 500 persons use disinfection without
any additional treatment. Most surface systems
serving more than 500 persons use more sophisticated
treatment. Forty percent of systems serving 501-3,300
persons use conventional nitration; this increases to
87 percent for systems serving more than 100,000
persons. (See Volume II, Table 17 for more detail on
the number of treatment plants per system. Table 43
provides additional details on treatment schemes used
by systems.)
Treatment Practices and Objectives of
Treatment Plants
Like the previous discussion of treatment at the
system level, the complexity of treatment varies with
the size and water source of each treatment plant.
Nearly 50 percent of treatment plants that solely treat
ground water only disinfect and do not provide any
additional treatment. At the other end of the spectrum,
50 percent of surface water plants use conventional
Filters in a treatment plant.
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Treatment Characteristics and Percentage of Systems Applying Various Treatments at One or
More Plants
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
> 100,000
100-percent ground water systems
A/lean number of treatment plants per system
Percent of systems not providing treatment
1.1
29%
1.7
11%
2.1
7%
3.8
0%
9.5
8%
Treatment practices of systems that provide treatment
Disinfection with no additional treatment
Other chemical addition
Ion exchange, activated alumina, aeration
Other filtration (not including direct or
conventional)
Direct Filtration
Conventional filtration
Membranes
Other
53%
13%
13%
17%
0%
1%
1%
4%
48%
28%
11%
15%
1%
2%
1%
1%
49%
28%
10%
21%
0%
5%
0%
0%
33%
33%
31%
30%
8%
1%
1%
3%
33%
26%
17%
40%
3%
18%
0%
9%
100-percent surface water systems
Mean number of treatment plants per system
Percent of systems not providing treatment
1.1
0%
1.1
0%
1.1
0%
1.2
0%
1.6
0%
Treatment practices of systems that provide treatment
Disinfection with no additional treatment
Other chemical addition
Ion exchange, activated alumina, aeration
Other filtration (not including direct or
conventional)
Direct filtration
Conventional filtration
Membranes
Other
25%
1%
0%
37%
12%
21%
5%
0%
5%
7%
0%
28%
15%
40%
7%
0%
0%
10%
2%
12%
22%
52%
6%
0%
2%
2%
2%
5%
15%
78%
1%
0%
0%
4%
0%
3%
16%
86%
3%
0%
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Percentage of Plants using Various Treatment Schemes
Disinfection with no additional treatment
Other chemical addition
Ion exchange, activated alumina,
aeration
Other filtration (not direct or
conventional)
Direct filtration
Conventional filtration (with and without
softening)
Membranes
Other
Ground
Water
Plants
48%
23%
10%
13%
1%
1%
1%
3%
Surface
Water
Plants
6%
6%
1%
17%
16%
51%
4%
0%
filtration similar to the schematic below. A conventional
nitration plant may use many steps, including pre-
disinfection, flocculation, sedimentation, nitration,
post-disinfection, and use of a clearwell to provide
contact time for the disinfectant. In the schematic
shown, the plant disinfects with chlorine after nitration.
Other conventional nitration plants may add chlorine or
other disinfectants at this or other points in the process.
(See Volume II, Tables 23 and 24 for details by the size
of the population served by the system and the average
daily flow of the plant. Tables 23-30 provide further
information on treatment schemes and practices.)
Treatment plants are designed to meet many
objectives. Ninety-one percent of the nation's treatment
plants are designed to disinfect water. Twenty-three
percent are designed to either remove or sequester iron
and 13 percent are designed to remove or sequester
manganese. Twenty-one percent are designed for
corrosion control.
There are important differences in the treatment
objectives of plants that treat ground water and plants
that treat surface water. For example, 88 percent of
plants treating surface water are designed to remove
particulates or turbidity, compared to 6 percent of
systems treating ground water. While 27 percent
of surface water plants are designed to remove total
organic carbon (TOC), only 1 percent of ground water
plants are designed with this objective. (See Volume
II, Tables 21 and 22 for additional details on treatment
plant objectives.)
Surface
Water
Source
Coagulation/
Flocculation
Sedimentation
Filtration
I I I I I I I
Distribution System
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Treatment Residual Management by Systems
The cost to dispose of treatment residuals is an
important component of treatment costs and must be
included in evaluations of treatment requirements.
Treatment practices produce a range of residual
wastes, including brines, concentrates, and spent
media. Systems have several options for disposing of
residuals, including land application, direct discharge
Percentage of Treatment Plants with Each
Treatment Objective
Treatment Objective
Algae control
Corrosion control
Primary disinfection
Secondary disinfection
Disinfectant byproduct
control
Dechlorination
Oxidation
Iron removal
Manganese removal
Taste /odor control
TOC removal
Particulate/turbidity
removal
Softening (hardness
removal)
Recarbonation
Organic chemical
contaminant removal
(e.g., VOCs, pesticides)
Inorganic chemical
contaminant removal
(e.g., arsenic)
Radionuclides
contaminant removal
Security
Mussel control
Fluoridation
Other
Ground
Water
Plants
1%
18%
90%
11%
3%
0%
8%
24%
13%
7%
1%
6%
5%
0%
2%
4%
1%
0%
0%
13%
1%
Surface
Water
Plants
12%
42%
95%
45%
21%
0%
19%
19%
21%
27%
27%
88%
6%
2%
7%
4%
1%
0%
3%
36%
3%
to surface water, and discharge to sanitary sewers.
Approximately 50 percent of surface water systems,
most of them larger systems, dewater their treatment
residuals. Ground water systems, on the other hand,
rarely dewater. Surface water systems also are more
likely to rely on direct discharge than ground water
systems, reflecting their proximity to surface water
and the type of treatment they use. Only 14 percent of
systems discharge to sanitary sewers; however, nearly
85 percent of systems that have access to sanitary
sewers use them to dispose of liquid waste. (Tables 31-
40 in Volume II provide related information on residual
management practices.)
Storage
Finished water storage is an integral component
of a water system. In addition to providing a cushion
against fluctuations in demand, storage often is
required to provide contact time for disinfectants.
In this context, not all storage is equal: clearwells
and storage with dedicated inlets and outlets provide
contact time, but storage that "rides the line" (i.e., with
a common inlet and outlet) may not. The 2000 CWS
Survey asked detailed questions about the location
of storage facilities and the type of inlets and outlets
used. Systems of all sizes that rely primarily on surface
water are more likely to have clearwell storage than
are ground water systems. Surface water and ground
water systems are more likely to use storage that has
dedicated inlets and outlets than storage that rides the
line. The need for storage is related to the complexity of
the system. Surface water systems tend to have greater
storage capacity than ground water systems because
they typically have more complex treatment schemes
that require longer production lead-time and need to
rely on storage to meet short-term increases in demand.
All systems tend to have most of their storage within
their distribution networks, but purchased systems
have a larger share than surface and ground water
systems. This year, the survey asked detailed questions
about the type of storage beyond the first connection
in the distribution network. This new information is
summarized in Chapter 3.
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Distribution Networks
Buried infrastructure often is the largest
component of a CWS's asset inventory. Water systems
maintain more than 2 million miles of distribution
mains, of which half is between 6 and 10 inches
in diameter. The considerable variation in system
spending to maintain distribution networks reflects
not only the diverse age and condition of pipe in the
ground but also the systems' financial condition.
Systems replaced over 56,000 miles, or 2.8
percent, of existing pipe in the past 5 years. They also
added nearly 225,000 miles of new pipe. Each year
during this period, systems serving up to 100 persons
replaced 0.4 percent of their pipe. (Most replaced none,
but several replaced more than 10 percent of their
pipe each year. Most of these systems had less than
10 miles of distribution mains.) The median indicates
that at least half of the small systems replaced no pipe
Distribution Mains by Pipe Diameter
< 6 Inches
10-24 Inches
Miles of Pipe Replaced Annually during Previous 5 Years as a
Percentage of Total Miles of Existing Pipe
Population
Served
<100
101-500
501-3,300
3,301-10,000
10,001-50,000
50,001-100,000
100,001-500,000
> 500, 000
Publicly Owned Systems
Mean
0.0%
0.9%
0.5%
1.5%
0.7%
0.5%
0.4%
0.3%
Median
0.0%
0.0%
0.0%
0.3%
0.2%
0.2%
0.2%
0.2%
Privately Owned Systems
Mean
0.4%
0.7%
0.3%
1.1%
0.1%
0.4%
0.1%
0.4%
Median
0.0%
0.0%
0.0%
0.2%
0.0%
0.0%
0.1%
0.1%
between 2001 and 2006. (Volume II, Table 48 provides
related information on miles of existing and replaced
pipe.)
Large systems, especially publicly owned large
systems, tend to be located in densely populated
urban areas. Therefore, larger systems tend to serve
larger populations per mile of
pipe than smaller systems, as
shown in the second table to
the left. (Table 48 in Volume II
provides related information on
connections per mile of pipe. In
addition to Table 48, Tables 49-
52 in Volume II provide more
information about systems'
distribution networks.)
Population Served per Mile of Existing Pipe
Population
Served
<100
101-500
501-3,300
3,301-10,000
10,001-50,000
50,001-100,000
100,001-500,000
>500,000
Publicly Owned Systems
Mean
87
106
123
166
212
230
266
426
Median
56
79
114
133
179
198
210
289
Privately Owned Systems
Mean
118
227
182
155
196
273
250
258
Median
98
185
125
104
127
195
206
216
Financial Summary
EPA needs an accurate
assessment of community
water systems' finances to
gauge the ability of these
systems to make the technical
and capital investments
required for sustainable water
operations. The survey asked
systems to provide basic
information on their annual
revenue and expenses. It also
requested data on the type of
capital investments made over
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Chapter 2: Overview of System Operations and Finance
the previous 5 years and the source of funds for the
investments. Revenue and spending data cover a single
year, which limits the Agency's ability to generalize
about the industry's financial well being. As with
the 2000 Survey, the data are intended to provide a
snapshot of the water industry.
The diverse nature of water systems is reflected
in their accounting systems and financial reports.
Two systems with similar finances may report them
differently, depending on their type of ownership and
accounting practices. Due to differences in accounting
practices, systems may use similar terms to describe
different concepts. For example, the expenses included
in "operations and maintenance" may vary across
systems. This report clearly defines the terms used to
describe systems' financial characteristics. These terms
may not always take on the precise technical definition
used in accounting or by individual systems, but they
should accurately portray water system finances across
the nation. To facilitate comparisons across systems
(and to limit the burden of the survey on respondents),
the financial data were collected at a relatively high
level of aggregation and were subjected to thorough
review.
Summary of Revenue and Expenses
Water systems earn revenue from water sales and
other water-related revenue. Water sales revenue is
payment for the delivery of water to customers. Water-
related revenue is payment for water services not tied
directly to the delivery of water, including development
fees, connection fees, fines, and miscellaneous
payments. Some publicly owned systems also receive
transfers from a governmental general fund. (On the
other hand, some municipalities may transfer water
system revenue to the general fund to pay for activities
not related to the provision of drinking water.)
Revenue from water sales in 2006 was $47 billion,
which was 85 percent of total system revenue. The
balance ($8 billion) was water-related revenue. (See
Tables 58-70 and 75-79 in Volume II for further data
on total revenue and expenses. The tables in Volume II
report transfers from municipal general funds as water-
related revenue. Also, the analysis presented here
includes only systems that answered both the revenue
and expense questions. The tables in Volume II include
all systems that responded to each question, unless
otherwise noted.) Private systems depend more heavily
on water sales than do public systems—over 99 percent
of private for-profit and ancillary systems' revenue
comes from water sales, compared to 84 percent for
publicly owned systems. Private not-for-profit systems
are in between, with 91 percent of revenue from water
sales.
These national figures mask important differences
among systems. For the average system of any size,
residential customers provide about 89 percent of water
sales revenue. Commercial, industrial, institutional,
and agricultural customers account for an additional 9
percent of water sales revenue, and wholesale revenue
makes up 2 percent of the total. Smaller systems
depend more on residential customers for revenue
Water System Annual Revenue
Public Private Private Ancillary
for-Profit Not-for-Profit
Water Sales
Other Water Related
than do larger systems. More than 96 percent of water
sales revenue for the smallest systems comes from
residential sales. On the other hand, residential sales
account for a bit more than 57 percent of water sales
revenue in systems serving more than 100,000 persons.
These systems typically derive a higher proportion of
their total revenue from commercial and industrial
customers than do smaller systems. (Because ancillary
systems often do not charge directly for water and thus
do not report water revenue, they are excluded from
this analysis. Ancillary water sales revenue tends to
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Percentage Distribution of Water Sales Revenue by Customer Class
(Excludes Ancillary Systems)
Customer Type
Residential
Nonresidential
Wholesale
Total
<501
96.2%
2.8%
0.9%
100.0%
501-
3,300
87.8%
11.4%
0.8%
100.0%
3,301-
10,000
73.5%
16.9%
9.6%
100.0%
10,001-
100,000
72.9%
19.4%
7.7%
100.0%
> 100, 000
57.3%
26.9%
15.8%
100.0%
All Sizes
88.8%
8.8%
2.4%
100.0%
be overwhelmingly residential. Volume II, Table 66
provides details on the percentage of revenue from
each customer category for the average system.)
On average, water systems received $1 million
in revenue in 2006. Systems serving up to 500 persons
received an average of $21,000 per year, while systems
serving more than 100,000 persons received over $43
million. Public systems tend to receive more revenue
because they tend to be larger. (See Volume II, Table 58.
Tables 59-70 provide additional relevant information
on average water system revenue.)
One way to compare revenue of different-
sized systems is to consider revenue per customer
connection. (This estimate excludes ancillary systems,
which often do not charge directly for water. It also
excludes wholesale revenue because systems did
not report the number of retail customer connections
associated with their wholesale deliveries.) Average
revenue per connection from nonresidential customers
is significantly larger than earnings from residential
customers.
Publicly owned systems tend to receive less than
privately owned systems per residential connection;
this is true overall and within each system size category.
Because a small number of systems have very large
revenues per connection, median revenue is a better
measure of central tendency than the average. (See
Table 70 in Volume II for more details on residential
revenue per connection.)
On average, water systems receive the large
majority of their revenues from residential customers,
who would bear much of the cost of efforts to improve
water quality and to maintain or expand the system.
Median revenue per residential connection is less
Average Annual Water System Revenue
<501
501-3,300
3,301-10,000
10,001-
100,000
> 100, 000
Publicly
owned
systems
$46,325
$477,446
$523,298
$3,341,898
$41,419,524
Privately
owned for
profit
$18,377
$143,831
$332,134
$4,956,673
$59,932,110
Privately
owned not
for profit
$17,646
$418,825
$751,584
$2,848,003
$45,989,681
Ancillary
$2,840
$49,976
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Chapter 2: Overview of System Operations and Finance
Median Revenue per Connection, Excluding Ancillary
Population Served
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
Residential
Nonresidential
Publicly Owned Systems
$285
$283
$264
$265
$305
$365
$836
$1,000
$1,280
$1,640
Residential
Nonresidential
Privately Owned Systems
$342
$397
$423
$366
$379
$360
$2,057
$730
$1,588
$2,321
than 1 percent of median household income nationally.3
There is a great deal of variation around the median,
as well as considerable variation in household income,
so not every household pays this percentage of their
income for drinking water. But on a national basis,
water charges constitute a relatively small portion of
household income.
The final factor that affects system revenue, in
addition to the number and types of customers, is the
rate the system charges for water. The median rate per
thousand gallons charged to residential customers is
$2.89. Nonresidential customers tend to pay less per
thousand gallons (except for nonresidential customers
of certain categories of small systems), and larger
systems tend to charge less per thousand gallons, likely
reflecting load profiles and scale economies. Wholesale
customers tend to pay the lowest rates, which reflect the
relatively high volume of their purchases and the lower
cost per gallon of their service. (See Volume II, Table
69. Tables 67 and 68 provide additional information on
water system revenue per thousand gallons delivered.)
Allocating costs to nonresidential customers (especially
large-volume users) and residential customers is
important since demand stability is a key objective of
systems. Large-volume customers can help cover fixed
costs, which potentially lowers costs to residential
customers.
Water systems rely on a variety of approaches
to charging for water. The most common means of
charging residential customers is to use a single rate
per gallon of water sold; 36 percent of all systems
rely on uniform rates. Separate flat fees (17 percent of
systems) and combined flat fees (16 percent) are the
next most common rate structures. (Combined flat
3 Based on the estimated national median household
income of $50,007 (U.S. Census Bureau, 2005-2007 American
Community Survey.)
Piping supported by ropes and jacks.
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10.00
8.00
6.00
4.00
2.00
0.00
<501
10.00
8.00
6.00
4.00
2.00
0.00
<501
Chapter 2: Overview of System Operations and Finance
Average Revenue per Thousand Gallons
Public
3.6
3.1
3.5
2.8 2.7
1.6
1.7
501-3,300 3,301-10,000
Private For-Profit
10,001-100,000 >100,000
501-3,300 3,301-10,000 10,001-100,000
Private Not-for-Profit
>100,000
<501
4.7
501-3,300 3,301-10,000 10,001-100,000 >100,000
Ancillary
<501
501-3,300 3,301-10,000 10,001-100,000 >100,000
Population Served
• Residential ^^^H Nonresidential Wholesale
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Chapter 2: Overview of System Operations and Finance
fees are fees for multiple services, such as rental fees.
association fees, and pad fees.) Large systems are more
likely to use an increasing block rate or a seasonal
rate structure. The table below indicates only whether
the rate structure was used; however, many systems
may use a combination of these rate options, such as
a flat fee and an increasing block rate. (See Volume
Percentage Use of Residential Rate Structures
Rate Structure
Uniform rate
Declining block
rate
Increasing
block rate
Seasonal rate
Separate flat
fee
Annual
connection fee
Combined flat
fee
Other
<501
28%
4%
11%
0%
18%
0%
28%
8%
501-
3,300
53%
19%
14%
0%
17%
0%
1%
8%
3,301-
10,000
39%
13%
14%
0%
17%
4%
2%
2%
10,001-
100,000
39%
15%
25%
0%
18%
6%
4%
3%
> 100,000
30%
23%
27%
5%
20%
3%
2%
9%
All
36%
10%
13%
0%
17%
1%
16%
7%
II, Table 71. Tables 72-73 provide additional detail on
residential rate structures.)
The survey groups expenses into three
categories. First are operating expenses, which are
costs regularly incurred by systems to provide water
to their customers. They include costs for labor, power,
chemicals, purchased water, and security. Operating
expenses include the cost of routine maintenance, as
well as depreciation, which is the cost of wear and
tear of equipment and plants. Operating expenses also
include income taxes for privately owned systems
and payments in the lieu of taxes for publicly owned
systems. Operating expenses accounted for 60.3
percent of system spending. The second category is
debt service, which is the payment of principal and
interest on past borrowing. It accounts for 16.8 percent
of system spending. The balance of system spending is
in the final category, which covers any other expenses
incurred by systems, including purchases of capital
equipment and payments to reserve funds.
The survey divides operating expenses into
several categories. Purchased water costs are 17
percent of operating expenses. Embedded in the cost
of purchased water are the labor, power, chemicals, and
maintenance costs necessary to treat and deliver that
water, so some of the expenses allocated for purchased
water are actually for
other operating expenses.
Depreciation comprises
18.6 percent of operating
costs. Security is a
relatively small expense.
Other operating expenses,
including the cost of
energy, chemicals, other
inputs, and labor, make
up nearly 60 percent
of annual operating
expenses. (A detailed
discussion of labor costs
is provided in Chapter 3.
The 2006 survey did not
ask for details on these
expenses.)
Expenses depend largely on system size. Systems
serving up to 500 persons spent approximately $55,000
on average, compared to $55 million for systems
serving more than 100,000 persons. Expenses tend to
be higher for publicly owned systems, even among
Total Expenses
Operating Expenses
Other
Debt Service
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Chapter 2: Overview of System Operations and Finance
Operating Expenses
Purchased Water ^^H Security
Other Operations (e.g., labor and supplies) Depreciation
Income Taxes and Other Payments
systems of similar size. (See Volume II, Tables 75 and
77.)
A more meaningful comparison is expense per
thousand gallons sold. Expenses per thousand gallons
tend to decline as system size increases, reflecting
the economies of scale inherent in the production
and delivery of drinking water. (Economies of scale
for distribution networks exist only up to a certain
threshold, beyond which there may be diseconomies of
scale.) For both publicly and privately owned systems,
spending per thousand gallons increases somewhat
in the largest systems. (See Volume II Tables 76 and
78 for additional details on expenses per thousand
gallons.) This increase is due, in part, to greater capital
spending (included in "other" spending) and higher
spending on operations and maintenance. Spending on
operations as a share of total spending also tends to
decline with system size. Bigger systems devote more
of their expenditures to debt service and other expenses
System Expenses (Dollars in Millions)
$440
$311
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
I Operating Expenses i^^^l Debt Service ^^B Other
(which include capital improvements and payments
to reserve funds). As a share of total expenses, debt
service for systems serving more than 100,000 persons
is more than twice that of the smallest systems. (See
Volume, II Table 80 for a breakdown of expenses by
major categories.)
Publicly owned systems tend to spend more
per thousand gallons than privately owned systems,
especially if the systems are small. In the smaller
size categories, publicly owned systems also tend to
spend more per thousand gallons on operations and
maintenance than privately owned systems.
One method of measuring the financial health of
a system is to compare the annual revenue generated
and expenses incurred in its operation. The comparison
should include revenue that is generated by the sale
and delivery of water and should exclude payments
not related to system operations. The survey's category
"water sales revenue" is part of operating revenue. In
Expense per Thousand Gallons by Expense Component
Public Private
0.82
<501
*Graphs by System Ownership
501- 3,301- 10,001- >100,000 <501 501- 3,301-
3,300 10,000 100,000 3,300 10,000
Population Served
^^^1 Operating Expenses ^^^1 Debt Service Other
10,001-
100,000
>100,000
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Chapter 2: Overview of System Operations and Finance
some cases, water-related revenue also may include
operating revenue; in others, it may not. For example,
some systems may charge a fee to connect new
customers to the system. These maybe one-time charges
intended to recover the capital cost of connecting new
customers. Other systems may charge fees on a regular
basis and use them to fund annual operations. In both
cases, systems may call these charges "connection fees"
and include them on the same line under water-related
revenue. Government transfers present a similar issue.
In some cases, the transfers may be special payments
to make up for a budget shortfall. In other cases, they
may be payments from the government to the water
system for services provided.
Because of these reporting differences, the survey
data do not provide a consistent measure of
operating revenue. Therefore, we present
three alternative measures. The first uses
water sales revenue only. The second uses
water sales plus connection and development
fees. The final version uses water sales,
connection and development fees, and
government transfers.
On the expense side of the ledger, the
comparison of revenue and expenses should
include the cost of general operations. The
costs of general operations include purchased
water, security, labor, chemicals, power,
supplies, and contractor services. Expenses
also should include depreciation, interest,
and taxes or payments in lieu of taxes.
Principle payments on debt, capital expenses,
and payments to reserve funds should be
excluded.
Net income is the difference between
revenue and expenses. Three measures of
net income, based on the three measures of operating
revenue, are shown in the table to the right. It shows net
income and its components by ownership of the system
and illustrates how net income is calculated. It also
highlights differences between publicly and privately
owned systems. On average, water sales alone were not
sufficient to cover publicly owned systems' expenses. If
fees and payments are included, net income is positive.
Fees play a smaller role for privately owned systems,
especially for-profit systems. Fees play a bigger role
among not-for-profit systems than among for-profit
systems, both in absolute terms and as a share of total
revenue. These differences may reflect differences in
accounting systems and definitions of terms, rather
than differences in how the systems generate revenue.
Some of the differences also are due to system size.
Table 83 in Volume II shows net income by ownership
and system size.
One way to compare the financial performance
of systems with different revenue and expenses is to
use the ratio of revenue to expenses rather than net
income. The table on the next page shows the ratio for
the three measures of revenue. All expenses are used
Average System Revenue, Expenses, and Net Income
Revenue and Expense
Category
Public
Private
Ancillary
Revenue
a. Water Sales
b. Fees
c. Government
d. Total (a+b+c)
$1,455,670
$298,567
$45,476
$1,799,713
$522,675
$22,279
$2,261
$547,216
$19,398
$132
$0
$19,530
Expenses
e. General Operations
f. Depreciation
g. Interest
h. Taxes
i. Total (e+f+g+h)
$1,048,470
$261,115
$194,666
$64,681
$1,568,933
$297,401
$68,867
$51,740
$16,541
$434,550
$13,079
$525
$1,037
$118
$14,759
Wet Income
j. Sales only (a-i)
k. Sales and Fees (a+b-i)
1. Sales, Fees, &
Government (d-i)
($113,263)
$185,304
$230,780
$88,125
$110,405
$112,666
$4,639
$4,771
$4,771
for all three ratios. (The letters in parentheses refer to
the lines from the previous table.) The median publicly
owned system has a ratio greater than 1.0 in all but the
largest size category using the most limited measure
of revenue. The median ratio is greater than 1.0 in
all size categories for publicly owned systems if fees
and government transfers are included. The ratios for
privately owned systems tend to be somewhat higher
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than for publicly owned systems.
Ancillary systems also perform
relatively well. Again, some of
these differences may be due to
different accounting methods,
but the relatively low ratios for
the larger for-profit systems are
noteworthy. (Tables 81-82 in
Volume II provide additional
details on this ratio.)
Another way to present these
results is to report the percentage
of systems that have a ratio less
than 1.0. Systems with a ratio less
than 1.0 are running an operating
deficit or loss that year, or may be
relying on other revenue sources
to finance operations. The table on
the next page shows the percentage
of systems that have ratios greater
than or equal to 1.0 for the three
measures of revenue.
A couple of notes of
caution regarding the interpretation of these measures
are warranted. Systems are grouped into the three
categories based on commonly applied thresholds.
The ratio thresholds are intended to characterize the
industry in general, but they may not be appropriate
measures of the well being of specific water systems.
Some well-run water systems may have ratios of
less than 1.0 for reasons that are consistent with
good planning and management, and it would be
inappropriate to characterize them as weak. The ratios
are "snap shots" that capture conditions for only a
limited period of time. (For example, a water system
may experience an emergency such as flooding that
shuts down operations for an extended period during a
particular year.) But if the ratio of a significant portion
of systems in a sector is less than 1.0, the financial well
being of systems in that sector may be in question. By
the same measure, if a ratio for a particular system
is less than 1.0 over consecutive years, the financial
health of that system is doubtful. Second, financial
data are recorded and reported in different ways by
Median Ratio of Revenue and Expense
Revenue Included
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
>1 00,000
Public
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
1.12
1.24
1.28
1.05
1.14
1.17
0.96
1.08
1.10
1.02
1.18
1.20
0.99
1.15
1.15
Private
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
1.13
1.17
1.17
1.11
1.18
1.18
1.05
1.15
1.15
1.13
1.16
1.16
1.14
1.19
1.19
Ancillary
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
1.07
1.15
1.15
1.20
1.20
1.20
Standpipe storage.
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Percentages of System with a Ratio Greater than or Equal to 1 .0
Revenue Included
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
>1 00,000
Public
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
57.5%
68.2%
75.1%
58.5%
67.2%
72.2%
49.2%
62.5%
64.7%
55.2%
70.0%
71 .2%
47.4%
72.3%
73.3%
Private
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
61.0%
69.4%
69.4%
72.4%
83.2%
83.2%
56.0%
56.0%
61.6%
50.9%
50.9%
50.9%
91.3%
95.6%
95.6%
Ancillary
Sales (a/i)
Sales and Fees
((a+b)/i)
Sales, Fees, &
Government (d/i)
52.2%
59.0%
59.0%
100.0%
100.0%
100.0%
different systems. The questionnaire was designed to
collect general information on revenue and expenses
in a consistent manner across systems. The ratio is
intended to provide a general measure of financial well
being; more detailed financial data than were available
in this survey are required for more specific analyses.
Capital Spending
Water systems made nearly $66 billion in capital
investments in the 5 years leading up to the survey.
more than $13 billion a year. Just less than 44 percent
of CWSs made capital investments over the 2001-
2006 period, investing an average of $1.3 million
each. Publicly owned systems tended to invest more
than privately owned ones. Most investments are
made by large systems. (See Tables 86-89 in Volume
II for related information on the percentage of systems
making capital investments
and the amount invested.4)
Systems need to
invest in infrastructure
for a variety of reasons.
They may need to upgrade
their treatment to improve
water quality to comply
with federal drinking water
standards or for other
reasons. They also need to
maintain their capital stock
by making major repairs
to worn assets or replacing
assets that have reached the
end of their useful lives.
Finally, they may need to
expand their capacity to
provide water to a growing
population.
The survey asked
systems to divide their
recent capital investments
into these three categories. The responses provided
a general sense of the underlying reasons for the
investment. There is some overlap, because the
reasons for investment are not mutually exclusive. For
example, a system may need to replace a worn-out
asset. In doing so, it may install a larger capacity asset
to meet the needs of a growing population; it also may
change the technology to comply with federal rules.
Whether this investment is for water quality
improvements, repair and replacement, or system
expansion depends largely on the priorities of the
system; therefore, the survey allowed the system to
4 Systems were asked to report the amount of funds
invested in treatment, as well as land, water source, distribution
networks, etc. In a separate question, they were asked to report
the percentage of their total capital investment that went towards
replacement or major repair of existing assets, system expansion, or
compliance with water quality regulations. Spending on treatment
and on compliance is not identical. Some investment in treatment
may be considered spending on water system expansion, system
replacement, or major repair. Also, spending on items other than
treatment, such as the distribution network, may be counted by
systems as a cost of compliance.
28
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Chapter 2: Overview of System Operations and Finance
Presenting Data on Capital Investment
Throughout this report, we describe the type of investment systems make and how they are
funded. We show whether an investment was for compliance, replacement, or expansion. We also
show what systems buy: land, treatment facilities, pipe, etc. Other tables show how systems pay
for this investment—with current revenue, by borrowing, or through private investment.
In each case, there are three ways to describe systems' capital investment activities. First,
we can describe how many systems make a type of investment or rely on a specific source of funds.
Several tables in this report show the percentage of systems that made capital investments or
relied on a source of funding. For example, approximately 64 percent of publicly owned systems
serving 500 or fewer persons paid for their capital investments with current revenue. (See page
33.) Note: systems may make more than one type of investment or rely on more than one source of
funds for their investments. Therefore, the total of the percentage of systems making investment
of each type or relying on sources of funds need not sum to 100 percent.
Second, we can describe the distribution of funds used by the average system. This
metric shows how the typical systems allocate their investments and how their investments are
funded. For example, consider two systems. One has $200,000 in capital investments and spends
$80,000, or 40 percent, on treatment. A second system invests $1,000,000 in capital equipment,
of which it invests 20 percent (or $200,000) on treatment. On average, these two systems put 30
percent of their investment towards treatment. The other 70 percent of average capital investment
is for land, transmission and distribution, storage, and other types of capital expenses.
Finally, the distribution of funds for the nation shows system investment and sources of
funds for all systems in the aggregate. The distribution may be different than it is for the typical
system because the magnitude of total investment varies greatly among systems. Continuing with
our example above, the two systems invested a total of $1,200,000. Of that, $280,000 was for
treatment. Overall, treatment counted for 23 percent of total investment ($280,000/$1,200,000).
This percentage is lower than the two systems' average investment of 30 percent because the
second system invests 5 times as much as the first system, but invests a smaller portion in
treatment.
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Chapter 2: Overview of System Operations and Finance
Water Industry Capital Expenditures
Expansion
Compliance
Replacement
make the designation. Also, systems may report an
expenditure as affecting quality only if it is related
directly to treatment. Water systems spend much of
their funds on their distribution networks; much of this
expense may be to improve the quality of their water,
but may be reported as repair and replacement.
Based on the systems'responses, 3 7 percent of the
investment for the nation over the past 5 years was to
replace or repair assets. Fifty-three percent of national
investment was for system expansion. The remaining
10 percent of the total capital investment was for
compliance with regulations. Privately owned systems
tended to use more of their investments for compliance
than publicly owned systems. This difference is due,
in part, to the larger size of public systems. For both
publicly and privately owned systems, the share of
investment attributed to compliance tends to decline
with system size (and publicly owned systems tend to
be larger). (The percentages given here are for systems
that reported positive investments on capital projects.
See Volume II, Table 101. Tables 98-99 provide related
information on the purpose of capital investments.)
An alternative way to view the purpose of the
investment is to look at what was purchased. Spending
on distribution mains and transmission lines accounted
for 41 percent of the average system's capital
investments over this period. Treatment accounted
for an additional 14 percent and storage another 13
Type of Capital Expense
Graphs by ownership
Private Not-for-Profit
Land •
Transmission
& Distribution
Ancillary
Source
Treatment
Storage
Security
Other
30
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Chapter 2: Overview of System Operations and Finance
Distribution of Capital Investment Nationally
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
> 100,000
All
Systems
Publicly Owned Systems
Land
Water source
Transmission and distribution
Treatment
Storage
Security
Other
0.0%
15.5%
63.6%
12.8%
7.4%
0.1%
0.6%
1.1%
18.2%
47.6%
10.2%
21.7%
0.0%
1.1%
0.3%
3.4%
45.2%
34.0%
13.0%
1.1%
3.0%
1.1%
7.2%
49.7%
22.3%
12.1%
0.4%
7.2%
1.6%
8.2%
42.2%
27.2%
6.2%
0.4%
14.2%
1.3%
8.6%
44.9%
25.0%
8.8%
0.4%
11.0%
Privately Owned Systems
Land
Water source
Transmission and distribution
Treatment
Storage
Security
Other
0.1%
18.9%
45.1%
14.3%
20.7%
0.8%
0.2%
0.7%
24.4%
50.9%
12.2%
10.3%
0.2%
1.3%
0.0%
9.4%
51.6%
31.5%
5.8%
1.1%
0.6%
0.6%
12.3%
57.5%
7.7%
16.5%
0.0%
5.5%
0.6%
4.1%
60.6%
19.7%
3.7%
3.4%
8.0%
0.5%
9.3%
56.8%
18.3%
7.8%
2.1%
5.4%
percent. The percentage of its capital investments
that the average system directs toward treatment has
remained relatively constant since the 1995 CWS
Survey. Spending for land, source development, and
other investments accounted for the remainder of the
investments.
Forty-five percent of the total national
investment in capital improvements made by publicly
owned systems was for distribution and transmission
networks; total national investment in this category by
privately owned systems was 57 percent. Treatment
accounts for an additional 25 and 18 percent of the
national investment by public and private systems,
respectively. The percentage of capital investments that
larger, privately owned systems make in distribution
and transmission networks, treatment, and security is
greater than the percentage of investments smaller,
privately owned systems make in those areas. Small
public systems together invest more than large systems
in transmission and distribution, storage, and source
development.5 It should be noted that the distribution
of these expenditures has remained virtually unchanged
since the 2000 Survey. (Tables 90-97 in Volume
II provide related information on types of capital
investments made. The table above and Table 97 in
Volume II show the distribution of capital investment
nationally. In other words, they show the distribution
of capital investment by all systems in the aggregate.
(Table 95 in Volume II presents the distribution for the
average system.)
Systems have several means of financing their
capital investments, including cash, government
grants and loans, and private sector borrowing. The
following table estimates the percentage of total capital
investment by all systems in the nation that is financed
by each source of funds. Overall, private sector debt
(loans) and current revenues fund investments equally.
Larger systems get more of their investment funds by
5 Investment in treatment does not need to equal investment
in compliance. The discussion of investment in treatment reported
the amount of investment by all systems. This discussion focuses
on the average investment in compliance by type of system.
Community Water System Survey Report: Volume I
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Chapter 2: Overview of System Operations and Finance
Distribution of Total Funds for Capital Investments Nationally by Each Source of Funds
Question Type
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
>100,000
Total
Publicly Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
11.5%
3.2%
19.9%
0.0%
35.9%
0.4%
19.9%
8.5%
0.9%
6.1%
16.6%
6.5%
0.1%
17.0%
2.9%
29.3%
18.5%
3.1%
25.6%
0.9%
15.5%
0.1%
26.2%
0.0%
20.4%
6.5%
4.8%
53.7%
0.7%
16.7%
0.4%
9.1%
0.0%
9.5%
6.9%
3.0%
30.6%
0.1%
48.1%
0.1%
1.7%
0.0%
6.7%
9.9%
2.8%
34.0%
1.7%
33.6%
0.2%
7.4%
0.2%
10.5%
9.5%
2.9%
Privately Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
16.3%
29.2%
3.1%
0.0%
37.8%
0.0%
0.0%
4.5%
9.2%
25.4%
24.4%
11.4%
0.0%
14.7%
0.0%
0.1%
22.2%
1.8%
a.
a.
a.
a.
a.
a.
a.
a.
a.
36.1%
2.7%
10.3%
0.0%
2.9%
0.0%
7.9%
32.9%
7.4%
a.
a.
a.
a.
a.
a.
a.
a.
a.
14.4%
9.7%
10.6%
0.0%
5.4%
0.0%
27.6%
8.8%
23.5%
All Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
12.4%
7.9%
16.9%
0.0%
36.2%
0.3%
16.3%
7.7%
2.4%
8.7%
17.6%
7.1%
0.1%
16.7%
2.5%
25.4%
19.0%
2.9%
a.
a.
a.
a.
a.
a.
a.
a.
a.
52.9%
0.8%
16.4%
0.4%
8.8%
0.0%
9.4%
8.1%
3.2%
a.
a.
a.
a.
a.
a.
a.
a.
a.
32.3%
2.4%
31.6%
0.2%
7.2%
0.2%
12.0%
9.5%
4.7%
a. The number of systems that provided information on sources of funds in these size categories was relatively small. Three systems
account for most of the investment made by private systems serving 3,301-10,000 persons. Four systems account for most of the
investment made by private serving more than 100,000. These systems funded large capital projects primarily with DWSRF loans.
borrowing from private sector sources than do smaller
systems. While over 48 percent of funding for systems
serving populations greater than 100,000 comes
from private sector borrowing, less than 20 percent
of funding for systems serving 500 or fewer persons
comes from private sector loans. Current revenue is
another important source of funds—especially for
publicly owned systems—and accounts for 34 percent
of public system investment.
32
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Chapter 2: Overview of System Operations and Finance
Percentage of Systems Acquiring Capital Funds from Each Source
Question Type
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
>1 00,000
Total
Publicly Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
63.7%
0.3%
12.2%
0.0%
35.8%
0.2%
16.4%
11.0%
4.5%
48.3%
3.4%
12.0%
1.5%
29.9%
3.9%
24.6%
7.2%
4.1%
74.5%
8.8%
23.9%
2.8%
28.5%
0.0%
19.2%
7.5%
10.7%
76.7%
2.7%
23.3%
5.5%
16.6%
0.0%
10.5%
10.2%
6.8%
62.0%
2.5%
40.3%
5.7%
16.3%
0.0%
14.1%
11.0%
7.8%
61.1%
3.2%
16.5%
2.1%
28.5%
1.6%
19.0%
8.9%
5.7%
Privately Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
70.7%
12.4%
2.6%
0.0%
6.5%
0.0%
0.0%
2.1%
12.0%
73.1%
23.7%
21.7%
0.0%
3.9%
0.0%
0.8%
7.9%
8.6%
a.
a.
a.
a.
a.
a.
a.
a.
a.
53.0%
3.2%
11.7%
0.0%
20.6%
0.0%
9.7%
20.5%
3.2%
a.
a.
a.
a.
a.
a.
a.
a.
a.
70.8%
14.5%
8.5%
0.0%
5.9%
0.0%
2.4%
4.2%
10.6%
All Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
68.2%
8.1%
6.0%
0.0%
17.0%
0.1%
5.9%
5.3%
9.3%
55.0%
9.0%
14.6%
1.1%
22.8%
2.8%
18.1%
7.4%
5.3%
a.
a.
a.
a.
a.
a.
a.
a.
a.
75.1%
2.8%
22.5%
5.1%
16.9%
0.0%
10.5%
10.9%
6.5%
a.
a.
a.
a.
a.
a.
a.
a.
a.
64.9%
7.7%
13.4%
1.3%
19.6%
1 .0%
12.5%
7.0%
7.6%
a. The number of systems that provided information on sources of funds in these size categories was relatively small. Three systems
account for most of the investment made by private systems serving 3,301-10,000 persons. Four systems account for most of the
investment made by private serving more than 100,000. These systems funded large capital projects primarily with DWSRF loans.
The Drinking Water State Revolving Fund
(DWSRF) program also is an important source of
funds for small systems. DWSRF assistance finances
over 20 percent of capital investments made by public
systems serving populations of up to 10,000. This
assistance includes loans in which all or a portion of
the principal repayment is forgiven. Many large private
systems received funding from sources that could not
be categorized by the options given. Some of these
Community Water System Survey Report: Volume I
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Chapter 2: Overview of System Operations and Finance
sources were developer contributions, disaster relief,
and revenue bonds. (See Volume II, Table 105.)
Even though roughly the same amount of total
national investment funds come from current revenues
as from private sector loans, many systems are much
more likely to use current revenues than borrow funds.
The table on the previous page demonstrates the
percentage of systems that use each type of funding
source.
Approximately 71 percent of all privately owned
systems financed some of their investment with current
revenue, while only 9 percent borrowed from private
sources. Borrowing by publicly owned systems from
private sector sources tends to increase with system
size: 40 percent of public systems serving more than
100,000 persons borrow from private sources, while
only 12 percent of public systems serving up to 500
persons borrow from the private sector. Approximately
19 percent of publicly owned systems relied on
DWSRF loans to finance at least a portion of their
capital improvements. The percentage of publicly
owned systems whose DWSRF principle repayments
were forgiven was 1.6 percent. (See Volume II, Table
102.)
The table on page 35 shows the distribution
of the source of funds, or the percentage of funds
obtained from each source, for the average system (as
opposed to the aggregate for all systems, which was
shown in the table on page 32). Not only do 65 percent
of systems use current revenue, most systems (53
percent) finance the majority of their investments out
of current revenue.
Larger systems are much more likely to rely
on borrowing than are small systems. As system size
increases, reliance on borrowing as a source of funds
more than quadruples. Since larger systems also invest
more than smaller systems, this increase in borrowing
(and decrease in the use of current revenues) by
large systems explains why less than one-third of
total national investment funds come from current
revenues. (See Table 105 in Volume II.) On average,
systems receive an additional 10 percent of their
investment funds through private sector borrowing.
Publicly owned systems finance somewhat more of
their investments through borrowing, due in large part
to the systems' size.
Publicly owned systems used the DWSRF loans
to fund approximately 13 percent of their investment, on
34
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Chapter 2: Overview of System Operations and Finance
Each System's Distribution of Total Funds for Capital Investments by Each Source of Funds
Question Type
Population Served
<501
501-
3,300
3,301-
10,000
10,001-
100,000
>1 00,000
Total
Publicly Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
49.2%
0.3%
9.6%
0.0%
25.7%
0.1%
9.5%
4.6%
1.1%
36.9%
3.0%
11.3%
0.5%
18.6%
0.7%
19.6%
7.2%
2.2%
54.5%
1.0%
13.2%
0.0%
13.5%
0.0%
7.8%
3.6%
6.2%
64.5%
0.6%
16.9%
0.3%
5.4%
0.0%
7.2%
4.2%
0.9%
52.2%
0.5%
29.7%
0.9%
2.6%
0.0%
5.5%
5.2%
3.4%
47.4%
1.6%
12.4%
0.3%
17.3%
0.3%
13.0%
5.5%
2.3%
Privately Owned Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
68.0%
11.8%
1.7%
0.0%
5.8%
0.0%
0.0%
0.4%
12.3%
50.4%
17.6%
17.5%
0.0%
1.6%
0.0%
0.2%
5.3%
7.4%
a.
a.
a.
a.
a.
a.
a.
a.
a.
51.2%
4.1%
8.3%
0.0%
3.1%
0.0%
9.1%
22.9%
1.5%
a.
a.
a.
a.
a.
a.
a.
a.
a.
61.9%
12.6%
6.6%
0.0%
4.5%
0.0%
1.7%
2.2%
10.5%
All Systems
Current revenues
Equity or other funds from private investors
Borrowing from private sector sources
Department of Homeland Security grants
Other government grants
DWSRF principal repayment forgiveness
DWSRF loans
Other borrowing from public sector sources
Other
61.1%
7.6%
4.6%
0.0%
13.1%
0.0%
3.5%
1.9%
8.2%
40.7%
7.1%
13.0%
0.4%
13.8%
0.5%
14.1%
6.6%
3.7%
a.
a.
a.
a.
a.
a.
a.
a.
a.
63.7%
0.8%
16.4%
0.3%
5.3%
0.0%
7.3%
5.3%
1 .0%
a.
a.
a.
a.
a.
a.
a.
a.
a.
53.2%
6.0%
10.1%
0.2%
12.2%
0.2%
8.5%
4.2%
5.5%
a. The number of systems that provided information on sources of funds in these size categories was relatively small. Three systems
account for most of the investment made by private systems serving 3,301-10,000 persons. Four systems account for most of the
investment made by private serving more than 100,000. These systems funded large capital projects primarily with DWSRF loans.
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35
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Chapter 2: Overview of System Operations and Finance
average. Publicly owned systems also are more likely
to use DWSRF loans than privately owned systems.
(Some states do not make DWSRF funds available to
private systems.) While small privately owned systems
met a larger percentage of their funding needs through
private investors than small publicly owned systems
did, small publicly owned systems more than make up
for the difference with DWSRF and other public sector
loans. (See Volume II, Table 104.)
Conclusions
The drinking water industry is large and capital-
intensive. Water systems incurred more than $54
billion in total expenses to provide water to more than
280 million persons, and they invested more than $13
billion annually in capital improvements. They rely on
a range of water sources and treatment practices. The
summary measures presented in this chapter provide
an overview of the industry as a whole; the tables in
Volume II provide detailed information at the system
and treatment facility levels. The tables provide a sense
of the diverse nature of the industry by highlighting
differences by system size, ownership, and water
source. The tables in Volume II also show a 95-percent
confidence interval for most estimates; these intervals
often are relatively large, which also reflects the diverse
nature of the systems.
Profile of CWSs
The 49,133 CWSs in the 50 states and
the District of Columbia supply water to
280 million persons. They are publicly
owned systems, privately owned systems,
and systems that provide water only as
an ancillary function of their principal
business. Most systems rely primarily on
ground water sources. The great majority of
systems also serve 3,300 or fewer persons,
but most people get their water from large,
publicly owned systems that rely primarily
on surface water.
Community Water
By Ownership
Public
Ancillary
Private
By Water Source
100% Ground
Other Ground
100% Surface
Other Surface
100% Purchased
Other Purchased
By System Size
<501
501-3,300
3,301-10,000
10,001-100,000
> 100,000
Systems
24,847
9,554
14,733
34,570
1,527
3,237
1,129
7,823
848
26,642
13,421
4,564
3,928
578
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3. New Topics and Trends
Topics New to the Survey
Several new categories of questions were added
to the CWS Survey this year in an effort to address
the changing analytical requirements of new rules and
revisions to existing rules. The sections below provide
an overview and some interpretations of the results
from those categories.
Technology
Computers have become a pervasive and vital
piece of water system technology throughout the nation.
The vast majority of systems have access to computers
for sending and receiving information. There is a slight
upward trend as the size of water system increases, but
no less than 70 percent of systems in each size category
Percentage of Water Systems with Access
to Computers
96 n.,9998 10099100
iMM
O o
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
•H Ground BBB1 Surface Purchased
Percentage of Systems with Computers That Have
Internet Access
Hill
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
HHH1 Highspeed •••§ Dial-Up
presented here have access to computers. (There are
differences within the smaller size categories. Less
than 50 percent of surface water systems serving 100
or fewer persons have access to a computer, compared
to more than 85 percent of surface water systems
serving 101 to 500 persons.) Of the systems that have
computers, almost all have either dial-up or high-speed
Internet access. The percentage of systems that have
high-speed modems trends upwards with the size of the
system. This trend may be due to the greater financial
resources of larger systems and some economies of
scale of high-speed access. And these high-speed
technologies may not be available in rural areas.
(Additional details are provided in Table 6 of Volume
II.)
Preferred Source of Security Information
EPA
Water Associations
Department of Homeland Security
No Preference Other
A well behind a secure fence at a water system.
Community Water System Survey Report: Volume I
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Chapter 3: New Topics and Trends
Security
Water systems have several possible sources
of security information. The pie chart below shows
where systems prefer to obtain security information or
products. More than 40 percent of water systems did
not have a preferred source of information, and over 30
percent preferred to rely on water associations.
While few systems cited EPA as their preferred
source, many attended EPA security training or use
EPA security guides. The bar graph below shows the
percentage of systems that have attended any EPA-
sponsored water security training. This percentage
tends to grow with the size of the system. The
percentage of systems using EPA's Web-based security
technology product guides is also substantial, but far
lower than the percentage that attended the training.
Again, there is an upward trend with system size.
There are many barriers that may prevent water
systems from enhancing security at their facilities.
Systems must balance funds and other resources based
on their priorities, and those priorities are affected
by other system needs as well as the interests of
stakeholders. The table below shows the percentage
of systems that selected each of the listed categories
as one of their greatest barriers to enhancing security.
(Each respondent was asked to choose two.) There are
a couple of notable trends in this table: first, as system
size increases the lack of interest at the system, public,
or rate board level also increases. Conversely, a small
percentage of large systems reported a lack of funding
as one of their largest barriers to security, while smaller
systems reported funding as a major barrier. Many
smaller systems may not have the funding necessary
to make security improvements. The categories
"competing priorities" and "lack of funding" are often
Percentage of Water Systems That Attended EPA
o I Security Training
<501 501- 3,301- 10,001-
3,300 10,000 100,000
Population Served
>100,000
Percentage of Systems That Used EPA Security
Technology Product Guides
o -
<501 501- 3,301- 10,001-
3,300 10,000 100,000
Population Served
^^^H Private
>100,000
Systems Reporting the Following Barriers to Enhancing Security
Barriers to Enhancing Security
Lack of interest at the system,
public, or rate board level
Competing priorities
(regulatory compliance, aging
infrastructure, etc.)
Lack of funding
Lack of knowledge/guidance/
training material
Other
Population Served
<501
33.3%
51.2%
35.5%
18.8%
36.3%
501-3,300
44.7%
67.4%
29.5%
16.4%
27.0%
3,301-
10,000
54.5%
62.6%
13.5%
21.6%
26.5%
10,001-
100,000
58.4%
61.0%
12.1%
10.0%
35.6%
> 100, 000
67.8%
53.4%
8.3%
5.1%
37.9%
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Chapter 3: New Topics and Trends
linked, since budget constraints may force systems to
choose among competing priorities. Sixty-nine percent
of systems reported either competing priorities or the
lack of funding as one of their greatest barriers. Many
systems reported "other" barriers. In most cases, these
systems reported that they do not face a security threat
or that their existing security is adequate. Other issues
raised include inadequate staffing, lack of reliable
equipment, and coordination with other departments
and jurisdictions. (Additional details are provided in
Tables 54 and 55 of Volume II.)
Labor
The graph below summarizes average hourly
salaries and wages by system size. The average
includes both full- and part-time employees. (The
average number of hours worked per employee per
week for part-time employees was used to convert
their hourly wages to full-time equivalents.) Contract
employees are excluded because their hourly costs
cannot be compared directly to employee wages. For
example, contract costs may include overhead or other
non-labor costs. The employees are categorized as
operators, administrative staff members, and managers.
(Distribution and treatment operators are combined
into the same category because very little difference in
hourly wages was found between the two.) The graph
shows that hourly wages increase with the size of the
water system, and that managers receive a higher wage
than administrative employees or operators. Benefits
were approximately 20 percent of wages. There is
little difference among type of employee (operators,
Average Hourly Wage of Full- and Part-Time
Employees
Type of Water Storage by Primary Water Source
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
.43
Ground
Surface
Partially or fully burie
Elevated
Standpipes
Other
Ground level
Hyropneumatic
Standpipes as surge tanks
managers, administrative staff), but benefits as a
percentage of wages do increase somewhat with the
size of the system. (Additional details are provided in
Tables 84 and 85 of Volume II.)
Storage
As described in Chapter 2, storage is an important
part of a water system, improving water availability
and benefiting many treatment schemes. (Storage here
refers to finished water storage past the first residential
customer.) The graph above shows the percentage of
systems that use each type of finished water storage
facility past the first residential customer. (Additional
details are provided in Table 44 of Volume II.) Ground
level and elevated storage facilities are used far more
than any other storage types. In most cases, there are
not substantial differences between ground, surface,
and purchased water systems. (The questionnaire
focused on finished water storage past the first customer
Average Storage Capacity Per Person
(Million Gallons Per Person)
.0.0025-
° 0.0005-
' 0.0000
Operator
Administrative
Manager
<501 501- 3,301- 10,001-
3,300 10,000 100,000
Population Served
• Ground ^M • Surface Purch
>100,000
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Chapter 3: New Topics and Trends
80 _,
Modeling
or other
detention time
evaluations
Percentage of Systems with Storage Using Practices to Maintain
Water Quality in Storage Vessels
Longer
fill/draw
cycles to
increase mixing
Inlet/outlet
modifications
Ground
Mechanical
mixing
Increase or
switch
disinfectant
residual
Operational
modifications
to maintain
disinfectant
residual
Other
Use any of
the listed
practices
Surface
Purchased
connection. There likely are differences between
surface and ground water systems in the amount of raw
water storage.) As would be expected, average storage
capacity increases with water system size; however
the graph below shows that the average capacity per
person actually decreases with system size. (It is also
true that storage needs increase with fire protection
and pressure requirements, but these topics were not
covered in the survey.)
Water systems must also maintain water quality
in their storage vessels, and they use varied means to do
so. The graph above shows the percentage of systems
that use each of the listed practices. The last category
shows the percentage of systems that use any of the
listed practices. A far greater percentage of surface
water systems use each of these practices except longer
fill/draw cycles. That said, the average number of years
between cleaning a storage vessel is 6.5 for all water
systems, and it does not vary substantially by system
type or size. (Additional details are provided in Table
46 of Volume II.)
Pressure Zones
Water systems often boost finished water
disinfection in their distribution systems (i.e., after
the formal treatment process). These boosts occur
at specific stations within pressure zones. As seen
in the graph below, the average number of pressure
zones and booster disinfection stations increases with
system size, and there are far more pressure zones than
booster stations. Given that the size of the distribution
system increases with a system's service population,
both trends are expected. The graph at the top of page
41 also shows that the number of pressure zones that
have booster disinfection stations is higher for surface
Average Number of Pressure Zones and Booster
Disinfection Stations in the Distribution System
10.9
<501
501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
Pressure Zones
Booster Disinfection Stations
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Chapter 3: New Topics and Trends
Average Number of Pressure Zones with
Booster Disinfection Stations
10,001-
100,000
>100,000
Population Served
and purchased water systems than for ground water
systems. This trend may be caused by several factors:
1) surface water treatment rules call for disinfection
residual maintenance; 2) surface and purchased
water systems are more likely to have problems with
disinfectant byproducts, which can be controlled by
booster disinfection; and 3) surface water systems
tend to have greater disinfection demand. (Additional
details are provided in Table 50 of Volume II.)
In some instances, there are pressure losses
within these zones caused by fire, power outages,
pipeline bursts, or other events. The average number of
pressure losses below 20 psi per year for each of these
situations is shown in the bar graph below. The vast
majority of losses are caused by main pipeline bursts,
with surface water systems experiencing far more
losses than ground or purchased water systems. The
causes of the differences in pressure losses between
ground water, purchased water, and surface water
systems are not clear. (Additional details are provided
in Table 51 of Volume II.)
Flushing
Water systems flush their distribution system to
clear out stagnant water, provide a measure of cleaning
to the pipes, and maintain water quality. The percentage
of systems that flush their distribution systems
regularly grows as system size increases from small
to medium, but then it falls for larger systems. This
drop may be caused by the way systems interpreted the
question about flushing. The question did not specify
a minimum percentage that had to be flushed in order
to respond "Yes" to this question; however, very large
systems may be flushing such a small percentage of
their distribution systems that the respondents did
not count these activities. Some evidence for this
Percentage of Systems that Flush Their
Distribution System Regularly
85
87
<501 501- 3,301- 10,001-
3,300 10,000 100,000
Population Served
> 100,000
Average Number of Losses of Pressure
below 20 PSI
Ground
Surface
Purchased
Main Pipeline Burst
Power Outage
Other
Fire
Percentage of Distribution System That is
Flushed Regularly
95
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
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Chapter 3: New Topics and Trends
Average Annual Water Sales Revenue by
Ownership
Population
Served
25-100
101-500
All systems,
25-500
501-3,300
3,301-
10,000
All systems,
25-10,000
Publicly
Owned
Systems
$26,962
$42,398
$39,575
$233,998
$783,150
$230,244
Privately
Owned
Systems
$10,613
$31,743
$22,385
$338,117
$1,020,381
$136,609
All
Systems
$14,254
$37,117
$29,427
$257,359
$832,171
$191,953
possibility is shown in the following graphs. Among
systems that regularly flush their distribution systems.
the percentage of the distribution system that is flushed
declines steadily as system size increases. (Additional
details are provided in Table 52 of Volume II.)
Small System Revenue
Small water systems face a number of challenges
that can affect their capacity to comply with public
health standards. The extent to which small systems
can fund their operations through water rates and
other charges will have a significant impact on their
financial capacity. This section provides an overview
of the major sources of funds available to small water
systems, including revenue generated through rates
and payments from the local government's general
fund. Not every small system has access to each source
of funds; therefore, only systems that have positive
revenue from a source of funds are included in the
estimated average revenue for that source. (Additional
details are provided in Table 65 of Volume II.)
Small systems generate substantial revenue
from the direct sale of water to customers. The table
"Average Annual Water Sales Revenue by Ownership"
summarizes water sales revenue for small systems that
have this revenue source. Average revenue from water
sales is higher for the smallest publicly owned systems
than for the smallest privately owned systems. But
privately owned systems serving 501-10,000 persons
Average Annual Water- related Revenue by
Ownership
Population
Served
25-100
101-500
All systems,
25-500
501-3,300
3,301-
10,000
All systems,
25-10,000
Publicly
Owned
Systems
$15,964
$27,437
$25,577
$50,779
$144,298
$59,943
Privately
Owned
Systems
$3,536
$4,366
$3,958
$30,079
$80,602
$21,023
All
Systems
$7,245
$20,067
$16,141
$46,745
$132,816
$49,275
tend to have higher water sales than publicly owned
systems of the same size.
Systems rely on other charges that are related to
water, but not tied directly to water sales. These charges
include connection fees, penalties, and, in the case
of publicly owned systems, transfers from the local
government's general fund. The table "Annual Other
Water-related Revenue by Ownership" summarizes
these charges. Publicly owned systems rely more on
water-related charges than do privately owned systems.
Average revenue tends to increase with system size.
Small systems often have sources of revenue that
are not at all related to water. Many small systems, such
as mobile home parks, provide water as an ancillary
component of their main business. The business's total
Average Annual Non-water Revenue by
Ownership
Population
Served
25-100
101-500
All systems,
25-500
501-3,300
3,301-
10,000
All systems,
25-10,000
Publicly
Owned
Systems
$25,495
$44,046
$43,249
$137,623
$64,975
$96,268
Privately
Owned
Systems
$211,715
$580,569
$402,364
$3,685,785
$6,014,066
$773,652
All
Systems
$210,909
$536,067
$385,638
$1,113,768
$1,986,360
$639,251
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Chapter 3: New Topics and Trends
Average Annual Municipal Non-water System
Revenue (Net or Transfers to System) by
Ownership
Population
Served
25-100
101-500
All systems,
25-500
501-3,300
3,301-
10,000
All systems,
25-10,000
Publicly
Owned
Systems
$385,927
$213,651
$240,486
$993,251
$5,349,726
$1,571,303
Privately
Owned
Systems
N/A
N/A
N/A
N/A
N/A
N/A
All
Systems
$385,927
$213,651
$240,486
$993,251
$5,349,726
$1,571,303
revenue will often exceed its water revenue. Non-water
revenue is summarized in the table below.
Finally, many local governments operate water
systems. The tax revenue of the locality may be used
to fund water system operations or capital investments.
The table above summarizes municipal revenue, net of
water system revenue, and transfers to water systems.
The table below summarizes total resources
available to small water systems. It includes water sales,
water-related revenue, non-water system revenue,
and, for publicly owned systems, non-water related
municipal revenue. Total revenue is not derived from
the simple addition of all the subcategories of revenue.
Rather, it is the weighted average of the subcategories
Average Annual Total Water System Revenue
by Ownership
Population
Served
25-100
101-500
All systems,
25-500
501-3,300
3,301-
10,000
All systems,
25-10,000
Publicly
Owned
Systems
$186,474
$164,078
$168,291
$908,211
$3,914,971
$1,171,867
Privately
Owned
Systems
$116,343
$292,685
$211,801
$791,382
$4,577,333
$431,109
All
Systems
$126,840
$242,323
$198,735
$880,052
$4,010,351
$804,636
with the weights dependent on the likelihood that the
average system will have access to that particular
revenue category. The revenue of systems serving
3,301 to 10,000 is lower for publicly owned systems
than it is for privately owned systems. Privately owned
smaller systems tend to have higher revenue than
smaller publicly owned systems.
Trends
Trends in Industry Structure and
Operating Characteristics
The fundamental characteristics of the water
industry have not changed since the 2000 CWS
Survey. As described in Chapter 2, most systems are
small, privately owned, and rely on ground water
sources. Most people, however, receive their water
from large, publicly owned systems that rely primarily
on surface water sources. The portion of systems that
relied primarily on ground water remained virtually
unchanged at 73.5 percent in 2006, compared to 73.9
percent in 2000.
Within this basic structure, however, there have
been noticeable changes in the numbers of systems,
their ownership, and water sources. The total number
of systems decreased 6 percent between the 2000 and
2006 surveys, from 52,186 to 49,133, as shown in
the table on the next page. The number of systems
serving up to 10,000 persons fell more than 7 percent,
while systems serving more than 10,000 persons grew
by nearly 13 percent. Among all size categories, the
percentage of systems that are publicly owned increased
from 49 percent in 2000 to 51 percent in 2006.
These trends are particularly evident in the
smaller size categories of systems, as shown in the
first table on the next page. Since the previous survey,
the number of privately owned systems serving 500
or fewer persons declined by almost 15 percent. The
decline is even more pronounced for systems serving
100 or fewer persons, as can be seen in Table 1 of
Volume II. This change follows a trend first noted in
the 2000 Survey in which the number of systems in
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Chapter 3: New Topics and Trends
Number of CWSs in 2000 and 2006,
by System Ownership and Population Served
Population
Served
Systems
in 2000
Systems
in 2006
Percentage
Change
Publicly Owned Systems
<501
501-3,300
3,301-10,000
>1 0,000
All sizes
6,487
11,282
4,315
3,426
25,510
7,353
9,775
3,617
4,103
24,847
13.358
-13.4%
-16.2%
19.8%
-2.6%
Privately Owned Systems
<501
501-3,300
3,301-10,000
>1 0,000
All sizes
All Systems
22,632
2,734
738
571
26,675
52,185
19,289
3,647
948
403
24,287
49,133
-14.8%
33.4%
28.5%
-29.4%
-9.0%
-5.8%
the smallest size categories—those serving up to 500
persons—declined by more than 8 percent. However
the decline in the number of small privately owned
systems has been accompanied by a significant increase
in the number of publicly owned systems serving the
same size categories. (See Table 1 in Volume II for
further detail on the changes in the types and numbers
of systems since the 2000 Survey.)
The table on the right compares the number of
systems in the 2000 and 2006 surveys by water source
and size ofthe population served. The number of systems
that rely primarily on purchased water increased from
7,979 in 2000 to 8,670 in 2006, an increase of 8.7
percent. This category of systems has grown from 15
percent to 18 percent of total systems. This change also
marks an increase from 1995, when only 10.6 percent
of systems relied primarily on purchased water. The
increase is particularly noticeable in systems serving
500 persons or fewer. Their numbers grew from 2,248
to 3,021, or from 7.7 percent of systems in this size
category to 11.3 percent. As shown in Table 1 of
Volume II, the increase is largest in systems serving
100 or fewer persons; their numbers grew from 69
systems to 764.
One of the metrics EPA has followed over the
Number of CWSs in 2000 and 2006,
by Water Source and Population Served
Population
Served
Systems
in 2000
Systems
in 2006
Percentage
Change
Primarily Ground Water
<501
501-3,300
3,301-10,000
>1 0,000
All Sizes
24,902
8,970
3,071
1,645
38,588
22,673
8,719
2,629
2,076
36,097
-9.0%
-2.8%
-14.4%
26.2%
-6.5%
Primarily Surface Water
<501
501-3,300
3,301-10,000
>1 0,000
All sizes
1,969
1,212
1,008
1,430
5,619
949
1,068
864
1,485
4,366
-51.8%
-11.9%
-14.3%
3.8%
-22.3%
Primarily Purchased Water
<501
501-3,300
3,301-10,000
>1 0,000
All Sizes
2,248
3,835
973
923
7,979
3,021
3,634
1,071
945
8,670
34.4%
-5.2%
10.1%
2.4%
8.7%
previous CWS Surveys is the percentage of systems
that provide no treatment. Since the first survey, this
number has generally declined, as seen in the graph
below. (Since most large systems provide treatment, the
graph focuses on smaller systems.) While the share of
systems that do not treat was somewhat higher in 2000
and 2006 than it was in 1995, the general trend remains
downward. While the percentage of systems not treating
Percentage of Systems Not Providing Treatment
0-100
11976
101-500 501-1,000
Population Served
11982 H1986 H1995
1,001-3,300 3,300-10,000
• 2000 • 2006
44
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continued to decline or remained the same between
1995 and 2006 in three of the five size categories, it
increased slightly in the two other categories. This
increase may indicate that the downward trend is
leveling off. The percentage of the population that
consumes water from CWSs with untreated sources is
very small because the vast majority of systems that
do not treat their water are small ground water systems
which serve less than 2 percent of the total population.
(Table 15 in Volume II provides further detail on
systems not providing treatment in 2006.)
The graph below shows that the percentage of
ground water systems not providing treatment has
declined slightly in two of the three size categories and
increased slightly in the other. It combines the 501-
1,000 and 1,001-3,300 size categories to increase the
precision of the estimate. The graph focuses on smaller
ground water systems, because most large systems
provide treatment. The differences are not statistically
significant.7
Some significant changes in the structure and
refurbishment of distribution systems occurred
between 2000 and 2006. (See Table 48 and Table 36,
Volume II of 2000 CWS Survey.) The table "Miles of
Pipe Replaced During Previous 5 Years as a Percentage
of Total Miles of Existing Pipe" shows that the average
Percentage of Ground Water Systems
Not Providing Treatment
101-500
Population Served
1995 ^^m 2000 ^^m 2006
501-3,300
7 Note that the percentage of systems not treating water
in 1995 is slightly different than previously reported. The 1995
data include systems that did not respond fully to the treatment
questions. Previously, it was assumed that these systems in
fact provided treatment. This assumption likely understated the
percentage of systems not providing treatment in 1995. These
systems were dropped from the current analysis.
amount of pipe replaced over the past 5 years as a
percentage of total existing pipe has increased slightly.
The slight decrease in the number of entry
points into the distribution system in almost every
size category is also worth noting. The table "Average
Number of Entry Points per System by Primary
Water Source" shows the change from 2000 to 2006.
(Additional details are provided in Table 13 of Volume
II of this survey and Table 7 of the 2000 CWS Survey.)
Trends in Financial Characteristics
Average water sales and water-related revenue
increased between 2000 and 2006, and the growth in
revenue appears to have been relatively strong. Some
of the reported increase in water system revenue,
however, may have been due to non-response issues
in the survey—especially regarding water-related
revenue. The table on the next page compares water
system revenue for systems that reported positive
revenue. (In other words, systems that reported
no revenue or did not respond are excluded.) Data
from 2000 were converted to 2006 dollars using the
Consumer Price Index; non-water related revenue was
excluded. From the 2000 to the 2006 Surveys, water
Miles of Pipe Replaced During Previous
5 Years as a Percentage of Total Miles of
Existing Pipe
System Ownership
Public
Private
All
2000 Survey
2.1%
3.0%
2.3%
2006 Survey
3.2%
1 .4%
2.7%
Average Number of Entry Points per System
by Primary Water Source
Population
Served
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
Ground Water
Systems
2000
Survey
1.4
1.8
2.9
4.6
7.6
2006
Survey
1.2
1.7
2.2
4.2
14.7
Surface Water
Systems
2000
Survey
1.4
1.3
1.6
2.2
3.3
2006
Survey
1.1
1.2
1.2
1.5
2.6
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Chapter 3: New Topics and Trends
Trends in Water System Revenue
Average Water System Revenue (in 2006 Dollars)
Population Served
Publicly Owned Systems
2000
Survey
2006
Survey
Percent
Change
Privately Owned Systems
2000
Survey
2006
Survey
Percent
Change
Water Sales
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
All Sizes
35,443
196,265
800,562
3,648,251
39,996,583
1,407,043
39,575
233,998
783,150
3,623,261
41,307,641
1,502,107
12%
19%
-2%
-1%
3%
7%
22,826
208,986
880,363
4,514,351
52,372,644
316,651
22,385
338,117
1,020,381
3,621,358
74,689,545
523,928
-2%
62%
16%
-20%
43%
65%
Water-related Revenue
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
All Sizes
7,630
33,030
122,970
681,518
9,344,574
318,055
25,577
50,779
144,298
942,165
10,622,558
474,898
235%
54%
17%
38%
14%
49%
5,576
21,718
94,065
341,425
1,711,026
37,006
3,958
30,079
80,602
607,979
740,608
45,839
-29%
38%
-14%
78%
-57%
24%
Water Sales Plus Water-related Revenue
<501
501-3,300
3,301-10,000
10,001-100,000
> 100, 000
All Sizes
25,024
123,786
470,058
2,228,942
26,086,836
926,395
34,764
154,912
489,450
2,354,284
26,378,432
1,067,394
39%
25%
4%
6%
1%
15%
18,439
135,849
549,801
2,744,080
30,408,636
235,241
18,309
218,413
588,277
2,137,384
49,543,009
386,217
-1%
61%
7%
-22%
63%
64%
sales revenue of publicly owned systems increased
by 7 percent and sales by privately owned systems
increased 65 percent. Water-related revenue from fees
and other charges increased by 49 percent for publicly
owned systems and 24 percent for privately owned
systems. (Tables 59, 61, and 65 of Volume II provide
additional information on system revenue.)
Systems' annual expenses also grew in real
terms (i.e., faster than the rate of inflation) between
the two surveys. Total expenses included routine
operating expenses (employee and other operations
and maintenance costs), debt service, payments to
reserve funds, and other expenses. While expenses
of publicly owned systems increased by 57 percent
between 2000 and 2006, revenue increased by only
15 percent. Increases of 64 percent in the revenue of
privately owned systems, however, easily outstripped
increases in expenses of 29 percent during this period.
Unlike the expenses of publicly owned systems, the
expenses of large privately owned systems largely kept
pace with inflation. (Tables 77 and 79 in Volume II
provide additional information on total expenses.)
A substantial portion of systems continued to have
annual operating costs that exceeded revenue. To compare
operating expenses and revenue, we included employee
and other operating expenses and interest payments. We
excluded depreciation, a non-cash expense, as well as
principal payments, other capital purchases, and other
expenses not related to system operations. Revenue
includes water sales and water-related revenue and
excludes non-water-related revenue.
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Chapter 3: New Topics and Trends
Trends in Water System Expenses
Annual Expenses (in 2006 Dollars)
Population Served
<501
501 - 3,300
3,301 - 10,000
10,001 - 100,000
> 100, 000
All Sizes
Publicly Owned
2000 Survey
45,612
190,309
841,370
3,912,316
38,821,400
1,378,519
2006 Survey
79,285
286,417
1,068,841
4,906,701
62,367,379
2,159,740
Percent
Change
74%
51%
27%
25%
61%
57%
Privately Owned
2000 Survey
16,777
198,037
812,132
3,643,246
33,310,122
146,470
2006 Survey
27,487
210,286
1,154,767
4,409,779
35,594,711
189,477
Percent
Change
64%
6%
42%
21%
7%
29%
Percentage of Systems with Deficits or Losses
Publicly Owned Systems
39
33
3,301-
10,000
Population Served
10,001-
100,000
32
>100,000
1995
Privately Owned Systems
29
2000
<501 501- 3,301- 10,001- >100,000
3,300 10,000 100,000
Population Served
2006
Except for publicly owned water systems in
the two smallest size categories and privately owned
systems in the largest category, the percentage of
systems operating with a deficit or a loss increased
between 2000 and 2006.8 The percentage of publicly
owned systems serving 500 or fewer persons that
operated with a deficit declined from 32 percent to 31
percent between 2000 and 2006. The percentage of
publicly owned systems serving 501 to 3,300 persons
that operated with a deficit declined from 30 percent
to 27 percent. While the percentage of small publicly
8 Publicly and privately owned systems tend to use
different terms when comparing revenue and expenses. When the
expenses of public systems exceed their revenue, they operate with
a deficit. If revenue exceeds expenses, public systems operate with
a surplus. Private systems incur a loss if expenses exceed revenue.
They earn a profit if revenue exceeds expenses.
owned systems that had an operating deficit decreased
between the two surveys, the percentage of small
privately owned systems operating at a loss increased.
Privately owned systems serving populations of 500 or
fewer persons that were operating at a loss increased
from 39 percent to 52 percent. Privately owned systems
serving populations of 501 to 3,300 that operated at
a loss increased from 21 to 24 percent. None of the
privately owned systems in the sample that serve more
than 100,000 persons operated at a loss.
Some caveats are needed before drawing
conclusions about the industry's financial well being:
• The survey's estimates of surpluses and deficits
are based on a single year's financial data. As
noted earlier, water systems often face temporary
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Chapter 3: New Topics and Trends
deficits while waiting to implement higher rates.
There also may be a strong cyclical component
to system finances; the recent downturn in the
economy may affect system finances, reversing
some of the improvements shown in the graphs
on the previous page (at least for systems with
substantial nonresidential sales).
Combined systems (e.g., water and sewer, water
and power) often had difficulty disaggregating
their operating expenses. Many combined
utilities track sales revenue for each operation
separately, but combine operating expenses.
Systems (and site visitors to small systems) often
used simple rules of thumb to approximate water
related expenses, such as assuming expenses
are proportional to revenue. In some cases, non-
water-related expenses may remain in reported
expenses, resulting in an overestimate of the
percentage of systems that have operating losses
or deficits.
The relatively small percentage of large, privately
owned systems that have losses may reflect
these systems' reliance on equity capital. Profits
are needed to pay dividends to shareholders or
to maintain share value. The small portion of
large, privately owned systems with losses could
also reflect rate regulation by public utilities
commissions.
Many systems operate with a negative cash flow.
Although this situation may indicate the systems
are in financial trouble, there may have good
reasons for the negative cash flow. The system
Comparison of Residential Rate Designs,
1995 and 2006
Uniform rate
Declining block rate
Increasing block rate
Peak period or seasonal rate
Separate flat fee
Combined flat fee
Other
1995
35%
11%
8%
1%
11%
7%
6%
2006
36%
10%
13%
0%
17%
16%
7%
may be "paying it backward," or using revenue
from next year to pay for this year's expenses.
Rate lag causes some of this, as do dividend
payments to investors.
• Expenses include some items that are important
accounting expenses, but do not require cash
outlays. Depreciation, for example, often is a
large item, but requires no cash payments. A
system, therefore, may be operating with a deficit
but still have positive cash flow. (See Jordan, J.L.,
"Do You Use Your Depreciation Funds Wisely,"
Opflow, Vol. 21, No. 12, December 1995, p.l.)
• The way systems account for depreciation
over time has changed. Large privately owned
systems have consistently reported depreciation
as an annual expense. Publicly owned systems—
especially those run as public enterprise funds—
now tend to do so as well. Depreciation was not
always reported consistently in previous surveys.
In the 2000 Survey, depreciation was reported
as an "other" expense (distinct from labor and
routine operating expenses). Some systems may
not have reported it at all, while others may
have lumped it in with other routine operating
expenses. Whether—and how—systems report
depreciation can affect the reported results.
The way systems charge residential customers
for water has changed over time. As the table to the left
shows, the percentage of systems that use increasing
block rates increased from 8 percent in 1995 to 13
percent in 2006, while the use of uniform rates and
declining block rates remained virtually unchanged.
The use of fees also increased. The changes may
reflect increased use of conservation rate designs and
efforts to decouple rates from sales. The reasons for the
changes cannot be determined from this survey. (Table
71 in Volume II provides additional detail.)
Trends in Capital Investment
When compared to the 5-year period prior to the
2000 CWS Survey, there was a decline in the number
of systems making major capital investments in the
5 years preceding the 2006 survey. The 2000 CWS
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Chapter 3: New Topics and Trends
Percentage of Systems Making Capital
Investments in the Previous 5 Years
2000 Survey
2006 Survey
Publicly Owned Systems
<101
101 - 500
501 - 3,300
3,301 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 -500,000
> 500, 000
All Sizes
65%
59%
52%
69%
84%
85%
84%
93%
40%
41%
45%
54%
49%
62%
69%
77%
87%
52%
Privately Owned Systems
<101
101 - 500
501 - 3,300
3,301 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 -500,000
> 500, 000
All Sizes
49%
56%
65%
82%
81%
74%
51%
42%
53%
32%
29%
54%
39%
51%
42%
52%
24%
35%
All Systems
<101
101 - 500
501 - 3,300
3,301 - 10,000
10,001 - 50,000
50,001 - 100,000
100,001 -500,000
> 500, 000
All Sizes
42%
53%
53%
69%
84%
84%
83%
89%
54%
33%
35%
54%
47%
61%
66%
74%
79%
44%
Survey reported that almost 54 percent of all systems
made capital investments. The current survey shows
that fewer than 44 percent did so between 2001 and
2006. (See Table 70, Volume II of the 2000 CWS
Survey and page 28 and Tables 86 and 87 of Volume II
of this survey.)
While systems continue to make substantial
capital investments to fund water quality improvements.
totaling nearly $66 billion over the past 5 years.
Average Distribution of Capital Investment
in the 2000 and 2006 Surveys
Type of Investment
Land
Water Source
Transmission and Distribution
System
Treatment
Storage
Other
2000
Survey
10.2%
9.8%
27.1%
25.0%
12.4%
15.5%
2006
Survey
1 .0%
25.3%
40.8%
13.5%
13.3%
6.1%
Distribution of Capital Investment in the
2000 and 2006 Surveys for the Nation
Type of Investment
2000
Survey
2006
Survey
Publicly Owned Systems
Land
Water source
Transmission and distribution
Treatment
Storage
Other
2.3%
8.4%
46.7%
22.8%
12.5%
7.4%
1.3%
8.6%
44.9%
25.0%
8.8%
11.4%
Privately Owned Systems
Land
Water source
Transmission and distribution
Treatment
Storage
Other
1.5%
8.8%
53.3%
16.3%
8.5%
11.6%
0.5%
9.3%
56.8%
18.3%
7.8%
7.4%
All Systems
Land
Water source
Transmission and distribution
Treatment
Storage
Other
2.2%
8.4%
47.3%
22.2%
12.1%
7.8%
1.3%
8.7%
45.9%
24.4%
8.8%
11.0%
investment in treatment accounts for an average of
only 14 percent of systems' total capital investments.
(See Volume II, Table 95 for further detail.) In 2000,
systems reported spending $53 billion on capital
investment over the previous 5 years. On average, 25
percent of total capital investment in 2000 was spent
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Chapter 3: New Topics and Trends
on treatment. (See Table 74, Volume II, 2000 CWS
Survey.)
The largest share of water system investments
nationwide continue to be made in distribution mains
and transmission lines, accounting for 44.9 percent of
all capital expenses for publicly owned systems and
over 56.8 percent of such expenses for privately owned
systems. (See page 31.) This proportion is similar to
that reported in the 2000 CWS Survey when 46.7
percent and 53.3 percent of all capital expenditures,
for publicly and privately owned systems respectively,
went to distribution and transmission lines. (See
Table 95 of Volume II. The "Other" category in the
previous tables includes security, which is shown as a
separate category in Volume II Table 95.) How capital
investments stacked up in 2000 and 2006 is shown
in the next table. (See Table 96 of Volume II of this
Survey and Table 75 of the 2000 CWS Survey.)
Trends in Sources of Funds for Capital
Investment for Publicly Owned Systems:
The Growth of the DWSRF
Chapter 2 presented data on the sources of funds
for capital investment over the past 5 years. Since the
2000 survey, the DWSRF has grown in importance as
a source of funds for capital investment, especially for
publicly owned systems. Approximately 19 percent of
publicly owned systems relied on DWSRF loans to
Percentage of Public Systems Acquiring
Capital Funds from Each Source
Source of Funds
Current revenues
Borrowing from private sector
sources
Other government grants
DWSRF principal repayment
forgiveness
DWSRF loans
Other borrowing from public
sector sources
Equity or other funds
2000
Survey
69.5%
19.5%
21.8%
7.1%
9.8%
12.9%
3.6%
2006
Survey
61.1%
16.5%
29.4%
1.6%
19.0%
8.9%
8.8%
finance at least a portion of their capital improvements,
which is up from 10 percent in the 2000 Survey. The
percentage of publicly owned systems whose DWSRF
principle repayments were forgiven was 1.6 percent,
down from 7 percent in 2000. Associated with this
change is a shift away from current revenue and
borrowing from other private and public sources. (See
Volume II, Table 102 and Table 79, Volume II of the
2000 CWS Survey.)
The increase in the share of systems relying on
the DWSRF also was accompanied by an increase
in the percentage of capital investment funded by
the DWSRF for the average system. Publicly owned
Each Public System's Distribution of Total
Funds for Capital Investment by Each Source
of Funds
Source of Funds
Current revenues
Borrowing from private
sector sources
Other government grants
DWSRF principal
repayment forgiveness
DWSRF loans
Other borrowing from
public sector sources
Equity or other funds
2000
Survey
51.1%
14.3%
12.9%
4.3%
7.0%
7.8%
2.9%
2006
Survey
47.4%
12.4%
17.6%
0.3%
13.0%
5.5%
3.8%
Distribution of Total Funds for Capital
Investments of Public Systems Nationally by
Each Source of Funds
Source of Funds
Current revenues
Borrowing from private
sector sources
Other government grants
DWSRF principal
repayment forgiveness
DWSRF loans
Other borrowing from
public sector sources
Equity or other funds
2000
Survey
38.8
42.0
4.8
1.2
4.1
7.9
1.2
2006
Survey
34.0%
33.6%
7.5%
0.2%
10.5%
9.5%
4.6%
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Chapter 3: New Topics and Trends
systems used DWSRF loans to fund approximately 13
percent of their investment, on average. This is up from
approximately 7 percent in the 2000 Survey. (See Table
104 in Volume II and Table 80 of Volume II of the 2000
CWS Survey.)
The share of publicly owned systems using the
DWSRF has grown since 2000, as has the average
proportion of funds coming from the DWSRF.
This translates into an increase in the total share of
investment of publicly owned systems nationally that
is funded by the DWSRF. Nationally, DWSRF loans
account for 11 percent of funds for all publicly owned
systems, up from 4 percent in 2000.
Reliance on current revenue and borrowing from
public sources is down. Other public sources of funds—
including grants and loans—account for a larger share
of total funding in 2006 than in 2000. The share paid
for out of current revenue and borrowing from private
sources declined. (See Table 105 in Volume II. Also see
Table 81 in Volume II of the 2000 report.)
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Glossary
Ancillary System: A water system that is privately owned and operated as a necessary part of another business (e.g..
a mobile home park).
Average Daily Production: The average amount of finished water produced daily by all of a system's treatment plants.
Capital Expenses: Spending on any capital project that is not part of routine maintenance.
Compliance Analyses: EPA may use the survey data to develop profiles of operational and financial characteristics for
different types of water systems, which can be compared to the Agency's database of compliance records in the Safe
Drinking Water Information System (SDWIS).
Community Water System (CWS): Defined by the U.S. Environmental Protection Agency as a public water system
that serves at least 15 service connections used by year-round residents or regularly serves at least 25 year-round
residents.
Connection Fees: A one-time charge that water systems impose on new customers to connect to the distribution
system. Connection fees are used by some water systems to fund capital projects, while others use these fees to fund
general operations.
Debt Service: The payment of interest and principal on past borrowing.
Deficit: The difference between expenses and revenue in a year, if expenses exceed revenue. The term is used for
publicly owned systems. Privately owned systems generally use the term "loss."
Deliveries: Water that is sold and delivered to customers. For this report, deliveries include unaccounted for water.
Depreciation: The cost of wear and tear on a system's equipment and plant.
Distribution Network: The network of pipes that distributes finished or potable water to consumers.
Drinking Water State Revolving Fund (DWSRF): Established by the Safe Drinking Water Act, as amended in
1996, to make funds available to drinking water systems to finance infrastructure improvements. The program also
emphasizes providing funds to small and disadvantaged communities and to programs that encourage pollution
prevention as a tool for ensuring safe drinking water.
Entry Points: Points at which water enters a water system's distribution network.
Excess Capacity: Production capacity beyond that required to meet peak flows.
Finished Water: Potable water that is ready for delivery. If treatment is required, finished water has been filtered,
disinfected, or otherwise treated.
General Operational Expenses: Expenses for purchased water, security, energy, chemicals, materials, laboratory
costs, and other supplies. It equals operating expenses minus depreciation, income taxes, and payments in lieu of taxes.
Government Transfers: Transfers from a municipal general fund to a publicly owned water system for operations
and, in some cases, other expenses.
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Ground Water: Water that originates in underground streams and aquifers beneath the earth's surface.
Loss: The difference between expenses and revenue in a year, if expenses exceed revenue. The term is generally used
by privately owned systems. Publicly owned systems generally use the term "deficit."
Net Income: Revenue from sales minus general operational expenses, depreciation, interest, and income taxes or
payments in lieu of taxes.
Non-Community Water System (NCWS): A water system that provides water in a place where people do not remain
for long periods of time (transient NCWS) or that supplies water at least six months per year, but not year-round (non-
transient NCWS). Examples of transient NCWSs are gas stations or campgrounds. Examples of non-transient NCWSs
are schools, factories, office buildings and hospitals that have their own water systems.
Operating Expenses: Expenses for purchased water, security, energy, chemicals, materials, laboratory costs, and
other supplies. It includes the cost of depreciation. It also includes income taxes paid by privately owned systems and
payments in lieu of taxes by publicly owned systems.
Other Expenses: Capital improvements and payments to the reserve fund.
Peak Daily Flow: The maximum amount of finished water produced by a system's treatment plants on a single day
over a 12-month reporting period.
Policy Development Analyses: The survey is designed to collect financial and operational data on the full range of
water systems to support a variety of policy and guidance initiatives. EPA also uses the data to respond to periodic
requests from Congress, federal agencies, and the public for information on the water supply industry.
Primary Water Source: The primary water source of a system (i.e., ground, surface, or purchased) is defined as the
source from which the system receives the largest percentage of its water. For example, a system is classified as a
ground water system if it receives more of its water from ground water sources than from surface or purchased sources.
Because systems can have three sources of water, some may receive less than half their water from their primary
source.
Private Not-for-Profit System: A system that is owned privately and not operated for profit (e.g., a system operated
by a homeowners association or a non-profit cooperative).
Privately Owned System: A system that is owned privately and operated for profit primarily as a water business (e.g.,
American Water Company).
Production: Treatment of water at a system's treatment facilities or plants.
Profit: The difference between revenue and expenses if revenue is greater than expenses. The term is used by privately
owned systems. Publicly owned systems generally use the term "surplus."
Publicly Owned System: A system that is owned and operated by a government or public agency.
Raw Water: Water that has not been filtered, disinfected, or otherwise treated.
Regulatory Development Analyses: EPA must satisfy the requirements of various statutes and regulations for
analyses of proposed regulations under the Safe Drinking Water Act (SDWA). The survey provides data on water
system operations and finances that are critical to the preparation of these analyses.
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Regulatory Implementation Analyses: The survey data, along with data from the Drinking Water Infrastructure
Needs Survey and Assessment, can be used to assess the financial capacity of water systems in general and of small
systems in particular.
Retail Customers: Customers that water systems serve directly.
Small Water Systems: The definition of a small water system varies depending on the context, but the SDWA defines
small systems as those serving 3,300 persons or fewer. This is the definition used throughout this document, except in
specific instances where small systems are explicitly defined as serving 10,000 persons or fewer.
Storage: The capacity to store water in tanks or other vessels. For the purposes of this report, storage is limited to
finished water and is located past the first residential customer.
Stratified Random Sample: To obtain a more representative sample of water systems, the population (number of
community water systems in the nation) is first divided into strata according to population served and source of water.
Then, a particular number of participants (determined by percentages in the actual population) are randomly selected
from each stratum.
Surface Water: Water that originates from surface sources such as lakes, streams, and reservoirs. Surface water also
includes ground water that is under the direct influence of surface water (GWUDI).
Surplus: The difference between revenue and expenses if revenue is greater than expenses. The term is used by
publicly owned systems. Privately owned systems generally use the term "profit."
System Design Capacity: The maximum amount of finished water that a system's treatment plants are designed to
produce daily in the aggregate when operating at capacity.
Transmission Network: The network of pipelines that transport raw or partially treated water to a water treatment
plant or that transport finished water to distribution mains.
Treatment Plant: Any facility where water is filtered, disinfected, or otherwise treated prior to its transmission to the
distribution system (or its conveyance to another purchasing water system). For this report, simple disinfection only
or pH adjustment prior to entry into the distribution system are considered to constitute a water treatment plant. Other
examples include large-scale filtration plants and chemical feeds on wells to provide disinfection. For this report,
treatment plants do not include facilities within the distribution system that boost disinfection.
Unaccounted for Water: Water that is lost (e.g., leaks) or used for uncompensated uses (e.g., firefighting).
Water-Related Revenue: Payments for water services that are not tied directly to the delivery of water. They include
development fees, connection fees, fines, and other miscellaneous payments. Some publicly owned systems also
receive transfers from a municipal general fund. (On the other hand, some municipalities may transfer water system
revenue to fund other activities.)
Water Sales Revenue: Payments received for the delivery of water to customers.
Wholesale Customers: Public water suppliers that purchase water from other public water suppliers.
Withdrawals: Water taken from ground water or surface water sources.
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Acronyms
AwwaRF American Water Works Association Research Foundation
BAT Best Available Technology
CWS Community Water System
DWSRF Drinking Water State Revolving Fund
EA Economic Analysis
EPA U.S. Environmental Protection Agency
GWUDI Ground Water Under the Direct Influence of Surface Water
ICR Information Collection Request
MGD Millions of Gallons per Day
NCWS Non-Community Water System
PRA Paperwork Reduction Act
PSI Pound per Square Inch
RFA Regulatory Flexibility Act
SBREFA Small Business Regulatory Enforcement Fairness Act
SD WA Safe Drinking Water Act
SDWIS Safe Drinking Water Information System
TOC Total Organic Carbon
UMRA Unfunded Mandates Reform Act
VOC Volatile Organic Compound
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