&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
                         Community Water System Survey Report: Volume I

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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
            Community Water System Survey Report: Volume I

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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.
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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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                                                 Chapter 2: Overview of System Operations and  Finance
 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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Chapter 2: Overview of System Operations and Finance
                 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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                                                 Chapter 2: Overview of System Operations and Finance
                 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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                                                 Chapter 2: Overview of System Operations and Finance
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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Chapter 2: Overview of System Operations and Finance

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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                                                 Chapter 2: Overview of System Operations and Finance
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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                                                Chapter 2: Overview of System Operations and Finance
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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                                                Chapter 2: Overview of System Operations and Finance
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
26
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                                                 Chapter 2: Overview of System Operations and Finance
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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Chapter 2:  Overview of System  Operations and Finance
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.
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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
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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.
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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.
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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
                                                   33

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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.
Community Water System Survey Report: Volume I
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
36
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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%
38
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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
40
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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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                                                                          Chapter 3: New Topics and Trends
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%
50
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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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