Financing Strategies for Small Systems

The financing demands and economic burdens of complying with the requirements of the 1986 amendments to the Safe Drinking Water Act will be the greatest and most difficult to overcome for water systems serving populations of fewer than 10,000 people. The unit cost of compliance will be dramatically higher for small systems than that for larger systems, and small systems will have to deal with "rate shock," financing plans of marginal feasibility, and limited access to capital markets. Creative new measures must be developed to furnish the needed capital to small water utilities. Models for these efforts include local initiatives in the form of mergers and joint action and state initiatives that include pooling of debt financing, credit support, and outright subsidies.