Impact of the Safe Drinking Water Act: Not Just A Rate Increase

(from Maine Townsman September, 1990)
By Jo Josephson, Assistant Editor

Just as the days of cheap sewage treatment and cheap garbage disposal are coming to an end, so too are the days of cheap water.

As municipal water departments and their cousins, the quasi-municipal water districts, struggle to comply with the 1993 deadline requirements of the federal Safe Drinking Water Act, the cost of water in many Maine communities is expected to double at best or quadruple at worst, according to Steve Levy, program manager of the Maine Rural Water Association.

Levy guesstimates that mandatory surface water filtration, increased monitoring requirements, well head protection plans, and corrosion control will cost Maine communities from $300 to $500 million over the next five years.

Testifying recently in Washington, D.C., Levy said the cost will fall most heavily on those communities that do not have a large customer base to provide the revenue to retire the debt of compliance.

Appearing before the Senate Environment and Public Works Committee, Levy highlighted the cases of Winter Harbor and Andover, where water bills could approach $600 a year, up from the current rate of $135 a year in Winter Harbor and $128 a year in Andover.

"Many towns simply cannot comply," Levy said.

But an increase in residential user fees is just one of the cost effects of the Act's 1986 Amendments, and its 1989 Rules.

The cost of fire protection or "hydrant rental," which is pegged to the revenue requirements of a utility (no less than 6 percent and no more than 30 percent of a utilities revenue requirements according to the Maine Public Utilities Commission) will also go up.

In the case of Augusta, which has 420 hydrants, the water district is planning a $14 million project to comply with the new rules.

The cost for city fire protection is expected to rise from its current $214,000 a year to $770,000 by 1992.

Costs aside, Levy and others point out that the effects of the Act's stringent testing and monitoring rules will certainly lead to a major restructuring of Maine's water industry.

Among the changes they see are the demise of the small private water company.

They also see the demise of the volunteer and/or part-time labor provided by the boards of trustees of water districts and the coming of age of full-time highly trained and paid employees.

They also see a justification for and increase in the practice of metering water usage as well as the initiation of cost service studies to analyze the current rate structures, many of which are based on the idea the more water you use the less you pay per unit.

Those foreseeing the change, say, "a gallon is a gallon." The impact on the big users could be monumental.

All of which gets one back to the money issue.

But beyond money, they predict there will also be an increase in the number of watershed protection associations, as many towns seek exemption from the filtration requirement.

And last but not least, as the price goes up, they predict there will be a change in habits, as users begin to equate shower time and car washing with dollars and cents.

A Public Health Issue

One of the major goals of the 1986 Amendments to the Safe Drinking Water Act—filtration and disinfection—is to avoid major outbreaks of infectious diseases and endemic gastrointestinal disorders.

The residents of Dover-Foxcroft need no explanation of what that means. It was in Dover-Foxcroft in 1985, that Maine's first and only confirmed outbreak of waterborne "giardiasis" was recorded, infecting approximately 20 residents with the debilitating gastrointestinal disorder.

Carried by mammals, such as beaver and moose who deposit its cysts in streams, ponds and other surface waters they come into contact with, the disease is also known as the "backpacker's disease."

It was the increased incidence of such waterborne diseases as "giardiasis" in public water supplies nationally that paved the way for the 1986 Amendments and its subsequent Rules, says Levy, noting that under the rules filtration must remove 99.9 percent of the giardia cysts in the water.

Officials in Dover-Foxcroft believe the outbreak in their town occurred after a large fire drew down the water and its pressure thereby interfering with the chlorination process.

Whatever the cause, following the outbreak among its customers, the Dover-Foxcroft Water District, which draws its water from the 70-acre Salmon Pond, subsequently built a filtration plant priced at $1 million.

By the time they were finished they had spent a total of $2.3 million which included not only the installation of a filtration plant but the replacement of four miles of a 90 year-old transmission main as well as the installation of 900 meters.

Farmers Home Administration provided a $100,000 grant and a $282,000 low interest loan.

The effect on the water rate was to increase it by 337 percent, according to Water District Superintendent Brian Ames. The rate went from a flat rate of $24.80 a year, which Ames admits was "one of the lowest rates in the state," to a base minimum rate of $38.60 a quarter.

Surface Water Filtration Rules

The Act's Surface Water Filtration Rule issued in its final form approximately one year ago in June 1989 requires that most public water systems using surface water supplies (water from lakes, ponds and rivers) must filter the supply.

However, in some cases, the Maine Department of Human Services may issue some exemptions to the filtration requirement. The deadline for supporting studies for an exemption is June 19, 1991.

If they don't build a filtration plant, water departments can search for an underground supply and drill a well, but even then they will not be out of the woods, (see Geoff Herman's article on wellhead protection in this issue).

Or, they can seek a "waiver." To obtain it, they will have to increase their disinfection program and guarantee "control" of the watershed surrounding their supply, like owning all of the shorefrontage, a requirement that for some could be more costly in the end than filtration.

Or, they can seek to hook into a neighboring water system and share the costs.

Guesstimating the cost of compliance to Maine's communities at $300 to $500 million, Levy says, "Compared to the rest of the country, Maine is especially hard-hit by the rules because basically, the water quality in Maine is good and therefore has not needed filtering."

According to Francis Drake of the Maine Department of Human Services, Division of Health Engineering, which is charged with enforcing the rules, there are only a handful of water systems in Maine that have traditionally filtered their water. Most of them are in Aroostook County, where water is drawn from rivers and must be filtered to decrease the natural turbidity of the water.

The more recently built filtration systems can be found in Kittery, York, Kennebunk, Biddeford/Saco, Eastport and Dover-Foxcroft, notes Drake.

Organization of Maine's Water Systems

A brief overview of the organization of Maine's water systems shows that there are approximately 400 community water systems. Community water systems provide water to residents who use their water nearly every day over a long period of time and include water districts and companies both public and private.

Approximately 150 of them are systems whose rates are regulated by the Public Utilities Commission.

More than three-quarters are publicly owned. They include 87 "quasi-municipal" water districts, like Dover-Foxcroft and 27 municipal water companies.

The remaining 38 are privately-owned community water systems, like those in Winter Harbor and Andover.

Approximately 90 of those community systems currently draw their water from surface supplies. They are the target of the 1989 rules.

Impact

According to Levy, hard hit will be those communities served by private water companies that do not have access to cheap, albeit limited, loans and/or grants through the Farmers Home Administration.

Also hard hit will be those quasi-public and public water systems that, while having access to limited FmHA loans and grants, do not have a large consumer base to absorb the associated high fixed capital costs associated with compliance.

Levy expects rates to double for the "larger" systems, which he defines as those with over 1,000 customers; those with less than 1,000 customers he predicts will see a tripling or quadrupling of rates.

Figures prepared for the PUC by the Maine Rural Water Association in 1984 indicate that almost three-quarters of Maine's community water systems have fewer than 1,000 customers; approximately 20 percent have between 1,000 and 5,000 customers and approximately six percent have more than 5,000.

Levy notes that those who will be most affected by the increase are those who live in the developed areas of those small rural towns that are on public water. They usually live in older apartments in the downtown area and income surveys show their income to be less than the town average.

Lou Beauchamp, superintendent of the Wilton Water and Sewer Department, confirms this observation, noting that when Wilton applied for a FmHA loan to build a filtration plant, it was first determined that the interest rate on the loan would come to 7 percent because the town's median household income was approximately $14,000.

But then when the median household income of those served by the system was figured alone, it came to approximately $12,000. The lower figure allowed Wilton to apply for the five-percent interest loan.

As mentioned above, also affected will be the water districts that operate on miniscule budgets with volunteer part-time labor supplied by the trustees.

Levy notes that approximately 60 of the 150 community systems do not have any full-time help and approximately 30 do not even have an office. The filtration process will require expensive instrumentation, chemicals and labor.

"The days of volunteer-trustee labor are closing," says Levy.

Funding Availability

One of the major sources of available water and wastewater grants and low-interest loans for communities with populations of 10,000 and under is the Farmers Home Administration.

Major, but by no means satisfactory. . .

"There is no way the FmHA can meet all the needs associated with the Safe Drinking Water Act," says Maine's FmHA Daniel McAllister. And he adds, he does not know where the money will come from.

But McAllister appears hopeful, noting that although no one will know the outcome until the fall, the House has agreed to a $500 million loan package and a $300 million grant package for water and waste treatment. In fiscal year 1990 there were $330 million in water and waste water loans available nationwide and $200 million available nationwide in grants.

"Congress is realizing that someone has to fund the Safe Drinking Water Act; it looks to me that this is one area in the FmHA that will be increased and strengthened," says McAllister.

The future aside, McAllister notes that in the past the majority of the water and sewer monies went to sewer projects. But no more. More and more monies are going into water projects, says McAllister, so that now the distribution of funds is closer to fifty-fifty.

Maine currently receives approximately one percent of the national allocation, explains McAllister, adding that with good luck, it gets additional reserve and pool monies.

Last year, Maine received quite a bit of extra monies for upgrading water and sewer facilities. From October 1989 to date, it received approximately $12 million for low-interest loans (more than $9 million than it was allocated) and approximately $4 million in grants (about two times more than allocated).

McAllister notes that while the grant monies were used in the past to reduce the user rate to a reasonable $160 a year, under the new rules, the best FmHA will be able to do with its grant monies will be to keep the rates between $250 and $350 a year.

And, McAllister notes that while Maine will continue to pull from the reserves and pool (monies not used by other states), that practice is in jeopardy under the Rural Economic Development bill now before Congress. If it passes, Maine could have a sharp reduction in its water and sewer monies due to the lack of pool and reserve funds.

Perhaps hardest hit will be the private water companies in Maine who have no access to the limited low-interest loans and grants from FmHA. Their customers could see their rates go as high as $600 a year as in the case of Winter Harbor and Andover.

Their option is to convert to a water district in order to become eligible for FmHA monies, says Levy. But that approach is predicated on the availability of FmHA grants for the purchase of their assets by the water districts, he says.

Another option, notes Levy, is for the private companies to gain tax-exempt financing through the Maine Public Utilities Finance Bank. Levy's Association currently has grant monies to set up that process.

Mitigating Rate Increases

To enable utilities to mitigate the rate shock, PUC's Grant Siwinski says the Commission is willing to look at a number of different plans to "phase in" the increases over a number of years.

One way is to wait until the project is complete and then seek a phased-in rate increase each year over a period of years.

Another is to structure the project over a period of years in a number of stages so that you go out for new bonds every year and structure the increases accordingly.

That appears to be what the Augusta Water District is doing to the 5,600 customers it serves in Augusta, Chelsea, Manchester and parts of Vassalboro and Winthrop, as it constructs a $14 million new system in three stages. Its customers face a doubling of their rates from $24 a quarter to $48 a quarter.

"To mitigate the shock," the District is raising the rates in three stages: 42 percent in 1990, 17 percent in 1991 and 32 percent in 1992.

Is It Needed

As Robert Sanders, a trustee of the Bethel Water District, which is seeking a waiver to the filtration rule, sees it the current requirements are but an indication of the changing sense of what is viewed as "appropriate."

It used to be we relied on a good source of water. Then came chlorination "to be sure." But even if the chlorination failed the source was "good enough," says Sanders.

"We have now gotten to the point where we don't rely on the source but rather the treatment," says Sanders.

"The surface water rule is asking for extra assurance. But it is hard to be sure that extra assurance is needed in very many places," he says.

"Does the public want to buy that much insurance?"

"How much is enough?" he asks.

"In many ways there is no real answer," he confesses.

"But it is sure costing a lot to trim the remaining risk. We are buying into an area of diminishing returns," he concludes.

Chris Branch, director of the Public Works Department for the City of Lewiston, echoes Sanders comments, when he quotes a news article in which the Environmental Protection Agency rated Maine water as number one in the nation.

"The number of problems we have in Maine is extremely small, says Branch, who is also seeking a waiver from the filtration rule.

"I think it is a waste of money; regretfully we need to comply," says Branch.

Filtration requirements aside, most interviewed for this article agreed that the rules have gotten them to address some areas that needed to be addressed. In Dover-Foxcroft, it was the replacement of an old transmission main, in Bethel it has been to upgrade its chlorinator system, in Lewiston it will be a joint outflow pipe with neighboring Auburn.

Needed. Necessary. Or not. All agree, the days of cheap public water in Maine are over. The days of more sophisticated treatment and personnel are beginning, as Maine follows the nation.