Consolidation

Bruce Florquist
Director of Public Works
City of Rawlins, Wyoming
Member, APWA Water Resources Management Committee

It should come as no surprise to anyone that water and wastewater systems are moving towards consolidation to create larger and more cost-effective systems. This movement has taken place in the last fifty years with everything from department stores, to hardware stores, to utilities. Probably the most forgotten example of consolidation is the movement from small, sometimes one-room schools, to larger, more regional school systems. Call it consolidation, regionalization, cooperation, or restructuring; the results are systems that are operated to maintain a level of service without a large increase in costs to the consumers.

In the fall of 2002 EPA's Office of Ground Water/Drinking Water, through its National Drinking Water Advisory Council (NDWAC), assembled a work group to better define affordability issues and options for small systems. The report on that endeavor was released in July 2003. During those long, frequent and sometimes acrimonious deliberations, the issue of consolidation was frequently addressed. In the final report, "Recommendations of the National Drinking Water Advisory Council to U.S. EPA on its National Small Systems Affordability Criteria, July 2003," the issue of "cooperation" was discussed in detail under Section 4, System-Level Strategies for Addressing Affordability Challenges. That discussion outlined both the drivers and barriers to cooperation. Common drivers included such items as increased technical requirements for systems and operators, common interests of systems within a watershed as it relates to planning and regulatory oversight, and regional problems with drought, pollution or other water supply issues. Barriers included the desire for independence, lack of funding for planning and capital investment, geographical barriers, and land use factors.

Jim Taft, formerly of the EPA Office of Ground Water/Drinking Water, and now executive director of the Association of State Drinking Water Administrators, says, "Consolidation is not a panacea, and is not possible in all instances and places." He also said, "Consolidation needs a champion or champions—folks who can put in the time to overcome the problems that arise. There needs to be a champion who helps make it happen."

Blanca Surgeon, a technical assistance provider and trainer with the Rural Community Assistance Program in New Mexico, and a member of both the working group and NDWAC, says there is currently a big push in New Mexico (for consolidation and cooperation) because of the lingering drought. Various agencies in the state are working toward more collaboration in planning and management. The New Mexico State Engineer's Office, which oversees water rights in the state, will allow small systems to gain more control over the water they use if they plan together with other systems and stakeholders. Because of the remote nature of many of the small systems in New Mexico, Surgeon says that physical interconnections are frequently not feasible, but they have devised a new program entitled "Geographic Collaborative Efforts," which is self-explanatory and avoids the terms regionalization or consolidation. She says, "The hardest problem is the groundwork that has to be done to get several entities and community leaders to see collaboration as a benefit to their communities. In addition, because of the initial capital expense, regional projects often have to be completed in phases and locals are concerned over who gets built first."

In a dissenting opinion to the EPA work group's report, the National Rural Water Association wrote, "EPA's authority to form consolidation policy is limited under the SDWA (Safe Drinking Water Act) to the provisions in the SRF, enforcement and variance sections. Policy recommendations outside the limited federal scope should be resisted." Further in their dissent, they wrote, "Communities will choose to consolidate when it is in their self-interest (when it makes economic sense)."

Notwithstanding NRWA's fervent defense of small systems, some states have made significant strides in implementing cooperation and consolidation efforts among small systems. Pennsylvania, for instance, which has a strong program to promote cooperation, has seen the total number of small systems grow by 14 percent between 1994 and 2001; yet the number of consolidated systems increased by 72 percent. During that time, stand-alone small systems increased by only 7 percent.

Kentucky, also, has an outstanding program to foster cooperation and consolidation. Donna Marlin, Drinking Water Branch Manager for the Kentucky DEQ, said, "State laws allow water systems to take innovative approaches." For instance, water districts can form third-party commissions. The Logan-Todd Regional Water Commission, which includes Logan, Todd, and Christian Counties, incorporated twelve independent water systems to develop a 10 MGD water system that takes water from the Cumberland River and distributes it to its members at wholesale prices. Each system maintains operational control for distribution within its service area.

Consolidation efforts are never easy and frequently unsuccessful. A vote on November 4, 2003 to pass a $5.7 million bond to extend Great Falls, Montana water and sewer to residents in the Upper and Lower River Road area failed. The district included approximately 400 properties including five mobile home parks. In an article in the Great Falls Tribune (Tuesday, October 21, 2003), Sonja Lee reported that some residents and park owners felt that if the bond issue passed, some of the parks would be forced to close.

There are success stories, however. In November, the City of Rawlins, Wyoming completed a connection to a new water tank built by the Town of Sinclair, Wyoming. This project, which was the final phase of a nine-year effort to upgrade the City of Rawlins Water Supply, included a complex agreement between the City of Rawlins, the Town of Sinclair, the Sinclair Refinery, and the Wyoming Water Development Commission. The project provides treated water to the Town of Sinclair at wholesale and in exchange for senior water rights on the North Platte River. For years the Town of Sinclair had been supplied by the Sinclair Refinery that operated the town's pump station, treatment plant and distribution system. The treatment plant was outdated and unable to meet water quality standards, so the town of approximately 500 was faced with either building a new and very expensive treatment system or obtaining an alternate water supply. Rawlins was in the process of completing a new pre-treatment plant and in the design phase of a new 16-mile pipeline from the North Platte River when it was approached by the Town of Sinclair to work out a cooperative agreement to provide water to the town. The connection of the new treated water line to the Sinclair tank and delivery of water to that tank completed a process that all parties hailed as beneficial and a precedent-setting achievement for Wyoming water development. This agreement had the added benefit of preserving very early and valuable water rights for the Upper North Platte Valley region of Wyoming.

As stricter requirements on water and wastewater systems are implemented, consolidation and cooperation efforts are expected to grow. This can be accomplished in many ways. The spectrum of options is limited only by the imagination and motivation of the parties involved.

Cooperative strategies as described above, physical consolidation and connection, privatization and other means are explored and used for systems struggling to meet regulations and maintain viable and affordable systems for their customers.

At times, unexpected outside forces can require consolidation or cooperative efforts. Many certified system operators are members of the National Guard or the Reserves. If these individuals are called up, they must report to active duty, which can leave some small systems without a properly certified operator. When this happens, other systems are pressed to provide support with certified operators.

As it is with many of the other examples, water and sewer utilities are increasingly influenced by the economy of scale. The principal driving force in most cases is more and stricter environmental regulations. In the final analysis, the determining factor is almost always economics.

Bruce Florquist is a member of APWA's Water Resources Management Committee and a member of EPA's National Drinking Water Advisory Council. He can be reached at (307) 328-4599 or at brucef@trib.com.