Small Public Drinking Water Systems Fulfilling Requirements from 2008 Session, Enrolled Substitute House Bill 2765

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Small Public Drinking Water Systems Fulfilling Requirements from 2008 Session, Enrolled Substitute House Bill 2765 Report to the Legislature Small Public Drinking Water Systems Fulfilling Requirements from 2008 Session, Enrolled Substitute House Bill 2765 July 2009 DOH 331-437 Report to the Legislature Small Public Drinking Water Systems Fulfilling Requirements from 2008 Session, Enrolled Substitute House Bill 2765 July 2009 For more information or additional copies of this report contact: Constituent Services Section Office of Drinking Water Department of Health P. O. Box 47822 Olympia, WA 98504-7822 Phone: 360-236-3164 or 1-800-521-0323 FAX: 360-236-2252 Mary C. Selecky Secretary of Health Denise Addotta Clifford Director, Office of Drinking Water The Department of Health is an equal opportunity agency. For people with disabilities, this document is available on request in other formats. To submit a request, please call 1-800-525-0127 (TTY 1-800-833-6388). For additional copies of this publication, call 1-800-521-0323. This and other publications are available at http://www.doh.wa.gov/ehp/dw Contents Executive Summary...........................................................................................................1 Background ........................................................................................................................5 Regulatory framework 6 Where people get their water .....................................................................................................7 Recent trends in the number of public water systems................................................................8 Ownership of small water systems ............................................................................................9 Regulatory role of the Utilities and Transportation Commission............................................10 Compliance issues for small water systems 11 More violations seen in privately owned water systems .................................................. 11 Compliance and Group B public water systems............................................................... 11 Satellite management of small water systems 12 Limitations of the satellite management program ............................................................ 12 Satellite management agencies and Group B water systems............................................ 13 Policy Analysis and Recommendations .........................................................................14 Reduce the growth of public water systems 15 Ensure water systems have an ownership structure that positions them for success 17 Improve department oversight of financial health and align resources to assist water systems in need 19 Rates and Oversight Challenges ....................................................................................... 19 Create a new tool that ranks water system capacity ......................................................... 20 Evaluate new ways to promote financial awareness......................................................... 20 Link third-party financial assistance with capacity assessment score .............................. 21 Evaluate the feasibility of requiring financial indicators in consumer confidence reports22 Propose to allow limited principal forgiveness for DWSRF loans................................... 22 Develop a more targeted, focused approach to compliance ............................................. 23 Future considerations 24 Small Systems not paying their “fair share”..................................................................... 24 Strengthen the existing legal framework for addressing failing water systems................ 24 Appendices .......................................................................................................................28 Appendix A: Sample communities that would benefit from consolidation 28 Woodland Mobile Home Park and Woodland Foursquare Church, Clark County .................29 Bar Development and neighboring water systems, Douglas County ......................................31 Eltopia Water Association, Franklin County...........................................................................32 South Keyport Heights, Kitsap County ...................................................................................34 Bertrand Creek and Northwood areas, Whatcom County .......................................................35 Appendix B: Potential Water System Acquisition and Rehabilitation Program Projects 38 Appendix C: Issues affecting the number of water systems 42 Appendix D: Section 2009 of Engrossed Substitute House Bill 2765 46 Executive Summary Since 2003, the Washington State Legislature has appropriated more than $18 million toward failing small water systems to address urgent health and safety needs. To seek recommendations on how to prevent this need for state intervention, the 2008 Legislature directed the Department of Health (the department) to “conduct a statewide review of small public drinking water systems that have or may in the future require significant state resources to resolve urgent threats to public health and safety.” The Environmental Protection Agency (EPA) defines small water systems as those water systems that supply drinking water to fewer than 1,000 households. These systems face many technical, managerial, and financial challenges that affect their capacity to provide safe drinking water to their customers: Technical Compared with larger water systems, small water systems have more water quality violations and are more likely to fail to properly monitor for contaminants, make timely repairs, or replace faulty materials. This can lead to poor water quality, water system unreliability, and failing water system infrastructure, all of which can pose significant public health risks to their customers. Managerial Water system owners and board members of small water associations often do not fully understand their responsibilities to ensure the safe and reliable delivery of drinking water to their customers. Financial The most pressing problem for small water systems is financial viability. Their smaller rate base puts them at a significant financial disadvantage. They must bear relatively higher per-capita costs to meet regulatory requirements and to maintain infrastructure, because fewer customers share the expenses. Understanding the inherent challenges facing small water systems, the policy direction from the Legislature and State Board of Health over the past 30 years has been to: • Limit the creation of new water systems whenever possible. • Direct new water system applicants to a satellite management agency to own or operate the newly created water system. Small Public Drinking Water Systems 1 To improve state oversight of small water systems, the department proposes building upon the past and making the following changes to state policy, State Board of Health regulations, and agency practices: Reduce the growth of small public water systems. • The department recommends that the legislature amend chapters 70.119A and 43.20, Revised Code of Washington (RCW), to require new water system developers to first request service from an existing utility that serves the area before seeking approval to create a new Group A community water system. The department would approve a new water system only if an existing water system could not provide service. Ensure new water systems have an ownership structure that positions them for success. • The department recommends that the legislature amend RCW 70.119A.060, RCW 70.119A.110, and RCW 70.116.134 to require all new Group A community water systems to be owned by a satellite management agency, if one is available. If a satellite management agency is not available, require a public entity to own the new water system. • The department recommends that the legislature amend RCW 70.119A.060 and RCW 70.116.134 to eliminate satellite management agency requirements for Group B (water systems with fewer than 14 connections) and Group A non-community water systems. • The department recommends that the legislature increase funding for the Water System Acquisition and Rehabilitation Program. Funding provided through this program helps small, troubled systems consolidate with larger, well-operated municipal water systems. Improve department oversight of the financial health of water systems, and align resources to assist water systems in need. • The department recommends that the State Board of Health amend chapter 246-290 WAC to require water systems to include financial viability indicators in their annual consumer confidence reports. • The department recommends that the legislature, the department, and Utilities and Transportation Commission (UTC) evaluate potential changes by researching other states’ regulatory oversight of rate setting for water systems. • The department will create a new financial capacity assessment tool to evaluate water systems’ technical, managerial, and financial capacity. • The department will modify the water system planning program to help small water systems improve their financial viability. • The department will expand and improve delivery of financial technical assistance through third-party providers. • The department will amend chapter 246-296 WAC to allow limited principal forgiveness for some Drinking Water State Revolving Fund loans. 2 Small Public Drinking Water Systems Future Considerations The department recommends that the legislature amend RCW 70.119A.110 to increase the base fee for water systems to obtain an operating permit that would includes a
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