2006 Community Water 

System Survey 

Volume I: 

Overview
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 Fortner of the Gaffney Board of Public Works

Office of Water (4606M)

EPA 815-R-09-001

February 2009

www.epa.gov/safewater
2006 Community Water 

System Survey

Volume I: Overview

Community Water System Survey Report: Volume I i

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
ii Community Water System Survey Report: Volume I

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 iii

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.

Community Water System Survey Report: Volume I v

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 
vi Community Water System Survey Report: Volume I

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 nonresidential rate structures can be found in Volume II, Tables 71 and 72.) 
Community Water System Survey Report: Volume I vii

• 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.
viii Community Water System Survey Report: Volume I
Community Water System Survey Report: Volume I 1

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 

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 

Storage tank.
2 Community Water System Survey Report: Volume I

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

Population Served

<500 501-3,300 3,301-

10,000

10,001-

100,000

More Than 

100,000 Total

Sample selected 362 238 389 646 575 2,210

Inactive systems 7 1 2 5 2 17

Refusals and invalid 

responses

13 5 50 85 66 219

Received 340 231 154 292 297 1,314

Response rate 94% 97% 40% 45% 52% 59%

Chapter 1: Introduction
Community Water System Survey Report: Volume I 3

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. 

Chapter 1: Introduction
4 Community Water System Survey Report: Volume I

EPA is required by SDWA to 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 upto-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.) 

Chapter 1: Introduction
Community Water System Survey Report: Volume I 5

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. 

Chapter 1: Introduction
6 Community Water System Survey Report: Volume I
Community Water System Survey Report: Volume I 7

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 

(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 

A mountain point intake. potential cost impacts of drinking water regulations. 

An open reservoir.
8 Community Water System Survey Report: Volume I

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 

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. 

73.5%

8.9%

17.6%

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 

Ground

Purchased

Community Water Systems by Primary Water Source

Surface

29.4%

28.6% 17.7%

1.3%

23.1%

Ground

Lakes

Streams

GWUDI

Purchased

Percentage of Water from Each Source

29.4%

1.3%

Water Systems by Ownership

49.4% 50.6%

Public Private

Chapter 2: Overview of System Operations and Finance
Community Water System Survey Report: Volume I 9

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. 

29.4%

1.3%

Percentage of Private Community Water Systems, by Type

50.6%

22.3%

38.4%

39.4%

Private for-Profit Private Not-for-Profit

Ancillary

System Ownership by Primary Water Source

0 20 40 60 80

Percentage of Systems

Ground Surface Purchased

Public Private for-Profit

Private Not-for-Profit Ancillary

15,944

4,457

6,604

3,272

206

5,630

100

9,903

299

588

650

2,123

268

System Ownership by Population Served

0 20 40 60 80 100

Percentage of Systems

Public Private for-Profit

Private Not-for-Profit Ancillary

7,353

3,179

6,894

9,216

9,775

1,661

1,647

388

3,617

299

637

12

3,595

207

129

507

60

7

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Chapter 2: Overview of System Operations and Finance
10 Community Water System Survey Report: Volume I

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 

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 

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.

Systems, Connections, and Population

Percentage

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Systems Connections Population

54

2 1

27

8

4

9 7 7 8

36

30

1

46

58

0 20 40 60

Total Water Delivered by Ownership

91.4%

6.8%

1.6%

0.2%

Public Private for-Profit

Private Not-for-Profit Ancillary

Chapter 2: Overview of System Operations and Finance
Community Water System Survey Report: Volume I 11

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 

29.4%

1.3%

Retail Connections

Residential Nonresidential

92.6%

7.4%

29.4%

1.3%

Retail Deliveries (Excludes Wholesale Deliveries)

Residential Nonresidential

69.2%

30.8%

Chapter 2: Overview of System Operations and Finance
12 Community Water System Survey Report: Volume I

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 

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) 21,118 138,572 746,026 3,120,594 33,295,058

Design capacity (gallons) 177,371 776,687 2,130,543 7,900,726 75,463,525

Peak daily production (gallons) 47,299 314,152 1,416,734 5,978,608 56,844,615

Average ratio of design to peak 

capacity 5.7 3.1 1.6 1.3 1.2

Finished water storage capacity 

(gallons) 72,756 470,970 963,505 4,090,698 23,266,323

Average daily deliveries, excluding 

unaccounted for water (gallons) 20,231 122,042 643,359 2,722,469 29,529,433

Average ratio of unaccounted for 

water to total daily deliveries 0.05 0.09 0.10 0.10 0.09

Primarily surface water

Average daily production (gallons) 30,572 237,804 1,002,420 4,651,544 56,631,910

Design capacity (gallons) 146,807 866,530 2,748,295 10,715,276 121,423,768

Peak daily production (gallons) 68,679 451,076 1,692,247 7,459,213 92,289,108

Average ratio of design to peak 

capacity 2.9 2.1 1.7 1.5 1.4

Finished water storage capacity 

(gallons) 413,665 526,044 1,664,389 5,680,280 43,096,379

Average daily deliveries, excluding 

unaccounted for water (gallons) 27,421 222,470 899,020 3,952,522 48,431,566

Average ratio of unaccounted for 

water to total daily deliveries 0.10 0.13 0.15 0.11 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.

Chapter 2: Overview of System Operations and Finance
Community Water System Survey Report: Volume I 13

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-dailyproduction 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 nonresidential 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 

Ratio of Peak to Average Daily Production, by 

Ownership

Population 

Served

Publicly Owned 

Systems

Privately Owned 

Systems

Mean Median Mean Median

<100 2.75 2.02 2.61 1.67

101–500 2.47 2.00 2.13 1.72

501–3,300 2.28 2.00 2.04 1.98

3,301–10,000 1.86 1.75 1.76 1.62

10,001–50,000 2.09 1.74 1.45 1.38

50,001–100,000 1.69 1.61 1.60 1.37

100,001–500,000 1.72 1.58 1.36 1.30

>500,000 1.62 1.58 1.47 1.39

Residential Deliveries as Percentage of Total 

Deliveries

Population 

Served

Publicly Owned 

Systems

Privately Owned 

Systems

Mean Median Mean Median

<100 91% 99% 97% 100%

101–500 87% 97% 96% 100%

501–3,300 78% 86% 88% 94%

3,301–10,000 61% 58% 73% 76%

10,001–50,000 63% 65% 66% 74%

50,001–100,000 61% 64% 39% 38%

100,001–500,000 53% 52% 40% 37%

>500,000 43% 42% 49% 50%

Chapter 2: Overview of System Operations and Finance
14 Community Water System Survey Report: Volume I

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 filtration 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.

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 

Annual Water Delivered per Residential 

Connection (Gallons)

Population Served Mean Median

<100 97,939 70,759

101–500 94,475 73,782

501–3,300 96,953 82,291

3,301–10,000 87,227 81,387

10,001–50,000 88,492 76,798

50,001–100,000 111,670 101,538

100,001–500,000 114,585 104,898

>500,000 129,124 103,770

All 95,623 76,943

Percentage of Systems Treating Water 

of Those That Do Not Purchase 100% 

of Water

Chapter 2: Overview of System Operations and Finance

An old wood stave pipe next to a current working pipe.

100% Ground Water Systems 80.2%

100% Surface Water 100.0%

Mixed Source Systems 96.2%

All Systems 83.0%
Community Water System Survey Report: Volume I 15

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.) 

Treatment Practices of Systems 

Water systems use many different practices to 

achieve their treatment objectives, including chemical 

addition, coagulation/flocculation, settling and 

sedimentation, filtration, 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 filtration 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 filtration; 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 

Average Number of Entry Points per System

Population 

Served

Primarily 

Ground Water 

Systems

Primarily 

Surface Water 

Systems

Mean Median Mean Median

<501 1.2 1.0 1.1 1.0

501–3,300 1.7 1.0 1.2 1.0

3,301–10,000 2.2 2.0 1.2 1.0

10,001–100,000 4.2 3.0 1.5 1.0

>100,000 14.7 6.0 2.6 2.0

Chapter 2: Overview of System Operations and Finance

Filters in a treatment plant.
16 Community Water System Survey Report: Volume I

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

Mean number of treatment plants per system 1.1 1.7 2.1 3.8 9.5

Percent of systems not providing treatment 29% 11% 7% 0% 8%

Treatment practices of systems that provide treatment

Disinfection with no additional treatment 53% 48% 49% 33% 33%

Other chemical addition 13% 28% 28% 33% 26%

Ion exchange, activated alumina, aeration 13% 11% 10% 31% 17%

Other filtration (not including direct or 

conventional) 17% 15% 21% 30% 40%

Direct Filtration 0% 1% 0% 8% 3%

Conventional filtration 1% 2% 5% 1% 18%

Membranes 1% 1% 0% 1% 0%

Other 4% 1% 0% 3% 9%

100-percent surface water systems

Mean number of treatment plants per system 1.1 1.1 1.1 1.2 1.6

Percent of systems not providing treatment 0% 0% 0% 0% 0%

Treatment practices of systems that provide treatment

Disinfection with no additional treatment 25% 5% 0% 2% 0%

Other chemical addition 1% 7% 10% 2% 4%

Ion exchange, activated alumina, aeration 0% 0% 2% 2% 0%

Other filtration (not including direct or 

conventional) 37% 28% 12% 5% 3%

Direct filtration 12% 15% 22% 15% 16%

Conventional filtration 21% 40% 52% 78% 86%

Membranes 5% 7% 6% 1% 3%

Other 0% 0% 0% 0% 0%

Chapter 2: Overview of System Operations and Finance
Community Water System Survey Report: Volume I 17

filtration similar to the schematic below. A conventional 

filtration plant may use many steps, including predisinfection, flocculation, sedimentation, filtration, 

post-disinfection, and use of a clearwell to provide 

contact time for the disinfectant. In the schematic 

shown, the plant disinfects with chlorine after filtration. 

Other conventional filtration 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.)

Percentage of Plants using Various Treatment Schemes

Ground 

Water 

Plants

Surface 

Water 

Plants

Disinfection with no additional treatment 48% 6%

Other chemical addition 23% 6%

Ion exchange, activated alumina, 

aeration 10% 1%

Other filtration (not direct or 

conventional) 13% 17%

Direct filtration 1% 16%

Conventional filtration (with and without 

softening) 1% 51%

Membranes 1% 4%

Other 3% 0%

Chapter 2: Overview of System Operations and Finance

Surface

Water

Source

Coagulation/

Flocculation

Sedimentation Filtration Distribution System

Cl2
18 Community Water System Survey Report: Volume I

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 

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. 

Chapter 2: Overview of System Operations and Finance

Percentage of Treatment Plants with Each 

Treatment Objective

Treatment Objective

Ground 

Water 

Plants

Surface 

Water 

Plants

Algae control 1% 12%

Corrosion control 18% 42%

Primary disinfection 90% 95%

Secondary disinfection 11% 45%

Disinfectant byproduct 

control 3% 21%

Dechlorination 0% 0%

Oxidation 8% 19%

Iron removal 24% 19%

Manganese removal 13% 21%

Taste/odor control 7% 27%

TOC removal 1% 27%

Particulate/turbidity 

removal 6% 88%

Softening (hardness 

removal) 5% 6%

Recarbonation 0% 2%

Organic chemical 

contaminant removal 

(e.g., VOCs, pesticides)

2% 7%

Inorganic chemical 

contaminant removal 

(e.g., arsenic)

4% 4%

Radionuclides 

contaminant removal 1% 1%

Security 0% 0%

Mussel control 0% 3%

Fluoridation 13% 36%

Other 1% 3%
Community Water System Survey Report: Volume I 19

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 

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.)

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 

< 6 Inches

10 - 24 Inches

6 - 10 Inches

> 24 Inches

Distribution Mains by Pipe Diameter

38.9%

49.5%

10.2%

1.4%

Miles of Pipe Replaced Annually during Previous 5 Years as a 

Percentage of Total Miles of Existing Pipe

Population 

Served

Publicly Owned Systems Privately Owned Systems

Mean Median Mean Median

<100 0.0% 0.0% 0.4% 0.0%

101–500 0.9% 0.0% 0.7% 0.0%

501–3,300 0.5% 0.0% 0.3% 0.0%

3,301–10,000 1.5% 0.3% 1.1% 0.2%

10,001–50,000 0.7% 0.2% 0.1% 0.0%

50,001–100,000 0.5% 0.2% 0.4% 0.0%

100,001–500,000 0.4% 0.2% 0.1% 0.1%

>500,000 0.3% 0.2% 0.4% 0.1%

Population Served per Mile of Existing Pipe

Population 

Served

Publicly Owned Systems Privately Owned Systems

Mean Median Mean Median

<100 87 56 118 98

101–500 106 79 227 185

501–3,300 123 114 182 125

3,301–10,000 166 133 155 104

10,001–50,000 212 179 196 127

50,001–100,000 230 198 273 195

100,001–500,000 266 210 250 206

>500,000 426 289 258 216

Chapter 2: Overview of System Operations and Finance
20 Community Water System Survey Report: Volume I

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. Waterrelated 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 waterrelated 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 

Chapter 2: Overview of System Operations and Finance

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 

Water System Annual Revenue

0 20 40 60 80 100

$39.52B

$7.58B

$4.31B

$0.04B

$2.42B

$0.25B

$0.06B

$0.00B

Public Private 

for-Profit

Private 

Not-for-Profit

Ancillary

Water Sales Other Water Related

Percentage of Revenue
Community Water System Survey Report: Volume I 21

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 differentsized 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 

Percentage Distribution of Water Sales Revenue by Customer Class

(Excludes Ancillary Systems)

Customer Type <501 501– 

3,300

3,301–

10,000

10,001–

100,000 >100,000 All Sizes

Residential 96.2% 87.8% 73.5% 72.9% 57.3% 88.8%

Nonresidential 2.8% 11.4% 16.9% 19.4% 26.9% 8.8%

Wholesale 0.9% 0.8% 9.6% 7.7% 15.8% 2.4%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Average Annual Water System Revenue

Publicly 

owned 

systems

Privately 

owned for 

profit

Privately 

owned not 

for profit

Ancillary

<501 $46,325 $18,377 $17,646 $2,840

501–3,300 $477,446 $143,831 $418,825 $49,976

3,301–10,000 $523,298 $332,134 $751,584

10,001–

100,000 $3,341,898 $4,956,673 $2,848,003

>100,000 $41,419,524 $59,932,110 $45,989,681

Chapter 2: Overview of System Operations and Finance
22 Community Water System Survey Report: Volume I

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 

3 Based on the estimated national median household 

income of $50,007 (U.S. Census Bureau, 2005-2007 American 

Community Survey.)

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 

Chapter 2: Overview of System Operations and Finance

Median Revenue per Connection, Excluding Ancillary

Population Served

Residential Nonresidential Residential Nonresidential

Publicly Owned Systems Privately Owned Systems

<501 $285 $365 $342 $360

501–3,300 $283 $836 $397 $2,057

3,301–10,000 $264 $1,000 $423 $730

10,001–100,000 $265 $1,280 $366 $1,588

>100,000 $305 $1,640 $379 $2,321

Piping supported by ropes and jacks.
Community Water System Survey Report: Volume I 23

Average Revenue per Thousand Gallons

<501 501-3,300 3,301-10,000 10,001-100,000 >100,000

Public

0.00

10.00

2.00

4.00

6.00

8.00

Population Served

Residential Nonresidential Wholesale

<501 501-3,300 3,301-10,000 10,001-100,000 >100,000

Private For-Profit

0.00

10.00

2.00

4.00

6.00

8.00

4.8

2.6

4.9

2.6

6.5

5.3

3.0

4.6

8.4

5.3

3.3

5.5

4.0

2.5

Private Not-for-Profit

0.00

10.00

2.00

4.00

6.00

8.00

2.9

9.4

1.1

6.6

3.9

6.4

5.2

4.0

5.7

4.4 4.2 4.4 4.7

2.0

<501 501-3,300 3,301-10,000 10,001-100,000 >100,000

Ancillary

0.00

10.00

2.00

4.00

6.00

8.00

<501 501-3,300 3,301-10,000 10,001-100,000 >100,000

1.0 1.6

Dollars

3.8 4.3 4.0 4.4

2.0

3.6 3.1

1.6

3.5 2.9

2.2 2.8 2.7

1.7

Chapter 2: Overview of System Operations and Finance
24 Community Water System Survey Report: Volume I

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 

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 

Chapter 2: Overview of System Operations and Finance

Percentage Use of Residential Rate Structures

Rate Structure <501 501–

3,300

3,301–

10,000

10,001–

100,000 >100,000 All

Uniform rate 28% 53% 39% 39% 30% 36%

Declining block 

rate

4% 19% 13% 15% 23% 10%

Increasing 

block rate

11% 14% 14% 25% 27% 13%

Seasonal rate 0% 0% 0% 0% 5% 0%

Separate flat 

fee

18% 17% 17% 18% 20% 17%

Annual 

connection fee

0% 0% 4% 6% 3% 1%

Combined flat 

fee

28% 1% 2% 4% 2% 16%

Other 8% 8% 2% 3% 9% 7%

Operating Expenses Debt Service

Other

Total Expenses

60.3% 16.8%

22.9%
Community Water System Survey Report: Volume I 25

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 

(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 

Chapter 2: Overview of System Operations and Finance

Operating Expenses

17.0%

0.5%

58.9%

18.6%

4.9%

Purchased Water Security

Other Operations (e.g., labor and supplies) Depreciation

Income Taxes and Other Payments

Percentage of Expenses

System Expenses (Dollars in Millions)

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Operating Expenses Debt Service Other

$574

$55

$311

$2,305

$416

$440

$2,423

$507

$620

$9,437

$1,842

$3,511

$18,121

$6,314

$7,593

0 20 40 60 80 100

Expense per Thousand Gallons by Expense Component

Dollars

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

$18,121

Population Served

Operating Expenses Debt Service Other

4.48

0.50

0.39

3.58

0.85

0.46

2.69

0.68

0.68

2.37

0.56

0.76

2.07

0.56

0.95

2.76

0.22

0.58

2.87

0.37

0.17

2.91

0.29

0.27

2.40

0.72

0.44

2.16

0.39

0.82

Public Private

*Graphs by System Ownership

1.00

2.00

3.00

4.00

5.00

6.00

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000
26 Community Water System Survey Report: Volume I

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 may be 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 

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 

Chapter 2: Overview of System Operations and Finance

Average System Revenue, Expenses, and Net Income

Revenue and Expense 

Category Public Private Ancillary

Revenue

a. Water Sales $1,455,670 $522,675 $19,398 

b. Fees $298,567 $22,279 $132 

c. Government $45,476 $2,261 $0 

d. Total (a+b+c) $1,799,713 $547,216 $19,530 

Expenses

e. General Operations $1,048,470 $297,401 $13,079 

f. Depreciation $261,115 $68,867 $525 

g. Interest $194,666 $51,740 $1,037 

h. Taxes $64,681 $16,541 $118 

i. Total (e+f+g+h) $1,568,933 $434,550 $14,759 

Net Income

j. Sales only (a-i) ($113,263) $88,125 $4,639 

k. Sales and Fees (a+b-i) $185,304 $110,405 $4,771 

l. Sales, Fees, & 

Government (d-i) $230,780 $112,666 $4,771 
Community Water System Survey Report: Volume I 27

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 

Chapter 2: Overview of System Operations and Finance

Median Ratio of Revenue and Expense

 Revenue Included

Population Served 

<501 501– 

3,300

3,301–

10,000

10,001–

100,000 >100,000

Public

Sales (a/i) 1.12 1.05 0.96 1.02 0.99

Sales and Fees 

((a+b)/i) 1.24 1.14 1.08 1.18 1.15

Sales, Fees, & 

Government (d/i) 1.28 1.17 1.10 1.20 1.15

Private 

Sales (a/i) 1.13 1.11 1.05 1.13 1.14

Sales and Fees 

((a+b)/i) 1.17 1.18 1.15 1.16 1.19

Sales, Fees, & 

Government (d/i) 1.17 1.18 1.15 1.16 1.19

Ancillary

Sales (a/i) 1.07 1.20

Sales and Fees 

((a+b)/i) 1.15 1.20

Sales, Fees, & 

Government (d/i) 1.15 1.20

Standpipe storage.
28 Community Water System Survey Report: Volume I

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.

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 >100,000

Public

Sales (a/i) 57.5% 58.5% 49.2% 55.2% 47.4%

Sales and Fees 

((a+b)/i) 68.2% 67.2% 62.5% 70.0% 72.3%

Sales, Fees, & 

Government (d/i) 75.1% 72.2% 64.7% 71.2% 73.3%

Private 

Sales (a/i) 61.0% 72.4% 56.0% 50.9% 91.3%

Sales and Fees 

((a+b)/i) 69.4% 83.2% 56.0% 50.9% 95.6%

Sales, Fees, & 

Government (d/i) 69.4% 83.2% 61.6% 50.9% 95.6%

Ancillary

Sales (a/i) 52.2% 100.0%

Sales and Fees 

((a+b)/i) 59.0% 100.0%

Sales, Fees, & 

Government (d/i) 59.0% 100.0%
Community Water System Survey Report: Volume I 29

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. 
30 Community Water System Survey Report: Volume I

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, 37 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 

Chapter 2: Overview of System Operations and Finance

Expansion Replacement

Compliance

Water Industry Capital Expenditures

52.6%

37.1%

10.3%

27.2%

42.8%

17.0%

11.9%

0.8%

41.0%

20.5%

14.4%

13.6%

9.4%

1.0%

1.2%

21.9%

43.9%

13.4%

14.0%

1.6%

4.0%

3.7%

22.1%

44.5%

5.6%

10.8%

4.9%

8.4%

Public Private for-Profit

Private Not-for-Profit Ancillary

Land Source

Transmission

& Distribution Treatment

Storage

Security

Other

Graphs by ownership

Type of Capital Expense
Community Water System Survey Report: Volume I 31

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.

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 0.0% 1.1% 0.3% 1.1% 1.6% 1.3%

Water source 15.5% 18.2% 3.4% 7.2% 8.2% 8.6%

Transmission and distribution 63.6% 47.6% 45.2% 49.7% 42.2% 44.9%

Treatment 12.8% 10.2% 34.0% 22.3% 27.2% 25.0%

Storage 7.4% 21.7% 13.0% 12.1% 6.2% 8.8%

Security 0.1% 0.0% 1.1% 0.4% 0.4% 0.4%

Other 0.6% 1.1% 3.0% 7.2% 14.2% 11.0%

Privately Owned Systems

Land 0.1% 0.7% 0.0% 0.6% 0.6% 0.5%

Water source 18.9% 24.4% 9.4% 12.3% 4.1% 9.3%

Transmission and distribution 45.1% 50.9% 51.6% 57.5% 60.6% 56.8%

Treatment 14.3% 12.2% 31.5% 7.7% 19.7% 18.3%

Storage 20.7% 10.3% 5.8% 16.5% 3.7% 7.8%

Security 0.8% 0.2% 1.1% 0.0% 3.4% 2.1%

Other 0.2% 1.3% 0.6% 5.5% 8.0% 5.4%
32 Community Water System Survey Report: Volume I

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. 

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 11.5% 6.1% 25.6% 53.7% 30.6% 34.0%

Equity or other funds from private investors 3.2% 16.6% 0.9% 0.7% 0.1% 1.7%

Borrowing from private sector sources 19.9% 6.5% 15.5% 16.7% 48.1% 33.6%

Department of Homeland Security grants 0.0% 0.1% 0.1% 0.4% 0.1% 0.2%

Other government grants 35.9% 17.0% 26.2% 9.1% 1.7% 7.4%

DWSRF principal repayment forgiveness 0.4% 2.9% 0.0% 0.0% 0.0% 0.2%

DWSRF loans 19.9% 29.3% 20.4% 9.5% 6.7% 10.5%

Other borrowing from public sector sources 8.5% 18.5% 6.5% 6.9% 9.9% 9.5%

Other 0.9% 3.1% 4.8% 3.0% 2.8% 2.9%

Privately Owned Systems

Current revenues 16.3% 25.4% a. 36.1% a. 14.4%

Equity or other funds from private investors 29.2% 24.4% a. 2.7% a. 9.7%

Borrowing from private sector sources 3.1% 11.4% a. 10.3% a. 10.6%

Department of Homeland Security grants 0.0% 0.0% a. 0.0% a. 0.0%

Other government grants 37.8% 14.7% a. 2.9% a. 5.4%

DWSRF principal repayment forgiveness 0.0% 0.0% a. 0.0% a. 0.0%

DWSRF loans 0.0% 0.1% a. 7.9% a. 27.6%

Other borrowing from public sector sources 4.5% 22.2% a. 32.9% a. 8.8%

Other 9.2% 1.8% a. 7.4% a. 23.5%

All Systems

Current revenues 12.4% 8.7% a. 52.9% a. 32.3%

Equity or other funds from private investors 7.9% 17.6% a. 0.8% a. 2.4%

Borrowing from private sector sources 16.9% 7.1% a. 16.4% a. 31.6%

Department of Homeland Security grants 0.0% 0.1% a. 0.4% a. 0.2%

Other government grants 36.2% 16.7% a. 8.8% a. 7.2%

DWSRF principal repayment forgiveness 0.3% 2.5% a. 0.0% a. 0.2%

DWSRF loans 16.3% 25.4% a. 9.4% a. 12.0%

Other borrowing from public sector sources 7.7% 19.0% a. 8.1% a. 9.5%

Other 2.4% 2.9% a. 3.2% a. 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.
Community Water System Survey Report: Volume I 33

Chapter 2: Overview of System Operations and Finance

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 

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 >100,000 Total

Publicly Owned Systems

Current revenues 63.7% 48.3% 74.5% 76.7% 62.0% 61.1%

Equity or other funds from private investors 0.3% 3.4% 8.8% 2.7% 2.5% 3.2%

Borrowing from private sector sources 12.2% 12.0% 23.9% 23.3% 40.3% 16.5%

Department of Homeland Security grants 0.0% 1.5% 2.8% 5.5% 5.7% 2.1%

Other government grants 35.8% 29.9% 28.5% 16.6% 16.3% 28.5%

DWSRF principal repayment forgiveness 0.2% 3.9% 0.0% 0.0% 0.0% 1.6%

DWSRF loans 16.4% 24.6% 19.2% 10.5% 14.1% 19.0%

Other borrowing from public sector sources 11.0% 7.2% 7.5% 10.2% 11.0% 8.9%

Other 4.5% 4.1% 10.7% 6.8% 7.8% 5.7%

Privately Owned Systems

Current revenues 70.7% 73.1% a. 53.0% a. 70.8%

Equity or other funds from private investors 12.4% 23.7% a. 3.2% a. 14.5%

Borrowing from private sector sources 2.6% 21.7% a. 11.7% a. 8.5%

Department of Homeland Security grants 0.0% 0.0% a. 0.0% a. 0.0%

Other government grants 6.5% 3.9% a. 20.6% a. 5.9%

DWSRF principal repayment forgiveness 0.0% 0.0% a. 0.0% a. 0.0%

DWSRF loans 0.0% 0.8% a. 9.7% a. 2.4%

Other borrowing from public sector sources 2.1% 7.9% a. 20.5% a. 4.2%

Other 12.0% 8.6% a. 3.2% a. 10.6%

All Systems

Current revenues 68.2% 55.0% a. 75.1% a. 64.9%

Equity or other funds from private investors 8.1% 9.0% a. 2.8% a. 7.7%

Borrowing from private sector sources 6.0% 14.6% a. 22.5% a. 13.4%

Department of Homeland Security grants 0.0% 1.1% a. 5.1% a. 1.3%

Other government grants 17.0% 22.8% a. 16.9% a. 19.6%

DWSRF principal repayment forgiveness 0.1% 2.8% a. 0.0% a. 1.0%

DWSRF loans 5.9% 18.1% a. 10.5% a. 12.5%

Other borrowing from public sector sources 5.3% 7.4% a. 10.9% a. 7.0%

Other 9.3% 5.3% a. 6.5% a. 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.
34 Community Water System Survey Report: Volume I

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 

Chapter 2: Overview of System Operations and Finance
Community Water System Survey Report: Volume I 35

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 >100,000 Total

Publicly Owned Systems

Current revenues 49.2% 36.9% 54.5% 64.5% 52.2% 47.4%

Equity or other funds from private investors 0.3% 3.0% 1.0% 0.6% 0.5% 1.6%

Borrowing from private sector sources 9.6% 11.3% 13.2% 16.9% 29.7% 12.4%

Department of Homeland Security grants 0.0% 0.5% 0.0% 0.3% 0.9% 0.3%

Other government grants 25.7% 18.6% 13.5% 5.4% 2.6% 17.3%

DWSRF principal repayment forgiveness 0.1% 0.7% 0.0% 0.0% 0.0% 0.3%

DWSRF loans 9.5% 19.6% 7.8% 7.2% 5.5% 13.0%

Other borrowing from public sector sources 4.6% 7.2% 3.6% 4.2% 5.2% 5.5%

Other 1.1% 2.2% 6.2% 0.9% 3.4% 2.3%

Privately Owned Systems

Current revenues 68.0% 50.4% a. 51.2% a. 61.9%

Equity or other funds from private investors 11.8% 17.6% a. 4.1% a. 12.6%

Borrowing from private sector sources 1.7% 17.5% a. 8.3% a. 6.6%

Department of Homeland Security grants 0.0% 0.0% a. 0.0% a. 0.0%

Other government grants 5.8% 1.6% a. 3.1% a. 4.5%

DWSRF principal repayment forgiveness 0.0% 0.0% a. 0.0% a. 0.0%

DWSRF loans 0.0% 0.2% a. 9.1% a. 1.7%

Other borrowing from public sector sources 0.4% 5.3% a. 22.9% a. 2.2%

Other 12.3% 7.4% a. 1.5% a. 10.5%

All Systems

Current revenues 61.1% 40.7% a. 63.7% a. 53.2%

Equity or other funds from private investors 7.6% 7.1% a. 0.8% a. 6.0%

Borrowing from private sector sources 4.6% 13.0% a. 16.4% a. 10.1%

Department of Homeland Security grants 0.0% 0.4% a. 0.3% a. 0.2%

Other government grants 13.1% 13.8% a. 5.3% a. 12.2%

DWSRF principal repayment forgiveness 0.0% 0.5% a. 0.0% a. 0.2%

DWSRF loans 3.5% 14.1% a. 7.3% a. 8.5%

Other borrowing from public sector sources 1.9% 6.6% a. 5.3% a. 4.2%

Other 8.2% 3.7% a. 1.0% a. 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.
36 Community Water System Survey Report: Volume I

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 capitalintensive. 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 Systems

By Ownership

Public 24,847

Ancillary 9,554

Private 14,733

By Water Source

100% Ground 34,570

Other Ground 1,527

100% Surface 3,237

Other Surface 1,129

100% Purchased 7,823

Other Purchased 848

By System Size 

<501 26,642

501-3,300 13,421

3,301-10,000 4,564

10,001-100,000 3,928

>100,000 578
Community Water System Survey Report: Volume I 37

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 

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.)

Percentage of Water Systems with Access 

to Computers

0 20 40 60 80 100

Percentage of Water Systems

Ground Surface Purchased

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

77

100 99 100 99 98 94 90 87 90 94 96 9292

72

Percentage of Systems with Computers That Have

Internet Access

0 20 40 60 80 100

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Percentage of Systems

Population Served

High Speed Dial-Up

18 12

85 87 95 99

13

81

1 5

29.4%

1.3%

EPA

Water Associations No Preference

Department of Homeland Security

Other

Preferred Source of Security Information

8.9

30.7

42.8

8.2

3.4

A well behind a secure fence at a water system.
38 Community Water System Survey Report: Volume I

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 EPAsponsored 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

Security Training

0 20 40 60 80 100

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Public Private

Percentage of Systems

36

83 81

39

57

71

55

31 28

19

Percentage of Systems That Used EPA Security

Technology Product Guides

0 20 40 60 80 100

Percentage of Systems

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Public Private

10

31

23 21

6 10 6

19

54

10

Systems Reporting the Following Barriers to Enhancing Security

Barriers to Enhancing Security

Population Served

<501 501–3,300 3,301–

10,000

10,001–

100,000 >100,000

Lack of interest at the system, 

public, or rate board level 33.3% 44.7% 54.5% 58.4% 67.8%

Competing priorities 

(regulatory compliance, aging 

infrastructure, etc.)

51.2% 67.4% 62.6% 61.0% 53.4%

Lack of funding 35.5% 29.5% 13.5% 12.1% 8.3%

Lack of knowledge/guidance/

training material 18.8% 16.4% 21.6% 10.0% 5.1%

Other 36.3% 27.0% 26.5% 35.6% 37.9%

Chapter 3: New Topics and Trends
Community Water System Survey Report: Volume I 39

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, 

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 

0 10 20 30 40

Hourly Wage (in Dollars)

Average Hourly Wage of Full- and Part-Time

Employees

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Operator Administrative Manager

12

38

22 22

32

21 18

25

14 16

20

14 16 18

11

Type of Water Storage by Primary Water Source

Proportion of Systems

0.0 0.1 0.2 0.3 0.4 0.5

Ground Surface Purchased

 Partially or fully buried Ground level

 Elevated Hyropneumatic

 Standpipes Standpipes as surge tanks

 Other

.15

.01

.21

.08

.43

.39

.12

.01.01

.23

.07

.48

.52

.21

.01

.17

.10

.49

.29

0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

Average Storage Capacity Per Person

(Million Gallons Per Person)

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Ground Surface Purchased

Million Gallons Per Person

Chapter 3: New Topics and Trends
40 Community Water System Survey Report: Volume I

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 

Percentage of Systems with Storage Using Practices to Maintain 

Water Quality in Storage Vessels

Use any of

the listed

practices

Operational Other

modifications

to maintain

disinfectant

residual

Increase or

switch

disinfectant

residual

Mechanical

mixing

Inlet/outlet

modifications

Modeling

or other

detention time

evaluations

Longer

fill/draw

cycles to 

increase mixing

80

60

40

20

Percentage of Systems

0

Ground Surface Purchased

7 3 8 9

25

38

18

10

26

9

2 4 5

16 19

8

51 45

7

31 33

62

76

52

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Average Number of Pressure Zones and Booster

Disinfection Stations in the Distribution System

Pressure Zones Booster Disinfection Stations

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Pressure Zones and 

Booster Disinfection Stations

1.4

2.6

10.9

0.4

4.7

0.5

2.8

0.1

1.6

Chapter 3: New Topics and Trends
Community Water System Survey Report: Volume I 41

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 

0.0

1.0

2.0

3.0

4.0

5.0

Average Number of Losses of Pressure

below 20 PSI

Ground Surface Purchased

Main Pipeline Burst

Power Outage

Other

Fire

Average Number of Losses

1.0

0.2 0.2

0.0

3.2

0.2 1.1

0.0

2.7

0.0 0.2

0.0

Percentage of Systems that Flush Their

Distribution System Regularly

0 20 40 60 80 100

Percentage of Systems

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

55

70

87 87 85

Percentage of Distribution System That is

Flushed Regularly

0 20 40 60 80 100

Percentage of System

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

98

57

69

77

95

0.0

0.5

1.0

1.5

2.0

2.5

Average Number of Pressure Zones with 

Booster Disinfection Stations

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Ground Surface Purchased

Number of Pressure Zones with 

Booster Disinfection Stations

0.1

2.3

1.3

0.4 0.5 0.4 0.4 0.3

0.6

0.3

0.1 0.0

0.2

0.6

Chapter 3: New Topics and Trends
42 Community Water System Survey Report: Volume I

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 

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 Water Sales Revenue by 

Ownership

Population 

Served

Publicly 

Owned 

Systems

Privately 

Owned 

Systems

All 

Systems

25–100 $26,962 $10,613 $14,254

101–500 $42,398 $31,743 $37,117

All systems, 

25–500 $39,575 $22,385 $29,427

501–3,300 $233,998 $338,117 $257,359

3,301–

10,000 $783,150 $1,020,381 $832,171

All systems, 

25–10,000 $230,244 $136,609 $191,953

Chapter 3: New Topics and Trends

Average Annual Water-related Revenue by 

Ownership

Population 

Served

Publicly 

Owned 

Systems

Privately 

Owned 

Systems

All 

Systems

25–100 $15,964 $3,536 $7,245

101–500 $27,437 $4,366 $20,067

All systems, 

25–500 $25,577 $3,958 $16,141

501–3,300 $50,779 $30,079 $46,745

3,301–

10,000 $144,298 $80,602 $132,816

All systems, 

25–10,000 $59,943 $21,023 $49,275

Average Annual Non-water Revenue by 

Ownership

Population 

Served

Publicly 

Owned 

Systems

Privately 

Owned 

Systems

All 

Systems

25–100 $25,495 $211,715 $210,909

101–500 $44,046 $580,569 $536,067

All systems, 

25–500 $43,249 $402,364 $385,638

501–3,300 $137,623 $3,685,785 $1,113,768

3,301–

10,000 $64,975 $6,014,066 $1,986,360

All systems, 

25–10,000 $96,268 $773,652 $639,251
Community Water System Survey Report: Volume I 43

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 

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 

Chapter 3: New Topics and Trends

Average Annual Municipal Non-water System 

Revenue (Net or Transfers to System) by 

Ownership

Average Annual Total Water System Revenue 

by Ownership

Population 

Served

Publicly 

Owned 

Systems

Privately 

Owned 

Systems

All 

Systems

25–100 $186,474 $116,343 $126,840

101–500 $164,078 $292,685 $242,323

All systems, 

25–500 $168,291 $211,801 $198,735

501–3,300 $908,211 $791,382 $880,052

3,301–

10,000 $3,914,971 $4,577,333 $4,010,351

All systems, 

25–10,000 $1,171,867 $431,109 $804,636

Population 

Served

Publicly 

Owned 

Systems

Privately 

Owned 

Systems

All 

Systems

25–100 $385,927 N/A $385,927

101–500 $213,651 N/A $213,651

All systems, 

25–500 $240,486 N/A $240,486

501–3,300 $993,251 N/A $993,251

3,301–

10,000 $5,349,726 N/A $5,349,726

All systems, 

25–10,000 $1,571,303 N/A $1,571,303
44 Community Water System Survey Report: Volume I

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 of the 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 

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 

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 6,487 7,353 13.3%

501-3,300 11,282 9,775 -13.4%

3,301-10,000 4,315 3,617 -16.2%

>10,000 3,426 4,103 19.8%

All sizes 25,510 24,847 -2.6%

Privately Owned Systems

<501 22,632 19,289 -14.8%

501-3,300 2,734 3,647 33.4%

3,301-10,000 738 948 28.5%

>10,000 571 403 -29.4%

All sizes 26,675 24,287 -9.0%

All Systems 52,185 49,133 -5.8%

0

10

20

30

40

50

60

70

0-100 101-500 501-1,000 1,001-3,300 3,300-10,000

Percentage of Systems Not Providing Treatment

Population Served

Percentage

1982 1986 1995 2000

Number of CWSs in 2000 and 2006, 

by Water Source and Population Served

1976 2006

67

27

33

38

5656

23 21

18

40

50

58

45

33

28

11

24

14

4

12

33 34

4 3

19

5

20

23

Chapter 3: New Topics and Trends

Population 

Served

Systems 

in 2000

Systems 

in 2006

Percentage 

Change

Primarily Ground Water

<501 24,902 22,673 -9.0%

501-3,300 8,970 8,719 -2.8%

3,301-10,000 3,071 2,629 -14.4%

>10,000 1,645 2,076 26.2%

All Sizes 38,588 36,097 -6.5%

Primarily Surface Water

<501 1,969 949 -51.8%

501-3,300 1,212 1,068 -11.9%

3,301-10,000 1,008 864 -14.3%

>10,000 1,430 1,485 3.8%

All sizes 5,619 4,366 -22.3%

Primarily Purchased Water

<501 2,248 3,021 34.4%

501-3,300 3,835 3,634 -5.2%

3,301-10,000 973 1,071 10.1%

>10,000 923 945 2.4%

All Sizes 7,979 8,670 8.7%
Community Water System Survey Report: Volume I 45

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 

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 

Chapter 3: New Topics and Trends

Percentage of Ground Water Systems

Not Providing Treatment

0 20 40 60 80

Percentage of Systems

<101 101-500 501-3,300

1995 2000 2006

Population Served

39

10 13 14

23 24

19

28

33

Miles of Pipe Replaced During Previous 

5 Years as a Percentage of Total Miles of 

Existing Pipe

System Ownership 2000 Survey 2006 Survey

Public 2.1% 3.2%

Private 3.0% 1.4%

All 2.3% 2.7%

Average Number of Entry Points per System 

by Primary Water Source

Ground Water 

Systems

Surface Water 

Systems

Population 

Served

2000 

Survey

2006 

Survey

2000 

Survey

2006 

Survey

<501 1.4 1.2 1.4 1.1

501-3,300 1.8 1.7 1.3 1.2

3,301-10,000 2.9 2.2 1.6 1.2

10,001–100,000 4.6 4.2 2.2 1.5

>100,000 7.6 14.7 3.3 2.6
46 Community Water System Survey Report: Volume I

Population Served

Publicly Owned Systems Privately Owned Systems

2000 

Survey

2006 

Survey

Percent 

Change

2000 

Survey

2006 

Survey

Percent 

Change

Water Sales

<501 35,443 39,575 12% 22,826 22,385 -2%

501-3,300 196,265 233,998 19% 208,986 338,117 62%

3,301-10,000 800,562 783,150 -2% 880,363 1,020,381 16%

10,001–100,000 3,648,251 3,623,261 -1% 4,514,351 3,621,358 -20%

>100,000 39,996,583 41,307,641 3% 52,372,644 74,689,545 43%

All Sizes 1,407,043 1,502,107 7% 316,651 523,928 65%

Water-related Revenue

<501 7,630 25,577 235% 5,576 3,958 -29%

501-3,300 33,030 50,779 54% 21,718 30,079 38%

3,301-10,000 122,970 144,298 17% 94,065 80,602 -14%

10,001–100,000 681,518 942,165 38% 341,425 607,979 78%

>100,000 9,344,574 10,622,558 14% 1,711,026 740,608 -57%

All Sizes 318,055 474,898 49% 37,006 45,839 24%

Water Sales Plus Water-related Revenue

<501 25,024 34,764 39% 18,439 18,309 -1%

501-3,300 123,786 154,912 25% 135,849 218,413 61%

3,301-10,000 470,058 489,450 4% 549,801 588,277 7%

10,001–100,000 2,228,942 2,354,284 6% 2,744,080 2,137,384 -22%

>100,000 26,086,836 26,378,432 1% 30,408,636 49,543,009 63%

All Sizes 926,395 1,067,394 15% 235,241 386,217 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. 

Chapter 3: New Topics and Trends

Trends in Water System Revenue 

Average Water System Revenue (in 2006 Dollars)
Community Water System Survey Report: Volume I 47

Chapter 3: New Topics and Trends

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 

0

10

20

30

40

50

Publicly Owned Systems

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

Percentage of Systems

Privately Owned Systems

<501 501-

3,300

3,301-

10,000

10,001-

100,000

>100,000

Population Served

1995 2000 2006 Percentage of Systems

0

10

20

30

40

50

Percentage of Systems with Deficits or Losses

40

3131

39

30

27

31

14

39

18

23 25

33

20

32

3939

52

35

2124 25

16

35

1214

29

5 3

Trends in Water System Expenses 

Annual Expenses (in 2006 Dollars)

Population Served

Publicly Owned Privately Owned

2000 Survey 2006 Survey Percent 

Change 2000 Survey 2006 Survey Percent Change

<501 45,612 79,285 74% 16,777 27,487 64%

501 - 3,300 190,309 286,417 51% 198,037 210,286 6%

3,301 - 10,000 841,370 1,068,841 27% 812,132 1,154,767 42%

10,001 - 100,000 3,912,316 4,906,701 25% 3,643,246 4,409,779 21%

>100,000 38,821,400 62,367,379 61% 33,310,122 35,594,711 7%

All Sizes 1,378,519 2,159,740 57% 146,470 189,477 29%
48 Community Water System Survey Report: Volume I

1995 2006

Uniform rate 35% 36%

Declining block rate 11% 10%

Increasing block rate 8% 13%

Peak period or seasonal rate 1% 0%

Separate flat fee 11% 17%

Combined flat fee 7% 16%

Other 6% 7%

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, nonwater-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 

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.1.)

• 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 

Chapter 3: New Topics and Trends

Comparison of Residential Rate Designs, 

1995 and 2006
Community Water System Survey Report: Volume I 49

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, 

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 

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 65% 41%

101 - 500 59% 45%

501 - 3,300 52% 54%

3,301 - 10,000 69% 49%

10,001 - 50,000 84% 62%

50,001 - 100,000 85% 69%

100,001 - 500,000 84% 77%

>500,000 93% 87%

All Sizes 40% 52%

Privately Owned Systems

<101 49% 32%

101 - 500 56% 29%

501 - 3,300 65% 54%

3,301 - 10,000 82% 39%

10,001 - 50,000 81% 51%

50,001 - 100,000 74% 42%

100,001 - 500,000 51% 52%

>500,000 42% 24%

All Sizes 53% 35%

All Systems

<101 42% 33%

101 - 500 53% 35%

501 - 3,300 53% 54%

3,301 - 10,000 69% 47%

10,001 - 50,000 84% 61%

50,001 - 100,000 84% 66%

100,001 - 500,000 83% 74%

>500,000 89% 79%

All Sizes 54% 44%

Average Distribution of Capital Investment 

in the 2000 and 2006 Surveys

Type of Investment 2000 

Survey

2006 

Survey

Land 10.2% 1.0%

Water Source 9.8% 25.3%

Transmission and Distribution 

System 27.1% 40.8%

Treatment 25.0% 13.5%

Storage 12.4% 13.3%

Other 15.5% 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 2.3% 1.3%

Water source 8.4% 8.6%

Transmission and distribution 46.7% 44.9%

Treatment 22.8% 25.0%

Storage 12.5% 8.8%

Other 7.4% 11.4%

Privately Owned Systems

Land 1.5% 0.5%

Water source 8.8% 9.3%

Transmission and distribution 53.3% 56.8%

Treatment 16.3% 18.3%

Storage 8.5% 7.8%

Other 11.6% 7.4%

All Systems

Land 2.2% 1.3%

Water source 8.4% 8.7%

Transmission and distribution 47.3% 45.9%

Treatment 22.2% 24.4%

Storage 12.1% 8.8%

Other 7.8% 11.0%
50 Community Water System Survey Report: Volume I

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 

Chapter 3: New Topics and Trends

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 

Percentage of Public Systems Acquiring 

Capital Funds from Each Source

Each Public System’s Distribution of Total 

Funds for Capital Investment by Each Source 

of Funds

Source of Funds 2000 

Survey

2006 

Survey

Current revenues 69.5% 61.1%

Borrowing from private sector 

sources

19.5% 16.5%

Other government grants 21.8% 29.4%

DWSRF principal repayment 

forgiveness 7.1% 1.6%

DWSRF loans 9.8% 19.0%

Other borrowing from public 

sector sources 12.9% 8.9%

Equity or other funds 3.6% 8.8%

Source of Funds 2000 

Survey

2006 

Survey

Current revenues 51.1% 47.4%

Borrowing from private 

sector sources

14.3% 12.4%

Other government grants 12.9% 17.6%

DWSRF principal 

repayment forgiveness

4.3% 0.3%

DWSRF loans 7.0% 13.0%

Other borrowing from 

public sector sources

7.8% 5.5%

Equity or other funds 2.9% 3.8%

Distribution of Total Funds for Capital 

Investments of Public Systems Nationally by 

Each Source of Funds

Source of Funds 2000 

Survey

2006 

Survey

Current revenues 38.8 34.0%

Borrowing from private 

sector sources

42.0 33.6%

Other government grants 4.8 7.5%

DWSRF principal 

repayment forgiveness

1.2 0.2%

DWSRF loans 4.1 10.5%

Other borrowing from 

public sector sources

7.9 9.5%

Equity or other funds 1.2 4.6%
Community Water System Survey Report: Volume I 51

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.) 

Chapter 3: New Topics and Trends
52 Community Water System Survey Report: Volume I
Community Water System Survey Report: Volume I 53

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.
54 Community Water System Survey Report: Volume I

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 (nontransient 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.
Community Water System Survey Report: Volume I 55

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.
56 Community Water System Survey Report: Volume I
Community Water System Survey Report: Volume I 57

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

SDWA Safe Drinking Water Act

SDWIS Safe Drinking Water Information System

TOC Total Organic Carbon

UMRA Unfunded Mandates Reform Act

VOC Volatile Organic Compound