Drinking Water and Wastewater Infrastructure 

in Appalachia 

An Analysis of Capital Funding and Funding Gaps 

Jeff Hughes, Richard Whisnant, Lynn Weller, 

Shadi Eskaf, Matthew Richardson, Scott Morrissey, Ben Altz-Stamm 

The UNC Environmental Finance Center 

School of Government 

The University of North Carolina at Chapel Hill 

July 2005 
 Drinking Water and Wastewater in Appalachia ii

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Drinking Water and Wastewater in Appalachia iii 

Contents 

List of Figures ............................................................................................................................vii

List of Tables............................................................................................................................... ix

Acknowledgments ..................................................................................................................... xi

List of Abbreviations...............................................................................................................xiii

About UNCEFC ......................................................................................................................... xv

Executive Summary .....................................................................................................................1

1 Introduction ........................................................................................................................13

 Background on Appalachia ................................................................................................... 

 Background on the Appalachian Regional Commission .................................................. 

 Study Goals and Research Questions .................................................................................. 

 Levels of Analysis ................................................................................................................... 

 Study Components ................................................................................................................. 

 Study Limitations.................................................................................................................... 

 Limits of the Data.................................................................................................................... 

2 Water and Wastewater Services in Appalachia............................................................27

 Drinking Water........................................................................................................................ 

 Wastewater .............................................................................................................................. 

 Ambient Water Quality.......................................................................................................... 

 Environmental Characteristics Influencing Service........................................................... 

 Summary .................................................................................................................................. 

3 Assessments of Needs for Water and Wastewater Infrastructure in 

 Appalachia...........................................................................................................................57

 Scope and Implementing Organizations ............................................................................. 

 Purpose..................................................................................................................................... 

 Frequency and Planning Period ........................................................................................... 

 Methodology............................................................................................................................ 

 Accuracy................................................................................................................................... 

 Undocumented and Unidentified Needs ............................................................................ 
 Drinking Water and Wastewater in Appalachia iv

4 Capital Needs for Water and Wastewater Infrastructure in Appalachia ................73

 The Clean Watersheds Needs Survey.................................................................................. 

 The Drinking Water Needs Survey ...................................................................................... 

 Other National Studies........................................................................................................... 

 State-Level Studies.................................................................................................................. 

 Needs by Physiographic Region........................................................................................... 

 Needs by County Economic Status ...................................................................................... 

 Regulatory Needs as Water and Wastewater Funding Needs......................................... 

 Application of Needs Estimates to the Policy Challenges Facing Appalachian 

 Communities ................................................................................................................... 

5 Sources of Funding for Water and Wastewater Infrastructure ................................93

 Current Revenues and Reserve Funds................................................................................. 

 The Private Capital Market ................................................................................................... 

 Public Funding Programs ...................................................................................................... 

6 Financial Management and Funding Strategies .......................................................111 

 Major Funding Challenges and Gaps .................................................................................. 

 Regionalization and Local Partnerships.............................................................................. 

 Full-Cost Pricing...................................................................................................................... 

 Rate-Making Strategies for Low-Income Customers......................................................... 

 Targeted Assistance for Low-Income Customers .............................................................. 

 Asset Management ................................................................................................................. 

 Improvement of Water Efficiency ........................................................................................ 

 Planning Grants and Assistance ........................................................................................... 

 Improved Access to the Private Capital Market................................................................. 

 Offering of Attractive Loan Terms ....................................................................................... 

 Establishment of State Funding Sources.............................................................................. 

 Pooled-Loan Programs........................................................................................................... 

 Streamlining of, Coordination of, and Cooperation among Funding Programs .......... 

 The Role of Private Service Providers.................................................................................. 

 A National Trust Fund ........................................................................................................... 

 Optimization of Grant Programs.......................................................................................... 

 Summary .................................................................................................................................. 
Drinking Water and Wastewater in Appalachia v 

Appendices 

A. Clean Water Needs per Appalachian County, 2000 ..................................................... 

 B. Public Funding Distributions to Each Appalachian County, 2000–2003 .................. 

 C. Appalachian Region Water and Sewer Needs Assessment: 

Consultations and Discussion Forums ................................................................... 

 D. Drinking Water and Wastewater Infrastructure Funding Survey.............................. 

 E. Community and System Level Case Studies.................................................................. 

Accident, Maryland ................................................................................................... 

Corinth, Mississippi................................................................................................... 

Jasper, New York ....................................................................................................... 

McDowell County, West Virginia, and Letcher County, Kentucky................... 

Weaverville, North Carolina .................................................................................... 

West Virginia—American Water............................................................................. 

 F. Environmental Characteristics Influencing Service....................................................... 

 G. Methodology for Projection of Drinking Water Needs from the 

Drinking Water Needs Survey................................................................................. 

 H. Regulatory Needs as Water and Wastewater Funding Needs ................................... 

 I. Methodology for Compilation of the Master Funding Database ................................. 

 J. Summaries of Selected Federal and State Funding Programs for Water and 

Wastewater Infrastructure........................................................................................ 

 K. Methodology for Analysis of 

Household Water and Wastewater Expenditures ................................................ 
 Drinking Water and Wastewater in Appalachia vi

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Drinking Water and Wastewater in Appalachia vii 

Figures 

Chapter 1 

Figure 1-1. Economically Distressed Counties of Appalachia.................................................. 

Figure 1-2. Physiographic Regions of Appalachia ..................................................................... 

Chapter 2 

Figure 2-1. Percentage of Appalachian Population with Public Water Service, 1995........... 

Figure 2-2. Increase in Percentage of Population with Public Water Service, 

1985–1995.................................................................................................................................... 

Figure 2-3. Number of Community Water Systems in Appalachia......................................... 

Figure 2-4. Community Water Systems in Appalachia, by Source of Water ......................... 

Figure 2-5. Appalachian Population Served by Community Water Systems, by 

Source of Water ......................................................................................................................... 

Figure 2-6. Percentage of Appalachian Community Water Population Served by 

Private Systems ......................................................................................................................... 

Figure 2-7. Percentage of Appalachian Population with Public Sewer Service, 1990........... 

Figure 2-8. Treatment Facilities and Collection Systems in Appalachia, 2000....................... 

Figure 2-9. Number of Septic Tanks per Square Mile in Appalachia, 1990............................ 

Figure 2-10. Percentage of Appalachian Households Using Septic Tanks and 

Cesspools, 1990.......................................................................................................................... 

Figure 2-11. Percentage of Appalachian Households Using Septic Tanks and 

Cesspools, 

by County, 1990......................................................................................................................... 

Figure 2-12. River Basins of Appalachia...................................................................................... 

Chapter 3 

Figure 3-1. Documented Clean Water Needs per Capita, Tennessee Counties versus 

All Counties in Appalachian States, 2000.............................................................................. 

Chapter 4 

Figure 4-1. Facilities in Appalachia with Greatest Needs in Categories I–V ......................... 

Figure 4-2. Documented Needs per Capita in Categories I–V ................................................. 

Figure 4-3. Facilities with and without Documented Needs in Categories I–V .................... 

Figure 4-4. Population of Metropolitan and Nonmetropolitan Appalachian Counties, 

by County Economic Status..................................................................................................... 

Chapter 5 

Figure 5-1. Documented Needs for Wastewater Systems in West Virginia, versus 

Current Revenues ..................................................................................................................... 
 Drinking Water and Wastewater in Appalachia viii

Figure 5-2. Communities in Appalachia with Credit Ratings from Moody’s for 

Water and Sewer Purposes...................................................................................................... 

Figure 5-3. Disbursements in Appalachia by Federal and State Programs, 

2000–2003.................................................................................................................................... 

Figure 5-4. Disbursements in Appalachia by Major Water and Wastewater Programs, 

2000-2003 .................................................................................................................................... 

Figure 5-5. Per Capita Disbursements for Water and Wastewater Projects from 

Stand Alone State Programs, 2000–2003................................................................................ 

Figure 5-6. Disbursements of Federal and State Programs in the Appalachian 

Region of North Carolina, 2000–2003..................................................................................... 

Chapter 6 

Figure 6-1. Community Water Systems per County in Selected Appalachian States........... 

Figure 6-2. Average Percentage of Household Income Spent on Water and 

Wastewater Services in Appalachia ....................................................................................... 

Figure 6-3. Per Capita Disbursements for Water and Wastewater Projects from 

Federal and State-Originated Programs, 2000–2003 ............................................................ 
Drinking Water and Wastewater in Appalachia ix 

Tables 

Chapter 1 

Table 1-1. Population and Area of Each Appalachian State in Comparison with Rest of 

State............................................................................................................................................. 

Chapter 2 

Table 2-1. Community Water Systems in Appalachia and U.S................................................ 

Table 2-2. Number of Special Government Districts and Authorities in Appalachia .......... 

Table 2-3. Percentage of Pipe in Each Age Category, by Ownership...................................... 

Table 2-4. Publicly Owned Wastewater Treatment Facilities, by Flow Rate, 2000................ 

Table 2-5. Endangered or Threatened Species, by Region........................................................ 

Chapter 3 

Table 3-1. Differences among National Infrastructure Needs Surveys and Reports ............ 

Table 3-2. Differences among State Infrastructure Needs Surveys and Reports................... 

Table 3-3. Adjustment Factors Used by EPA in One Approach to Estimating National 

Drinking Water Needs from 1997 DWNS ............................................................................. 

Table 3-4. New Wastewater Treatment Plants and Collection Systems Proposed for 

McDowell County, W.Va......................................................................................................... 

Chapter 4 

Table 4-1. CWNS Needs Categories ............................................................................................. 

Table 4-2. Documented Needs for Wastewater and Collection Systems in Appalachia (in 

Thousands of Dollars), by Type.............................................................................................. 

Table 4-3. Facilities with No Documented Needs in Categories I–V ...................................... 

Table 4-4. Per Capita Documented Needs in Appalachia......................................................... 

Table 4-5. Extrapolated Community Water System Needs in Appalachia ............................ 

Table 4-6. Water and Wastewater Needs in Appalachian Counties as Determined by 

State Surveys.............................................................................................................................. 

Table 4-7. Twenty-Year Water and Sewer Extension Needs in Kentucky.............................. 

Table 4-8. Wastewater and Drinking Water Needs and Population Served per System, 

by Physiographic Region ......................................................................................................... 

Table 4-9. Criteria for Economic Status Classification of Appalachian Counties.................. 

Table 4-10. Population of Appalachian Counties, by County Economic Status....................

Table 4-11. Wastewater Infrastructure Needs in Appalachia per Facility and per Capita, 

by County Economic Status..................................................................................................... 

Table 4-12. Community Water Systems in Appalachia, by County Economic Status.......... 

Table 4-13. Drinking Water Infrastructure Needs in Appalachia per Community Water 

System and per Person Served, by County Economic Status............................................. 
 Drinking Water and Wastewater in Appalachia x

Chapter 5 

Table 5-1. Major Water and Wastewater Funding Programs in Appalachia and 

Percentage of Total Funding in Appalachia, 2000 –2003..................................................... 

Table 5-2. Total Funding per Capita by State-Specific Programs ............................................ 

Table 5-3. Sample Indicators of Need and Expected Relationships with Funding ............... 

Table 5-4. Regression Analysis: Relationship between County Funding Totals (All 

Funding Programs) and Indicators of Need ......................................................................... 

Table 5-5. Decreases in Appropriations of Capitalization Funds for Appalachian States ... 

Chapter 6 

Table 6-1. Government-Owned Utilities in North Carolina and West Virginia.................... 

Table 6-2. Average Financial Results of Municipal Water and Sewer Systems for the 

Fiscal Year Ended June 30, 2003.............................................................................................. 

Table 6-3. Funding Coordination Methods Used by Funding Program Managers in 

Appalachia ................................................................................................................................. 
Drinking Water and Wastewater in Appalachia xi 

Acknowledgments 

 The authors would like to thank the numerous individuals who provided 

information, insight, and guidance for this project. Particular appreciation is due 

to the Appalachian Regional Commission and their staff for commissioning and 

managing this project. 

Three organizations, working under subcontracts, provided important content for 

this report. Subcontractors include: 

 Bluegrass Area Development District 

 Syracuse University Environmental Finance Center 

 Environmental Finance Center at the University System of Maryland 

The authors wrote, called, emailed, surveyed, visited, and interviewed hundreds 

of individuals during the course of this research. These individuals took valuable 

time from their busy schedules to help us understand the current water and 

wastewater challenges facing Appalachia and the diverse and often complex 

funding and financial management strategies employed throughout the study 

region. Behind the different organizations, different strategies, and different 

layers of government, we consistently noted a common desire to provide 

communities with safe drinking water and environmentally sound wastewater 

treatment. 

The authors also wish to thank the local governments and organizations that were 

the subject of the case studies for this report: 

Town of Accident, Maryland 

Town of Jasper, New York 

Town of Weaverville, North Carolina 

West Virginia American Water and their local government partners 

Communities of Letcher County, Kentucky 

Communities of McDowell County, West Virginia 

City of Corinth, MS and the Corinth Gas and Water Department 

The authors wish to thank Gary O’dell, Asst. Prof. of Geography at Morehead 

State University, for allowing us to reprint with minor modifications his excellent 

case studies on the Letcher County, KY and McDowell County WV 
 Drinking Water and Wastewater in Appalachia xii

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Drinking Water and Wastewater in Appalachia xiii 

Abbreviations 

AMSA Association of Metropolitan Sewerage Agencies 

ARC Appalachian Regional Commission 

ASIWPCA Association of State and Interstate Water Pollution Control 

Administrators 

AWWA American Water Works Association 

CBO Congressional Budget Office 

CDBG Community Development Block Grants program (of HUD) 

CIFA Council of Infrastructure Financing Authorities 

CSO Combined sewer overflow 

CWNS Clean Watersheds Needs Survey (by EPA) 

CWSRF Clean Water State Revolving Fund (of EPA) 

DENR Department of Natural Resources (of North Carolina) 

DWNS Drinking Water Needs Survey (by EPA) 

DWSRF Drinking Water State Revolving Fund (of EPA) 

ECOS Environmental Council of the States 

EDA Economic Development Administration 

EFC Environmental Finance Center (of UNC) 

EPA Environmental Protection Agency 

FIPS Federal Information Processing Standard 

HUD U.S. Department of Housing and Urban Development 

HUD–CDBG U.S. Department of Housing and Urban Development, Community 

Development Block Grants program 

KIA Kentucky Infrastructure Authority 

LIHEAP Low Income Heating Assistance Program 

LIWAP Low Income Water Assistance Program 

MDE Maryland Department of Environment 

MGD Million gallons per day 

MHI Median household income 

NASBO National Association of State Budget Officers 

NPDES National Pollutant Discharge Elimination System 

OH PWC Ohio Public Works Commission 

OWDA Ohio Water Development Authority 

POTW Publicly owned treatment works (a facility) 

PSC Public Service Commission 

PUMA Public Use MicroSample Area (of the Census Bureau) 

PUMS Public Use MicroSample (of the Census Bureau) 

RUS Rural Utilities Service, USDA 

RWA Regional Water Authority 

SDWA Safe Drinking Water Act 
 Drinking Water and Wastewater in Appalachia xiv

SDWIS Safe Drinking Water Information System 

SF Summary File (of the Census Bureau) 

SRF State Revolving Fund 

STAG State and Tribal Assistance Grants 

UNC University of North Carolina 

UNCEFC University of North Carolina Environmental Finance Center 

USDA U.S. Department of Agriculture 

USDA–RUS U.S. Department of Agriculture, Rural Utilities Service 

USGS U.S. Geological Survey 

WIN Water Infrastructure Network 

WRIS Water Resource Information System (of KIA) 

WVIJDC West Virginia Infrastructure and Jobs Development Council 

WWTP Wastewater Treatment Plant 
Drinking Water and Wastewater in Appalachia xv 

About the University of North Carolina Environmental Finance Center 

The University of North Carolina Environmental Finance Center is an interdisciplinary 

center for teaching and policy analysis, based at the School of Government at the 

University of North Carolina at Chapel Hill. Faculty and students working with the 

center concentrate on helping improve the financing and the delivery of environmental 

goods and services. For more information, visit www.efc.unc.edu. 

The center is one of a group of university-based centers that concentrate on problems 

in the financing of environmental services. The Environmental Protection Agency 

established the centers to bring the work of researchers in the universities directly to 

bear on local environmental problems. For more information on the Environmental 

Finance Center Network, visit www.epa.gov/efinpage/efc.htm. 
 Drinking Water and Wastewater in Appalachia xvi

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1

Executive Summary 

The way in which water and wastewater services are funded in the United States 

changed dramatically from the 1970s to the 2000s. The country moved from a sizable 

federal grant program that accompanied the passage of the 1972 Clean Water Act to a 

more complex system in which a smaller amount of funding is delivered through grants 

and loans administered by a wide variety of federal and state agencies. Around 2000, 

several national studies concluded that the level of spending on water and wastewater 

services in this new, more complex system is inadequate to meet the nation’s needs. 

In light of these conclusions, the Appalachian Regional Commission (ARC), one of 

the remaining important sources of federal grants for water and wastewater 

infrastructure in Appalachia, contracted with the University of North Carolina 

Environmental Finance Center (UNCEFC) to assess the needs and the gaps in funding 

for water and wastewater infrastructure in Appalachia.1 The overall goal of the study 

was to help ARC, as well as other policy makers at local, state, and federal levels who 

are concerned about the adequacy of water and wastewater services in Appalachia, 

understand how these services now are provided and funded and what might be done 

to meet the needs of the region more effectively. 

Some of the study’s quantitative findings reinforced commonly held beliefs, but 

others were surprising. In almost every aspect, Appalachia today resists its historical 

characterization of homogeneity. Its water and wastewater services are no exception. 

The types and the sizes of water systems, the methods of disposing of wastewater, stateoriginated funding programs, and institutional models for providing services vary 

widely across the states and the subregions of Appalachia. 

Significantly fewer households in Appalachia have access to centralized drinking 

water and wastewater services than households in the rest of the country do. On a per 

capita basis, documented infrastructure needs for Appalachia are on par with the rest of 

the country. However, the financial capacity of households and communities to meet 

those needs lags significantly behind the national average. As a result, households in 

Appalachia with access to centralized systems pay a much higher percentage of their 

 

1 For ARC purposes, Appalachia consists of 410 counties, encompassing all of West Virginia and parts 

of Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, 

South Carolina, Tennessee, and Virginia—an area of 200,000 square miles and about 23 million people. 
 Drinking Water and Wastewater in Appalachia 2

income for water and wastewater services than households in the United States as a 

whole do, on average. 

Some financial management strategies that have helped more advantaged 

communities in the country reduce the capital gap (for example, asset management and 

improved pricing) hold limited promise for many disadvantaged Appalachian 

communities. For many of the smallest and most impoverished communities, nothing 

short of large grants will bridge existing infrastructure gaps. Nevertheless, grant 

funding does not appear to be the whole solution. The communities most in need of 

support often lack the planning capacity to effectively design projects and many 

communities that receive funding support are unable to support operating and 

maintenance costs for existing facilities, let alone new ones. 

Federal funding and sound financial management and innovation at the local level 

remain crucial. However, the study helps highlight the major role that state 

governments play in supporting infrastructure development in the region. Each 

Appalachian state has developed a unique approach to meeting its communities’ 

infrastructure needs by choosing how it administers federally supported programs and 

whether or not it offers state-specific programs. The design of funding programs across 

Appalachia ranges widely, from basic grant funding to sophisticated structured finance 

programs designed to promote specific local management practices. Many differences 

in state funding strategies can be tied to state-specific conditions or objectives thereby 

limiting the usefulness of transferring practices from one state to another. However, 

there are clear examples of best practices used by some states that have yet to be 

discovered or implemented by other states. 

Most of the analysis carried out for the project relied on existing data sets. Extracting 

county-level information and aggregate information for Appalachia from many of them 

proved challenging, given the manner in which the data were collected or compiled. 

The lack of reliable data to answer fundamental questions such as the percentage of 

households with onsite systems was in itself a surprising finding. However, in the end, 

enough data were available to answer many of the key questions related to water and 

wastewater services in the region. 

What is the current state of water and wastewater services in Appalachia? 

Appalachian communities get their drinking water primarily from two sources. For 

most people the source is “community water systems”—that is, systems that provide 

water to the public for human consumption and serve at least twenty-five year-round 

residents. The technologies and the treatment systems they use vary, depending on the 

type and the quality of source water (surface water or groundwater) and the age and 

the size of the facility. Systems that treat surface water use a variety of physical and 
Drinking Water and Wastewater in Appalachia 3 

chemical processes, including sedimentation, filtration, and disinfection. Groundwater 

systems, which are common throughout Appalachia, employ simpler treatment systems 

than surface water systems do. The typical small groundwater system in a community 

includes wells, pumps, and facilities for disinfection but not for filtration or 

sedimentation. 

The second source of drinking water in Appalachia is the well systems of individual 

households. These have some similarities with community systems. Normally, though, 

they do not have disinfection processes. 

Appalachia’s methods of disposing of wastewater are diverse. Wastewater treatment 

“chains” include settling and clarifying processes (primary treatment) and reduction of 

the biological and pathogen contents (secondary treatment) by exposing the wastewater 

to microorganisms and oxygen. For facilities ending treatment at the secondary level, 

the treated effluent is disinfected and absorbed into the surface or discharged into a 

body of water. Secondary treatment has a limited impact on problem nutrients such as 

phosphorus and nitrogen, so many communities now must employ tertiary (advanced) 

treatment to reduce nutrient levels before discharge. 

Wastewater is delivered from households to centralized treatment facilities through 

sewer systems, which include “collector lines” through neighborhoods and major 

“interceptor lines” that serve as the backbone of the system. 

Small household systems that use septic tanks have self-contained treatment facilities 

on their property. Wastewater is typically collected in a tank that allows solids to 

separate out, provides some biological treatment, and allows relatively clear wastewater 

to be absorbed into the ground through a drainage facility. Like centralized systems, 

these systems may develop problems, ranging from septic tanks that get clogged, to 

drainage fields that lose their absorptive capacity. In many parts of Appalachia, some 

individual systems are nothing more than “straight piping” (discharging waste directly 

into a stream). 

Federal policy makers should realize that Appalachia is home to the headwaters of 

almost all the important rivers of the eastern United States. Thus whatever happens to 

Appalachian waters has major consequences for the nation as a whole. 

By any definition Appalachia is a rugged land of extremes. Its generally ample 

rainfall and, in some subregions, its groundwater resources bless it with water for 

drinking and waste assimilation. But its topography, its legacy of water pollution from 

economies built around resource extraction, and the extremely low fiscal capacity of 

many of its communities make funding water and wastewater improvements difficult. 
 Drinking Water and Wastewater in Appalachia 4

Key Findings 

• The 23 million people in Appalachia—8 percent of the U.S. population and 24 

percent of the population of the thirteen states in the region—get water and 

wastewater services in a wide variety of ways, from state-of-the-art centralized 

systems of treatment and distribution, to individual wells, septic tanks, and 

straight piping. 

• Coverage by community water systems has expanded significantly in the last 

fifteen years in Appalachia to 74 percent, but still lags significantly behind 

national coverage (85 percent of the population). Wells remain the primary source 

in some subregions (more than 75 percent of households in portions of the 

Highlands). 

• More people (33 percent) in Appalachia are served by small and medium-sized 

systems (those serving 10,000 or less) than people in the nation (20 percent) are. In 

general, the smaller the system, the higher the costs. 

• Community water systems in Appalachia rely much more heavily on surface 

water sources than systems in the nation as a whole do (18 percent versus 11 

percent). Systems that rely on surface water tend to have significantly higher 

operating and capital costs than systems that treat groundwater. 

• Only 29 percent of the Appalachian population whose wastewater is centrally 

collected have facilities that treat more than 10 million gallons per day, compared 

with 52 percent for the United States as a whole. In other words, the larger 

treatment facilities outside Appalachia connect more people per facility than those 

in Appalachia do. 

• Appalachian water and wastewater systems tend to be smaller than average 

systems nationally, making for higher unit costs. 

• Proportionately more people in Appalachia than in the nation as a whole rely on 

onsite wastewater disposal. In 1990, the last year in which national data were 

collected by the Census Bureau, about 75 percent of U.S. households reported 

being served by public sewers, versus 52 percent of Appalachian households. 

• In the scattered Appalachian places where careful surveys have been made, 

substantial numbers of people have failing onsite systems or no wastewater 

treatment systems at all. 

• Some of the highest-quality and most outstanding resource waters in the eastern 

United States are in Appalachia, but there are many areas where surface water 
Drinking Water and Wastewater in Appalachia 5 

and groundwater are seriously impaired. West Virginia, for example, has 878 

impaired streams, covering approximately 6,170 stream miles. 

• Water and wastewater infrastructure and services in Appalachia are intrinsically 

linked to and influenced by the natural environment of the region. Most of the 

environmental factors in Appalachia lead to higher costs, especially in the 

Highlands. Subsurface conditions often are hard rock, making installation and 

repair of pipes relatively expensive. Groundwater typically occurs in fractures of 

bedrock, rather than in large, deep aquifers that are predictable in yield and 

depth. Frequently, soils are thin and unsuitable for onsite waste systems. Slopes 

are pervasive and often steep, sometimes requiring more and larger pumps. 

What are the critical infrastructure needs in the region? 

Accurately quantifying needs in Appalachia is a challenge, as it is in the rest of the 

country. Certain attributes of the region—for example, the presence of many small 

systems that have few staff members and thus have a difficult time responding to 

requests for information—suggest that current needs assessments may be even more 

inaccurate than they are in other areas of the country. Nevertheless, enough data exist 

to shed light on the types and the scale of needs in different areas of the region and to 

compare them with national needs. 

The 2000 Clean Watersheds Needs Survey, coordinated by the Environmental 

Protection Agency (EPA), documented $162 billion as the nation’s current needs for 

wastewater infrastructure. Appalachia accounts for about $14.4 billion (8.9 percent) of 

that amount. The 1999 Drinking Water Needs Survey, also coordinated by EPA, 

generated estimates of $136.3 billion for the twenty-year needs of the United States. The 

Appalachian portion is estimated at $11.4 billion (8.4 percent). 

There is ample evidence from other national needs assessments and from several 

independent surveys at the state level that communities will actually have to pay far 

more than this amount to ensure services that meet basic public health and 

environmental standards. Given the manner in which the EPA surveys were carried 

out, it is impossible to estimate exactly how much more communities will have to pay. 

However, detailed needs extrapolations by others suggest that the number could easily 

be $35 billion–$40 billion. This range does not include the additional funds, certainly in 

the billions, needed to address the thousands of substandard and failing individual 

wells, septic tanks, cesspools, and straight pipes. Nor does it include the funds that will 

be necessary to operate and maintain new facilities or facilities that have been neglected 

in the past. 
 Drinking Water and Wastewater in Appalachia 6

Key Findings 

• Appalachia accounts for about $26 billion of the drinking water and clean water 

needs documented or projected in recent EPA surveys. This number is clearly a 

lower limit on the entire water and wastewater needs of the region. The surveys 

omit or underreport many needs either because of their definitions of what 

constitutes “need,” their methodologies, or their rate of nonparticipation. 

• These estimates do not fully include many categories of needs that are 

disproportionately high in Appalachia, such as improvements to failing septic 

systems, extension of service to people with inadequate or no central water and 

wastewater treatment, watershed restoration for areas impaired by historic 

resource extraction and industrial activity, and stormwater handling. 

• National needs estimates are further biased downward by lack of reporting in 

some Appalachian states. Within individual states some evidence suggests that 

underreporting is likely to occur in areas served by small systems with limited 

management resources to document needs and respond to external needs surveys. 

• Several states carry out needs surveys that are separate from the EPA surveys. 

Their definitions of “need” and their methodologies differ widely. There are no 

clear over- or underestimating trends between the needs estimates of the states 

and those of EPA. However, the more comprehensive surveys that some states 

have carried out have uncovered needs not reported in the EPA surveys. 

• Some evidence suggests that state and local officials take needs surveys linked to 

funding allocations at the federal, state, or local level much more seriously than 

needs surveys not linked to such allocations. 

• Physiographic regions may provide a useful way to analyze service needs and 

other environmental features of the region in the future, but the problems with 

data integration remain. 

• The most disadvantaged counties in Appalachia have per capita needs for 

wastewater infrastructure similar to those of other counties but fewer well-off rate 

payers, and fewer rate payers in general, to meet the burden. 

• The data suggest but do not conclusively prove that Appalachian states spend less 

per capita than non-Appalachian states on regulation of water and drinking water 

quality. 
Drinking Water and Wastewater in Appalachia 7 

What capital funding sources are currently available to meet those needs? 

Federally supported and coordinated programs disbursed about $3.6 billion to 

Appalachian communities for water and wastewater projects between January 1, 2000, 

and December 30, 2003, and state programs disbursed about $1 billion. More than $1.5 

billion was provided to communities as grants, and about $3.1 billion took the form of 

loans. 

Chief among the federal programs disbursing funds are the Clean Water State 

Revolving Fund and the Drinking Water State Revolving Fund, of the EPA; and the 

Water and Waste Disposal Loans and Grants Program, of the U.S. Department of 

Agriculture, Rural Utilities Service. States provide funding assistance through matching 

contributions to federal programs such as the revolving funds, and through their own 

stand-alone programs. The single largest state program is the West Virginia 

Infrastructure and Jobs Development Council’s Loan Program. 

Some Appalachian communities also have used their own savings, as well as funds 

from the private capital market, to make water and wastewater improvements. 

However, these sources of capital are out of reach for most Appalachian communities 

because of their strained fiscal capacity and limited creditworthiness. Several 

Appalachian states, such as Alabama, Ohio, and Virginia, use their state bonding 

capacity to create loan programs as a method of providing communities with access to 

private capital. 

Key Findings 

• Relatively few communities in Appalachia, especially in disadvantaged counties, 

have credit ratings for water and wastewater purposes from major rating 

agencies. This lack of creditworthiness limits their direct access to the private 

capital market. 

• From 2000 through 2003, federal and state programs disbursed about $4.6 billion 

for water and wastewater infrastructure in Appalachia. 

• The special programs established by individual states accounted for 22.8 percent 

of the public fund investments. Stand-alone state programs have been important 

in some states and nonexistent in others. States in Appalachia employ vastly 

different funding strategies, which lead to major differences in the types of 

assistance and incentives that reach local communities. 

• Capital funding comes from a wide variety of sources, making planning and 

management of applications, and timing of grants, loans, and matches a 

significant challenge for communities. 
 Drinking Water and Wastewater in Appalachia 8

• The number of public funding programs and the amount of public funding to 

upgrade existing wastewater systems in Appalachia or build new, decentralized 

ones are extremely limited. 

• A statistical analysis indicated that needs identified by the EPA’s 2000 Clean 

Watersheds Needs Survey were significantly and positively related to the 

distribution of water and wastewater infrastructure funding in Appalachia. (A 

“significant” relationship is one that could not have occurred by chance.) 

Violations of the National Pollutant Discharge Elimination System also were 

significantly and positively related to the distribution of funding, as were 

incidences of waterborne diseases. 

• Funding sources for project planning and other up-front aspects of water and 

wastewater projects are relatively few. 

What types of gaps exist, and what is the capacity to bridge them? 

Appalachia faces several types of interrelated water and wastewater financing 

challenges, including capital requirement gaps; annual cash-flow shortages; marginal 

utility/system fiscal capacity; diminishing household ability to pay; and diverse 

management-oriented needs. 

Despite the numerous capital funding programs in the region, a backlog of project 

funding requests exists in many areas. In other parts of the country, the private capital 

market provides a large pool of capital funds to supplement limited public capital 

funds. Although some communities in Appalachia have access to private capital, it is 

out of reach for the majority of communities in distressed areas. 

Key Findings 

• At the system level, many small utilities have insufficient revenues to cover future 

cash-flow requirements, once debt repayments and increased operating costs 

linked to new facilities are taken into account. These utilities are characterized by 

small and often shrinking customer bases. In some cases, even if grants for capital 

were available, the utilities would be unable to meet the operating costs associated 

with their facilities. 

• In comparison with the nation as a whole, households in many Appalachian 

counties are paying a higher proportion of their income for water and wastewater 

services, so high in several areas for large numbers of households that asking 

them to pay more for improved service is infeasible. This household affordability 

gap has become the critical challenge for many utilities. 
Drinking Water and Wastewater in Appalachia 9 

• Management shortfalls in the region range from small systems that are unable to 

support trained and educated staff, to large systems that have yet to shift from a 

reaction-oriented paradigm characterized by high maintenance costs and 

continual capital stock crises to a more proactive approach that includes asset 

management systems, proactive investments, and continual staff training. 

What financial management and funding strategies are likely to have the biggest 

impact on service in the region? 

Given the diversity of the Appalachian communities and the water and wastewater 

challenges they face, no single strategy or measure will work throughout the region. 

 Key Findings 

• In general, no single strategy or group of strategies identified in recent national 

studies of water and wastewater infrastructure will close the gap between services 

and needs in Appalachia as a whole. Instead, strategies must be designed and 

deployed on the basis of particular community characteristics. 

• Regionalization—with its attendant consolidation of providers—offers widely 

varying possibilities for achieving economies of scale. In Appalachia, 

regionalization has helped some communities pool their resources and reduce 

costs enough to remain viable. However, before funders and policy makers look 

too quickly at regionalization as a blanket solution, they should review the 

political and institutional environments in which various systems operate. Some 

states, such as Kentucky and West Virginia, have a history of regional entities and 

have institutional and regulatory frameworks favorable to regional systems. Other 

states, like North Carolina, have a go-it-alone culture, a historic model of a single 

provider prevalent in their system of government, and a relative lack of tested 

regional models. Promoting regionalization in these states requires addressing the 

structural obstacles. 

• Appalachian communities are an example of the willingness of people to make 

financial sacrifices in order to guarantee sustainable, high-quality services. 

Appalachia has shown that many communities can contribute to meeting their 

needs but many communities cannot generate adequate revenue to meet future 

needs with price increases alone. Full-cost pricing offers only limited gains for 

bridging the capital gap in many parts of Appalachia, particularly in small and 

low- or negative-growth communities. The additional revenue from even large 

price increases will never cover the funding gap for many Appalachian systems. 

Without external subsidization many of these systems will either collapse 

completely or slowly decline because of lack of system maintenance and 
 Drinking Water and Wastewater in Appalachia 10

investment. The issue of full-cost pricing is greatly complicated by the fact that for 

some communities, affordability limitations are very real, while for other 

communities the term “affordability” is used to mask the true obstacle —lack of 

political will. 

• Some funding programs encourage or require communities to follow the 

principles of full-cost pricing to the extent possible before receiving funding. Such 

inducements or requirements often result in greater community contributions, 

showing that affordability constraints were less than previously stated. 

• Privatization offers some communities a way to attain the economies of scale that 

regionalization brings, as well as access to greater technical and managerial 

capacity than is likely in a go-it-alone approach. Equally important, large 

multiple-jurisdiction for-profit providers offer rate-setting and institutional 

options not readily available to isolated single-jurisdiction systems. 

• However, private systems will not reach the most remote and difficult-to-serve 

communities in Appalachia. Private providers will seek to serve the systems with 

relatively low costs and high revenues. In addition, for-profit providers’ higher 

cost of obtaining capital, their profit needs, and their tax burdens inevitably 

influence the price their customers pay for water. The trade-offs between the 

benefits of consolidated private systems and the extra revenue requirements must 

be evaluated case by case throughout the region. 

• Many Appalachian systems are behind in implementing basic techniques of asset 

management, such as maintaining records of assets and repairs. Implementing 

these techniques is a laudable goal and will provide some marginal cost and 

water-quality benefits for some systems. However, given the small size and asset 

base of many systems, implementing the much-heralded advanced techniques of 

asset management developed in Australia and now being implemented in large 

U.S. systems will do little to solve their funding problems. 

What steps can funding agencies and technical assistance providers take to improve 

and expand service in the region? 

The thirteen states in Appalachia each employ different funding programs and 

strategies for assisting communities. Consultations with public officials at the state and 

local levels suggest that some of these approaches promote sustainability and improved 

access to funds more than others do. States that have developed coordinated funding 

organizations have been able to improve communication and minimize the 

administrative hurdles. Other states, such as Ohio and West Virginia, have made 

difficult decisions regarding the eligibility of communities for funds and the types of 
Drinking Water and Wastewater in Appalachia 11 

funds to make available to communities. These states offer a large proportion of their 

funds as loans and pay careful attention to the fiscal capacity of communities before 

granting them. The measures have promoted consolidation and have kept some 

communities from investing funds in systems that may not be sustainable. 

The private capital market in the United States has proven to be an essential 

component of infrastructure. However, it still is a tool beyond the reach of many 

communities in Appalachia. Many states have developed innovative methods of 

pooling loans for small, credit-risky communities to reduce their risk. These pooledloan programs often operate under the name “bond bank.” They follow several designs, 

but the common approach is to use a combination of state administrative capacity and 

creditworthiness to obtain private capital at more favorable terms than individual 

communities could obtain. 

Another option for increasing access to private capital is to improve the 

creditworthiness of local communities by strengthening their financial management 

capacity and improving their overall economic health. This approach has promise for 

many communities in Appalachia, but the extreme economic hardship present in some 

communities makes accessing the private market unlikely even if they can improve 

their management. 

Many public officials and advocacy organizations are convinced that finding 

additional sources of grant funds is essential to helping the poorest communities. In a 

survey that UNCEFC conducted as part of the study, it asked funding program 

managers to estimate the impact that different measures would have in helping 

communities meet their needs. Eighty-one percent of the respondents indicated a large 

impact for grants. Further, almost 50 percent felt that the inability of specific programs 

to offer grants was a major obstacle in the programs’ helping distressed communities. 

Many funders and policy makers have expressed concern about the process of 

determining who receives grant funds. Although most funders seem to agree that grant 

funds should go to communities most in need, some argue that grants made to the most 

fiscally distressed communities may be counterproductive because they support 

communities that do not have the managerial and financial capacity to maintain a 

viable system and in the worst case do not have the funds to operate the system the 

grant supported. Some states have used grants as an opportunity to encourage or force 

communities to address their shortcomings in fiscal capacity by partnering with other 

communities. For such strings to have an impact, a comprehensive funding strategy 

must be in place. Otherwise, as many officials reported in the UNCEFC survey, 

communities will play funders off each other and go to the funder that requires the least 

and provides the most. The West Virginia Infrastructure and Jobs Development 

Council’s system of reviewing project requests to multiple programs and 
 Drinking Water and Wastewater in Appalachia 12

recommending a comprehensive package has allowed it to distribute grants in a much 

more planned and focused manner. 

Key Findings 

• For many communities with marginal fiscal capacity, careful manipulation of 

funding terms may offer the best hope of stretching limited public dollars. In 

some situations, long-term loans can make a capital project feasible for a 

community. The U.S. Department of Agriculture, the Ohio Water Development 

Authority, and West Virginia’s Clean Water State Revolving Fund are examples of 

programs that offer thirty- and forty-year loans under special conditions to 

disadvantaged communities. Such loans should be made only after careful 

evaluation of a project. Generally accepted accounting principles dictate that loan 

terms not exceed the useful life of a facility. 

• The degree of cooperation and coordination among different funding programs 

varies significantly across Appalachia. Some states have coordination strategies 

and institutions that streamline local funding requests and assist in matching and 

optimizing different funding sources. In other areas of the region, the go-it-alone 

approach requires individual communities to navigate the complex funding 

options and seek the best deal they can get. 

• Evidence shows that external grant funding remains an essential component of an 

overall funding strategy, and that without significant grant funding, a certain of 

number of communities would be unable to generate sufficient revenue to protect 

the public health and their surface-water quality. Some states in the region have 

integrated funding programs and strategies that rely on small amounts of grants 

to leverage loan funds, enabling communities to access the capital they need while 

covering the majority of the costs themselves. 

• Some individual funding programs and some groups of funding programs 

carefully design funding packages for communities that include a mix of grant 

and loan funding. In states where such coordination is weak and grants are not 

strategically linked to loans, communities consistently seek out grant funding 

even if they clearly have the ability to take on loan financing.
13

1 

Introduction 

This report analyzes the conditions of water and wastewater services in the 

Appalachian Region and attempts to assess the financial requirements and strategies 

available to improve the quality of drinking water and wastewater services in the 

region, particularly in the areas that face chronic economic distress and clear 

deficiencies in these services. A better understanding of the water and wastewater 

capital funding challenges and the strategies to address those challenges could make a 

significant difference in quality of life for the thousands of Appalachians now living in 

poverty and for thousands more who may be affected by environmental problems 

related to the integrity of the region’s waters. 

The report takes the congressional definition of the Appalachian Region as its starting 

point in determining the jurisdictions for study (see Figure 1-1, which outlines the 

region by county and highlights the most economically distressed counties).2 The 

analyses are based on major data sources compiled by the Environmental Protection 

Agency (EPA), the U.S. Geological Survey, and the U.S. Census Bureau, as well as 

private credit-rating agencies. In addition, detailed case studies are developed to 

examine specific community-level services, issues, and practices. 

The way in which water and wastewater services are funded in the United States 

changed dramatically from the 1970s to the early 2000s. The country moved from a 

sizable federal grant program that accompanied the passage of the 1972 Clean Water 

Act to a more complex system in which a smaller amount of funding is delivered 

through grants and loans administered by a wide variety of federal and state agencies. 

Around 2000, several national studies concluded that the level of spending on water 

and wastewater services in this new, more complex system is inadequate to meet the 

nation’s needs. 

Between 1997 and 2003, the Appalachian Regional Commission (ARC) invested $129 

million in water and wastewater infrastructure for Appalachia, and it leveraged about 

$562 million more from other federal, state, and local government agencies. As a result 

of these public-sector investments in improved drinking water and wastewater services, 

Appalachian communities were able to attract $1.3 billion in private investment for 

commercial, residential, and industrial site development. 

 

2 For ARC purposes, “Appalachia” has a precise definition. See the section in this chapter headed 

Background on the Appalachian Regional Commission. 
      

14                                                               Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 15 

According to the ARC, 

these public investments have helped Appalachian localities meet their most critical water and sewer 

needs . . . Yet many rural Appalachian communities lack even the most basic services . . . and many 

more communities rely on private septic and private well water systems that are poorly regulated and 

. . . may present serious environmental problems.

3

The analyses of national needs issuing from various national agencies at the time 

were calling attention to the gaps between current levels of spending and projected 

costs over the first two decades of the twenty-first century: 

These analyses highlight that replacement of aging infrastructure, rising [operating and 

maintenance] costs to deal with deterioration of the capital stock, increasing environmental 

regulations, and a lack of research and innovation in management of these systems will likely drive 

capital investment and [operating and maintenance] expenditures higher compared to current 

historical levels.4

One of the analyses expressed the opinion that “management efficiencies are 

possible” and higher rates can be absorbed by customers. Yet it conceded that “smaller, 

rural systems face higher investment costs” and might need additional technical, 

managerial, and financial assistance.5 

In June 2003, ARC issued a request for proposals to assess the needs and the gaps in 

funding for water and wastewater infrastructure in Appalachia. ARC’s purpose in 

contracting for the research was “to provide policy makers and local officials with 

detailed information on future water and sewer investment requirements and financial 

strategies to meet these needs, given the fiscal capacity of their communities.” ARC also 

hoped that the findings of the research would “enable state and local officials to target 

financial assistance and develop strategies for smaller communities to meet their 

financing needs.”6

 

3 Appalachian Regional Commission, “Request for Proposals for Assessing Water and Sewer 

Infrastructure Needs and Gaps in Appalachia” (Washington, D.C.: ARC, June 30, 2003), 2. 

4 Ibid., 3.

5 Ibid.

6 Ibid., 1. 
 Drinking Water and Wastewater in Appalachia 16

The University of North Carolina Environmental Finance Center (UNCEFC) 

submitted a proposal in response to ARC’s request, and UNCEFC was selected to 

undertake the work. This report presents UNCEFC’s findings and recommendations. 

Background on Appalachia 

Since 1965, regional development has diminished some of the differences between 

Appalachia and the nation.7 However, the region still confronts a legacy of poverty and 

uneven development, as well as the competitive challenges of an internationalized 

economy. When ARC was established, about 33 percent of Appalachians lived in 

poverty—a rate 50 percent higher than the national rate of 22 percent. By 2000 the 

regional poverty rate had been reduced to 13.6 percent, and the spread between 

Appalachia and the nation had narrowed to 1.2 percentage points. From 1960 to 1980, 

the number of “distressed counties” in Appalachia (see the next section for a technical 

definition) declined steadily, but over the ensuing twenty years, it increased slowly, 

reaching 121 in 2003. In 2004, however, the number decreased sharply to 91, largely 

because of the impact of the newly available decennial poverty statistics on the 

calculation methodology. 

Appalachia’s population is geographically distributed across the urban-rural 

spectrum, from large urban areas in metropolitan counties to small, remote counties 

lacking even little urban concentrations. Fifty-six percent of the population lives in 

metropolitan counties, 27 percent in counties adjacent to metropolitan counties, and 17 

percent in remote, rural locations. 

Background on the Appalachian Regional Commission 

In 1965, Congress passed the Appalachian Regional Development Act, creating ARC, a 

federal-state partnership to promote the economic and social development of 

Appalachia. The act, as amended in 2002, defines the region as 410 counties, 

encompassing all of West Virginia and parts of Alabama, Georgia, Kentucky, Maryland, 

Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, 

and Virginia—an area of 200,000 square miles and about 23 million people.8 To promote 

 

7 The background information on Appalachia and ARC in this and the next section is drawn from 

ARC, “Request for Proposals,” 6–8, and from ARC staff. 

8 Appalachia has undergone several changes in the number of counties officially constituting it for 

ARC purposes. In 1965, after the inclusion of the New York Appalachian region, it encompassed 373 

counties in twelve states (excluding Mississippi). In 1967 twenty counties from Mississippi were added, 

along with 2 from Alabama, 1 from New York, and 1 from Tennessee, bringing the total to 397. In 1990 a 
Drinking Water and Wastewater in Appalachia 17 

local planning and implementation of its initiatives, ARC established seventy-two local 

development districts made up of groups of counties within each of the thirteen states. 

For forty years ARC has funded a wide range of programs in Appalachia, including 

highway corridors; community water and wastewater facilities and other physical 

infrastructure; health, education, and human resource development; economic 

development programs and local capacity building; and leadership development. 

In 1982, ARC first defined the region’s most distressed counties so that the agency 

could target its resources to the areas of greatest need. ARC’s measures of “distressed” 

evolved, and in 1997, ARC defined four broad categories of county economic status 

based on comparisons of individual counties with national unemployment and poverty 

rates and per capita market incomes.9 In fiscal year 2005, ARC designated Appalachia’s 

410 counties as follows: 

• “Distressed”—82 counties were distressed because they experienced high rates of 

poverty and unemployment (150 percent or more of the national average) and low 

rates of per capita market income (67 percent or less of the national average). 

• “Transitional”—300 counties were transitional, having higher-than-average rates 

of poverty and unemployment and lower rates of per capita market income (49 of 

these transitional counties might be characterized as at risk of returning to 

distressed status). 

• “Competitive”—22 were nearly at parity with national socioeconomic norms. 

• “Attainment”—8 counties reached or exceeded national norms. 

Preliminary numbers for fiscal year 2006 indicate incremental improvements, with 77 

counties designated as distressed, 303 as transitional, 20 as competitive, and 8 as 

attainment.10

 

county in Ohio was added, and in 1991 another county in Mississippi was added, raising the total to 399. 

In 1999, seven more counties were added, 2 in Alabama, 2 in Georgia, 1 in Mississippi, and 3 in Virginia, 

for a total of 406. In 2003, four more counties joined the region, 2 in Kentucky and 2 in Mississippi, for a 

current total of 410. Greg Bischak, ARC, memorandum to Jeff Hughes, UNCEFC, 2 February 2005.

9 “Per capital market income” is per capita income less transfer payments. 

10 For more details, visit ARC’s website, at www.arc.gov. 
 Drinking Water and Wastewater in Appalachia 18

The rationale for ARC’s Area Development program is to provide the basic building 

blocks that will enable Appalachian communities to create opportunities for selfsustaining economic development and improved quality of life. The strategic goals for 

these efforts were agreed on after a yearlong strategic planning process involving 

federal, state, and local officials and citizens. The process focused investment in four 

goal areas: 

• Increase job opportunities and per capita income in Appalachia to reach parity 

with the nation 

• Strengthen the capacity of the people of Appalachia to compete in the global 

economy 

• Develop and improve Appalachia’s infrastructure to make the region 

economically competitive 

• Build the Appalachian Development Highway System to reduce Appalachia’s 

isolation 

Area Development funds are allocated to the Appalachian states on a formula basis 

and each state has wide discretion in deploying its funds across the four goal areas on 

the basis of local needs and state priorities. However, an overarching policy mandated 

by Congress is that ARC resources be targeted at the distressed counties. 

Study Goals and Research Questions 

The two primary goals of the study undertaken by UNCEFC were (1) to provide 

information and insight on water and wastewater investment requirements in 

Appalachia and (2) to recommend financial management and funding strategies to 

policy makers and practitioners who work with and on behalf of Appalachian 

communities. These policy makers and practitioners include local, state, and federal 

elected officials and managers; regulators; funders; economic developers; finance 

officers; utility officials; and environmental public interest groups. 

To achieve these goals, the UNCEFC research team set out to answer six basic 

questions: 

• What is the current state of water and wastewater services in Appalachia? 

• What is the size and the scope of the region’s need for investment in water and 

wastewater infrastructure? 
Drinking Water and Wastewater in Appalachia 19 

• What capital funding sources are being used in the region to meet these needs? 

• What funding gaps exist, and what is the capacity of communities in the region to 

bridge those gaps? 

• Which community financial management and funding strategies are likely to have 

the biggest impact on water and wastewater services in the region? 

• What policies and measures can funding agencies and technical assistance 

providers implement to have the biggest impact on services and infrastructure in 

the region? 

Levels of Analysis 

To address the study’s research questions, the UNCEFC research team carried out 

analyses at three geographical levels: 

• Appalachian regionwide level: The team compiled and integrated data for the 

entire region as defined by ARC. This level of analysis draws out the differences 

among various parts of the region and highlights the characteristics of the region 

that distinguish it from other areas of the country. 

• Appalachian subregional and state level: The team analyzed issues and trends 

for particular subregions of Appalachia. The availability of some data varies 

widely across the region. For example, in some states and substate regions, 

detailed data on water and wastewater rates and utility financial reports are 

available, whereas in other areas of the region, they are not. This report presents 

the available data. For some purposes, such as environmental setting and 

hydrology, the important breakdown is by physiographic region. For other 

purposes it is by political jurisdiction. 

• Community and system level (case studies): Macro analyses and subregional 

analyses are not sufficient to understand all the practices and challenges facing 

individual communities. Although communities in the region have many 

similarities, they also have significant differences, which affect their infrastructure 

needs and their strategies for addressing those needs. To offer an in-depth view, 

this report presents assessments and analyses of infrastructure finance practices in 

seven communities selected to cover a broad range of challenges. 
 Drinking Water and Wastewater in Appalachia 20

Study Components 

The study had five major components, as follows. The study drew on a wide variety of 

data sets, some compiled by state and federal agencies, others created uniquely for the 

study. 

• An assessment of water and wastewater services. Using federal, state, and local 

data sources, the UNCEFC research team conducted a qualitative and quantitative 

assessment of current water and wastewater services in the region. Major data sources 

were the Safe Drinking Water Information System (SDWIS), the databases of the Clean 

Watersheds Needs Survey (CWNS, formerly referred to as the Clean Water Needs 

Survey), the Drinking Water Needs Survey (DWNS), and the National Pollutant 

Discharge Elimination System (NPDES), all coordinated by EPA; U.S. Geological Survey 

databases and atlases; U.S. Census publications; state utility commission databases; and 

state reports on capacity development and regulation. Chapter 2 describes the state of 

water and wastewater services in the region. 

• An inventory of needs studies and assessments. The UNCEFC research team 

reviewed and extracted data from more than fifteen national and state needs assessment 

reports to characterize and analyze the infrastructure needs of Appalachian 

communities. To understand the region’s ability to meet its needs, the team also 

collected information on the fiscal capacity of communities, including credit ratings and 

measures of households’ ability to pay. Chapter 3 summarizes the different approaches 

to needs assessments used by different studies. Chapter 4 presents a picture of the 

capital needs in Appalachia using documented, inventoried, and modeled needs from 

the assessments. Appendix A presents needs information available for individual 

counties in Appalachia. 

• A comprehensive inventory of public funding. To document the extent and the 

importance of public funding in the region, the UNCEFC research team compiled a 

comprehensive inventory of nonlocal public funding programs currently available to 

some or all of the 410 counties in the region. It identified all the major programs 

managed or operated by federal or state governments that operate in the region, and 

requested county-level funding information from those programs covering January 1, 

2000–December 31, 2003. Using these data, the team created a Master Funding Database 

that includes at least 24,000 records from more than forty-eight funding agencies and 

offices. Chapter 5 summarizes analyses that the team carried out using this database. 

Appendix B presents funding information for each county in Appalachia. 

• Consultations with public officials and policy makers. The UNCEFC research 

team conducted in-person meetings, telephone interviews, site visits, and structured 

discussion forums with hundreds of public officials who work for local communities, 

funding agencies, regulatory agencies, and advocacy groups. The team used 

information from these consultations to identify needs, challenges, and strategies; cross-
Drinking Water and Wastewater in Appalachia 21 

check data; test hypotheses; and identify local communities with particularly 

noteworthy funding experiences or challenges. The team also sent an Internet-based 

survey to representatives of 121 funding programs serving the region, to gather funding 

program managers’ opinions and information about current funding policies and 

trends. Seventy-two respondents (representing a 60 percent response rate) provided 

information on eighty-six funding programs. Information from the different 

consultations appears throughout the report. Appendix C contains a partial list of the 

organizations and the individuals that were consulted. It also summarizes the various 

purposes of the discussion forums that were held and identifies the people who 

attended. Appendix D contains a copy of the survey and a summary of the responses. 

• A selective inventory and case studies of best practices and financial 

management challenges and strategies. The UNCEFC research team selected a number 

of communities in Appalachia whose experiences illustrated the range of needs, 

challenges, and financial management strategies in the region. They used information 

and experiences from these communities to cross-check and complement information 

from public consultations and data analyses. These local-level studies were particularly 

helpful in identifying and analyzing the community financial management practices 

presented in chapter 6. For example, for each of the communities, actual needs as 

reported by local practitioners were compared with needs data in state- and nationallevel needs assessments. Seven of these communities were selected for in-depth study 

and have been written up in detailed case studies that are included in appendix E. 

Study Limitations 

Limitations on the strength of this study’s conclusions are explained throughout the 

report, where appropriate. Two large categories of limitations are inherent in the scope 

of the study, however, and are discussed here. The first concerns the size and the 

breakdown of the region, and the second concerns limits on available data. 

The Scope of the Region 

As noted earlier, this report presents analyses of water and wastewater funding needs 

and trends at three geographical levels: 

• Appalachia as a whole 

• Some selected subregions, including political jurisdictions such as states and 

counties, and physiographic provinces as defined by the geology, the topography, 

and the rivers of the region 

• Some particular water and wastewater systems and the communities they serve 
 Drinking Water and Wastewater in Appalachia 22

The question of the appropriate geographical size of Appalachia has long been 

debated, without any consensus emerging from scholars of the region. Thomas R. Ford 

traced the physiographic divisions used in his encyclopedic study of the southern 

Appalachians to a 1935 U.S. Department of Agriculture publication.11 David E. 

Whisnant has charted the comings and goings of Appalachian boundaries for his classes 

on the representation of folk culture in the region. His maps are available on the 

Internet.12 John Alexander Williams’s influential study of the region, published in 2002, 

presents an even longer historical view of the debate. Williams notes that “Appalachia 

has no agreed-upon boundaries—nothing comparable to the Mason-Dixon Line or the 

Hudson River.” However, he pragmatically accepts the 1965 boundaries used in the 

formation of ARC, trying at the same time to define a “core” within these boundaries 

and to emphasize the importance of physiographic subregions inside the core.13

Williams also notes that for some purposes, focusing on subregions of Appalachia is 

useful. This report refers to the region as defined by ARC for the simple reason that a 

major purpose of the study was to facilitate policy decisions and evaluation that involve 

ARC funding. 

For context in understanding the comparisons presented in this report, Appalachia as 

defined by ARC consists of widely varying percentages of the thirteen states that 

occupy some part of the region, from 100 percent of both the population and the area of 

West Virginia, to 47 percent of the population and 81 percent of the area of 

Pennsylvania, to 4 percent of the population and 16 percent of the area of Maryland (see 

Table 1-1). Overall, as noted earlier, in 2000 the region contained about 23 million 

people—8 percent of the U.S. population and 24 percent of the population of the 

thirteen states in the region. 

 

11 Thomas R. Ford, ed., The Southern Appalachian Region: A Survey (Lexington: University of Kentucky 

Press, 1967), citing U.S. Department of Agriculture, Economic and Social Problems and Conditions of the 

Southern Appalachians, Misc. Pub. No. 205 (Washington, D.C.: USDA, 1935). 

12 David E. Whisnant, Online Syllabus for Hillbilly Highway: Appalachia and America, junior seminar, 

University of North Carolina at Chapel Hill, Fall 1997, available at www.unc.edu/~whisnant/appal/ 

Sylfal97.htm. Links to the maps are under Class 2, Defining the Region I. 

13 John Alexander Williams, Appalachia: A History (Chapel Hill: University of North Carolina Press, 

2002), 9. 
Drinking Water and Wastewater in Appalachia 23 

Table 1-1. Population and Area of Each Appalachian State in Comparison with 

Rest of State 

State Pop. in App. 

Counties (2000) 

Percentage of 

Pop. in App. 

Counties 

Area of App. 

Counties 

(sq. miles) 

Percentage of 

Area in App. 

Counties 

Pop. Density (App. 

Counties : Rest of 

State) 

Ala. 2,837,224 64 26,469 51 107 : 64 

Ga. 2,207,531 27 11,601 20 190 : 127 

Ky. 1,141,511 28 17,907 44 64 : 129 

Md. 236,699 4 1,567 16 151 : 619 

Miss. 615,452 22 12,567 26 49 : 64 

N.C. 1,526,207 19 12,016 24 127 : 176 

N.Y. 1,072,786 6 11,909 25 90 : 488 

Ohio 1,455,313 13 14,338 35 101 : 369 

Pa. 5,819,800 47 36,899 81 158 : 764 

S.C. 1,028,656 26 3,991 13 258 : 111 

Tenn. 2,479,317 44 19,736 47 126 : 144 

Va. 665,177 9 10,369 26 64 : 218 

W.Va. 1,808,344 100 24,229 100 75 : — 

Appalachia 22,894,017 24 203,598 38 112 : 219 

Source: Data from Census Bureau, Census 2000, Summary File 1, Table GCT-PH1-R. Population, 

Housing Units, Area, and Density: 2000 (last visited 12 May 2005), available at http://factfinder. 

census.gov/. 

Pennsylvania residents constitute the largest proportion of the Appalachian regional 

population (25 percent), distantly followed by Alabama (12 percent), Tennessee (11 

percent), and Georgia (10 percent). Maryland has the smallest proportion (1 percent). 

The region as a whole, some 200,000 square miles in area, includes water and 

wastewater systems at every scale and level of funding and sophistication present in the 

contemporary United States. Appalachia clearly is not homogeneous. Its large size 

makes statements about watersheds in the region as a whole necessarily broad and 

often over generalized. In conjunction with this study, ARC staff laid U.S. Geological 

Survey data over an ARC county-by-county delineation to produce a map of 

“physiographic provinces” in Appalachia. On the largest scale, these are the 

Appalachian Highlands, the Interior Plains, and the Atlantic Plain. They can be broken 

down further into seven provinces (see Figure 1-2): 

Appalachian Highlands

 Appalachian Plateaus 

 Valley and Ridge 

 Blue Ridge 

 Piedmont 

Interior Plains

 Interior Low Plateaus 

 Central Lowland 

Atlantic Plain

 Coastal Plain 
24                                                                Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 25 

The UNCEFC research team made use of this division for some calculations of needs 

and some discussions of environmental setting. It should serve as an independently 

useful device for further analysis of Appalachian issues related to the environment. 

Political jurisdictions, particularly states and counties, also are important analytic 

units in this report. Much of the relevant data that the research team has analyzed is 

collected by these jurisdictions. Integrating the data with data on physiographic 

provinces or comparing them in any way with the data collected by other jurisdictions 

is difficult. However, the data often are the only and best data available on a given issue 

of environmental finance. Furthermore, much of the policy making and evaluation that 

this report aims to assist is and will be done by state and local jurisdictions, for whom 

these political jurisdictional boundaries are important. 

This report occasionally refers to river basins and smaller watershed units, 

particularly in discussing issues of ambient water quality in the region. On the smallest 

scale, the report discusses the problems and the projects of particular utility systems 

and communities. Water and wastewater services themselves represent a juncture 

between human activity, which is delimited by politically defined service boundaries, 

and the environment, which is delimited by physiographic boundaries. So different 

views of the region and its subregions are needed for a useful discussion of water and 

wastewater services. 

Limits of the Data 

Much of the effort behind this report went into integration of various databases that 

describe water and wastewater funding needs and sources across the region, as well as 

community and household characteristics. These databases have typically been 

compiled by different agencies, for different purposes, with different methodologies, 

and sometimes they have different degrees of reliability. The UNCEFC research team 

has tried to note, where appropriate, particular problems with data sets and the 

integration of databases. 

Even assuming that data from these disparate sources can be reliably integrated, 

there are overall conceptual limitations that the reader should understand. First, in the 

context of water and wastewater services, definitions of “need” vary widely. Most 

compilations of needs estimates focus exclusively on existing centralized systems, 

ignoring the needs of private well users and others not on centralized systems. Few 

data are available on unserved areas. In the scattered Appalachian places where careful 

surveys have been made—for example, in Weaverville, North Carolina (as reported in 

the case study in appendix E)—substantial numbers of people have failing onsite 

systems or no wastewater treatment systems at all. Appalachia has particularly high 
 Drinking Water and Wastewater in Appalachia 26

needs outside existing centralized systems, so it is reasonable to assume that the 

national and state needs surveys that the research team has integrated into this report 

underreport overall needs for the region, perhaps substantially. Historically, to the 

extent that studies of Appalachia focused on water and wastewater issues at all, they 

tended to be concerned mostly with plumbing and little with wastewater handling, 

water quality, or drinking-water quality. 

Finally, the study reported here (as well as all the state and federal studies of funding 

gaps of which the research team is aware) focuses primarily on capital financing, not on 

operational funding. There is an important relationship between capital needs and 

operational funding: the better a system’s assets are operated and maintained, the 

longer they last, and the lower the capital funding the system will need over time. Many 

water and wastewater professionals would say that the human capital needs for system 

operation and maintenance—that is, the needs for hiring and retaining skilled 

operators—are the biggest determinants of the adequacy of water and wastewater 

services. However, neither this study nor the needs databases and reports to which it 

refers really grapple with the human capital needs of Appalachian systems or their 

ongoing problems with funding for operations and maintenance. This does not suggest 

that these issues are not critical, but the extant databases give little insight into them. 

Similarly this report mentions but does not dwell at length on (1) the need for 

adequately funded regulatory systems to ensure that water and wastewater collection 

and treatment systems are working as they are supposed to work; (2) the magnitude of 

funding needed to restore watersheds and groundwater that are impaired by past 

pollution or uncontrolled development; and (3) the similar magnitude of funding 

needed for improved handling of stormwater, both to lessen the risk of flooding and to 

reduce the pollutant loading of the region’s streams from surface runoff. These are all 

important components of the full picture of water and wastewater system needs for the 

region and the country, but they are not adequately captured in the data that the 

UNCEFC research team has integrated to arrive at capital needs estimates. Once again, 

then, the estimates in this report quite likely underestimate the true needs, probably by 

a large amount. 
27

2 

Water and Wastewater Services in Appalachia 

In his classic 1940s study of Beech Creek (actually Clay County) in eastern Kentucky, 

the central part of Appalachia, James S. Brown noted, 

All streams are polluted, and the people of the area get water from springs and shallow wells. These 

are sometimes inconvenient distances from the house and often go dry in summer, making even 

longer trips for drinking water necessary. Some, but not all, families had privies; others just went in 

the bushes.14 

This image of an area where each family fended entirely for itself in obtaining drinking 

water and disposing of wastewater, frequently with awful results for families and the 

collective good, persisted through the era of the Great Society and Volunteers in Service 

to America and endures today. In truth, it is not dead for the most distressed 

communities in the Appalachian Highlands and the most remote rural residents, those 

at the “head of the hollow.” 

On the other hand, many people in the region now are served by modern, centralized 

systems for water and wastewater, and their problems are different: how to maintain 

and operate the systems efficiently and how to raise capital for periodic major 

investments and repairs. So, as with almost everything about Appalachia, presenting a 

single picture of how water and wastewater services are delivered is at best misleading. 

One must delve deeper to see the different types of service delivery, their distribution, 

and their accompanying problems. 

Drinking Water 

Households in Appalachia rely primarily on community water systems or individual 

wells for their drinking water.15 However, several parts of Appalachia report having 

incomplete plumbing, an indication that households in these areas may have no access 

 

14 James S. Brown, Beech Creek: A Study of a Kentucky Mountain Neighborhood (Reprint, Berea, Ky.: Berea 

College Press, 1988) 27. 

15 A “community water system” is a “public water system” (that is, a system providing water to the 

public for human consumption) that “serves at least 15 service connections used by year-round residents 

of the area or that regularly serves at least 25 year-round residents.” Safe Drinking Water Act, 42 U.S.C. § 

300f(16) (2004). 
 Drinking Water and Wastewater in Appalachia 28

to drinking water at their residences. The highest percentages of households without 

complete plumbing are in Kentucky, Pennsylvania, and West Virginia. Cameron 

County, in Pennsylvania, has the highest proportion of its population without indoor 

plumbing, at 23 percent.16 This compares with about 1 percent of households nationally 

without complete plumbing in 2000. 

Although the majority of Appalachia’s population (75 percent) is served by 

community water systems, wells still are the predominant source of water in many 

areas of the region. In parts of western North Carolina and western Virginia, less than 

25 percent of the population is served by community water systems (see Figure 2-1). 

The technologies and the treatment systems used by community water systems vary, 

depending on the type and the quality of source water, the age of the facility, and the 

size of the facility. Systems that treat surface water use a variety of physical and 

chemical processes, including sedimentation, filtration, and disinfection. Many in 

Appalachia and across the country have modified their disinfection systems over the 

last decade to meet more stringent regulations. Some still depend on the traditional 

method, chlorination. Others have implemented new systems, such as ozonation. 

Groundwater systems are common throughout Appalachia. In general, they employ 

simpler treatment systems than surface water systems do. The typical small 

groundwater system in a community includes wells, pumps, and facilities for 

disinfection but not for filtration or sedimentation. 

The well systems of individual households have some similarities with community 

systems. Normally, though, they do not have disinfection processes, making the 

protection of private wells even more important. 

Many states in Appalachia have made expansion of coverage by a community water 

system a policy priority. As a result, over the last fifteen years, the region has seen 

significant gains in the number of people served by community water systems to 74 

percent of the population, but still lags significantly behind national coverage (85 

percent of the population) (see Figure 2-2) 17. 

 

16 Census Bureau, Census 2000, Summary File 3, Table H47. 

17 U.S. Geological Survey, Water Use Data 2000, county-level data, available at 

water.usgs.gov/watuse/data/2000/index.html. 
Drinking Water and Wastewater in Appalachia                                                                                                         29
30             Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 31 

A little less than 10 percent (5,234) of the nation’s 54,064 community water systems 

are in Appalachia (see Table 2-1). Fourteen percent of the nation’s medium-sized 

systems (those serving 3,301–10,000 people) are in the region, compared with only 6 

percent of the nation’s very large systems (those serving more than 100,000). 

Table 2-1. Community Water Systems in Appalachia and U.S. 

Community Water System (CWS) Classification: 

Population Served per CWS 

Very 

Small 

500 or less

Small 

501– 

3,300 

Medium

3,301– 

10,000 

Large 

10,001– 

100,000 

Very 

Large 

> 100,000 Total 

Number of CWSs in Appalachia 2,621 1,586 644 363 20 5,234 

Percentage of CWSs in Appalachia 50 30 12 7 0 100 

Percentage of CWS–served population in 

Appalachia 

 2 12 19 44 23 100 

Number of CWSs in U.S. 31,688 14,149 4,458 3,416 353 54,064 

Percentage of CWSs in U.S. 59 26 8 6 1 100 

Percentage of CWS–served population in 

U.S. 

 2 8 10 37 44 100 

Percentage of U.S. CWSs in Appalachia 8 11 14 11 6 10 

Source: Data from Environmental Protection Agency, SDWIS, database for 4th quarter, fiscal year 2003, 

frozen in January 2004; downloaded from www.epa.gov/OGWDW/data/pivottables.html and compiled 

by UNCEFC

Nationally, 242 million people (85 percent of the country’s population) obtain their 

water from community systems.18 Most receive it from large or very large community 

systems (those serving more than 10,000 people).19 Seven percent of the nation’s 

systems serve 81 percent of the people who are served by such systems (see Table 2-1). 

In 1995, seventy-five percent of the Appalachian population was served by 

community water systems. Thus the region was more dependent on onsite water 

systems than the nation as a whole was. 

 

18 U.S. Geological Survey, Water Use Data 2000, county-level data, available at 

water.usgs.gov/watuse/data/2000/index.html. 

19 Environmental Protection Agency, 2000 Community Water System Survey (Washington, D.C.: EPA, 

December 2002), available at www.epa.gov/safewater/cwssvr.html. 
 Drinking Water and Wastewater in Appalachia 32

Furthermore, other aspects of water provision are significantly different in 

Appalachia. For example, the average service size of a community water system in 

Appalachia (3,800 people) is smaller than the average service size of all U.S. community 

water systems (4,900 people). Typically, smaller size means higher unit costs. 

Certain subregions of Appalachia, notably the Highlands of the Blue Ridge (with 

1,937 people per community water system) and the Appalachian Plateaus (with 3,396 

people per community water system), tend to have even smaller facilities, with 

corresponding difficulties obtaining the economies of scale achieved elsewhere in the 

country. In general, the Appalachian portions of each state tend to be served by smaller 

systems than the non-Appalachian portions. For example, the average size of a water 

system in the Appalachian region of Ohio is 43 percent the average size of a system in 

the non-Appalachian region, in terms of population served. 

More people (33 percent) in Appalachia are served by small and medium-sized 

systems (those serving 10,000 or less) than people in the nation (20 percent) are. 

Compared with the rest of the country, far fewer people are served by very large 

systems. Nationally the 353 largest water systems (those serving more than 100,000 

people) provide water to 44 percent of the community water population. In Appalachia 

the 20 largest systems provide service to 23 percent of the community water population. 

Kentucky, which has made reducing its number of small community water systems a 

priority, tends to have fewer systems than most other Appalachian states.20 New York, 

North Carolina, and Pennsylvania have an abundance of small systems. Chautauqua 

County, New York, currently has 76 systems, and Buncombe County, North Carolina, 

57. Every Appalachian county has at least 1 system. Fifty counties have 1 or 2, and 

thirty-six counties have more than 30. (For the number of systems in each Appalachian 

county, see Figure 2-3.) 

Operating and capital costs correlate with the size of a community water system.21 In 

general, the smaller the system, the higher the costs. They also correlate with the type of 

community water system. Such systems fall into three general categories based on their 

source of water: groundwater, which they treat and then distribute; surface water, 

which they treat and then distribute; and water (either ground or surface) that they 

purchase from another system and then distribute. (For the distribution of community 

 

20 Staff of Kentucky Infrastructure Authority, telephone conversations with authors, Fall 2004. 

21 Environmental Protection Agency, Drinking Water Infrastructure Needs Survey: Second Report to 

Congress (Washington, D.C.: EPA, 2001). 
Drinking Water and Wastewater in Appalachia                              33
 Drinking Water and Wastewater in Appalachia 34

Ground w ater 

systems

58%

Surface w ater 

systems

18%

Purchased w ater 

systems (surface 

w ater)

20%

Purchased w ater 

systems (ground 

w ater)

4%

water systems and the population served in Appalachia by source of water, see Figures 

2-4 and 2-5.) Systems that rely on surface water tend to have significantly higher 

operating and capital costs than systems that treat groundwater or systems that 

purchase water. Nationally, 11 percent of the community water systems rely primarily 

on surface water, 74 percent on groundwater, and 15 percent on purchased water. In 

Appalachia, the corresponding proportions are 18 percent, 58 percent, and 24 percent. 

On the whole, 68 percent of the national population is served by the 22 percent of 

systems that receive their water (purchased or not) from surface sources. In Appalachia, 

82 percent of the population served by community water systems is served by the 38 

percent of systems that receive their water from surface sources. 

Figure 2-4. Community Water Systems in Appalachia, by Source of Water 

Source: Data from Environmental Protection Agency, SDWIS, database for 4th quarter, fiscal year 2003, 

frozen in January 2004; downloaded from www.epa.gov/ OGWDW/data/pivottables.html and 

compiled by UNCEFC. Noncommunity water systems are excluded. There were 5,234 community water 

systems in Appalachia in January 2004. 

In sum, community water systems in Appalachia tend to face higher operating and 

capital costs than the national average because of their smaller size and their greater 

reliance on surface water. 

The water treatment facilities that serve the population of Appalachia range in size 

from small groundwater systems that treat several thousand gallons per day with 

packaged chlorinators, to large surface-water treatment plants, such as a facility in 

Pittsburgh, Pennsylvania, that treats 117 million gallons per day (and serves 250,000 

customers). 
Drinking Water and Wastewater in Appalachia 35 

Purchased 

w ater systems 

(surface w ater)

18%

Purchased 

w ater systems 

(ground w ater)

1%

Ground w ater 

systems

17%

Surface w ater 

systems

64%

Figure 2-5. Appalachian Population Served by Community Water Systems, by 

Source of Water 

Source: Data from Environmental Protection Agency, SDWIS, database for 4th quarter, fiscal year 2003, 

frozen in January 2004; downloaded from www.epa.gov/OGWDW/data/pivottables.html and compiled 

by UNCEFC. Noncommunity water systems are excluded. Percentages total to 100% of Appalachian 

population that is served by community water systems. 

Water systems may be owned by public government organizations, such as 

municipalities, counties, and special government districts, or by private 

(nongovernment) organizations. Private owners fall into several categories, ranging 

from for-profit water companies to not-for-profit corporations to ancillary organizations 

that provide water as a secondary responsibility. Although a slight majority of systems 

in the United States are owned by nongovernment private entities, the size of most of 

these systems is small, so the majority of the U.S. population gets its water from public 

systems. 

Forty-seven percent of the community water systems in Appalachia are privately 

owned and operated. They serve 18.3 percent of the community water population 

(compared with 15 percent of the U.S. community water population served by privately 

owned and operated systems). 

In several Appalachian states, the number of private systems and the percentage of 

the population served by private systems are much higher. For example, in Ohio and 

West Virginia, 67 percent and 34 percent, respectively, of the community water 

population are served by private systems. In Alabama, only 2.1 percent of the 

community water population is served by private systems. North Carolina leads 

Appalachia in percentage of private systems, with almost 80 percent of the 482 

community water systems in Appalachia in private hands. However, these systems 

serve only 14.6 percent of the state’s community water population. 
 Drinking Water and Wastewater in Appalachia 36

On a county basis, 65 percent of Appalachian counties (268) have less than 10 percent 

of their community water population served by private systems (see Figure 2-6). 

Pockets of high coverage by private systems occur in Ohio, northeast Pennsylvania, and 

West Virginia. Only 12 of the 104 Appalachian counties in the southern states of 

Alabama, Georgia, Mississippi, and South Carolina have more than 10 percent of their 

community water population covered by private systems. 

The type of ownership can have a significant impact on how systems are managed 

and regulated. Different ownership models result in different eligibilities for funding 

sources, different financial incentives, and different governance structures. Under the 

Safe Drinking Water Act Amendments of 1996, privately owned and operated 

community water systems have access to Drinking Water State Revolving Funds 

(DWSRFs).22 However, many states, such as North Carolina, have state laws that 

prohibit making those funds available to private for-profit systems.23 The U.S. 

Department of Agriculture’s Water and Waste Disposal Loans and Grants Program is 

available to nonprofit private systems but not to investor-owned systems. 

The institutional models for, responsibilities of, and regulations regarding 

government-owned water systems are primarily established at the state level. Thus they 

vary across Appalachia. In West Virginia, government systems include municipalities, 

counties, and public service districts. All these systems must submit their financial 

statements to the state’s Public Service Commission. Public service districts also must 

have their rates and charges reviewed and approved by the commission. In North 

Carolina, government systems include municipalities, counties, and several regional 

models, including water and sewer authorities and sanitary districts. These systems 

must have their financial statements reviewed by the North Carolina Local Government 

Commission, but they have autonomy over their rate-setting practices. 

In some states, such as Kentucky and West Virginia, regional government utility 

models have become increasingly important as systems have consolidated. These 

models have influenced how systems have evolved over the last few years in a number 

of Appalachian states. Models in Kentucky, for example, have facilitated the growth of 

larger regional systems. In North Carolina the number of districts has been relatively 

constant, and municipalities are the main government service providers. In 2002 there 

 

22 Safe Drinking Water Act Amendments of 1996, 42 U.S.C. § 300j-12(a)(2). 

23 See N.C. Gen. Stat. § 159G-3(2) (“applicants” are restricted to local government units or nonprofit 

water corporations that exist solely to provide community water or wastewater services and are eligible 

for funding from the Rural Utilities Service of the U.S. Department of Agriculture). 
Drinking Water and Wastewater in Appalachia                                            37
 Drinking Water and Wastewater in Appalachia 38

were 1,357 special government districts and authorities in Appalachia providing water 

and wastewater services (see Table 2-2). Pennsylvania has more than half of these 

districts. 

Table 2-2. Number of Special Government Districts and Authorities in Appalachia 

 Water Supply Sewerage 

Sewerage and Water 

Supply— Combination of 

Services Total 

Pa. 226 419 127 772 

W.Va. 112 52 43 207 

Tenn. 122 — 12 134 

Ala. 76 — 4 80 

Ky. 52 1 6 59 

Ga. 15 — 14 29 

Ohio 14 6 4 24 

S.C. 14 3 4 21 

Va. 4 7 3 14 

N.C. 4 3 2 9 

Miss. 1 1 2 4 

Md. 1 1 2 4 

Total 641 493 223 1,357 

Source: Census Bureau, Governments Integrated Directory of the 2002 Census of Governments, 

available at www.census.gov/govs/www/gid2002.html. Data on special district governments 

downloaded and compiled by UNCEFC using Type 4 and Function Codes 91 (Water Supply), 80 

(Sewerage), and 98 (Sewerage and Water Supply – Combination of Services). 

Several studies have gathered data on the age and the condition of community water 

systems across the country. An EPA survey suggests that large systems tend to have a 

higher percentage of older pipe than small systems do (see Table 2-3). 
Drinking Water and Wastewater in Appalachia 

Table 2-3. Percentage of Pipe in Each Age Category, by Ownership 

Ownership Type System Service Population Category 

100 or 

less 

101– 

500 

501– 

3,300 

3,301– 10,000 

10,001– 

50,000 

50,001– 100,000 

100,001–

500,000 

Public Systems Percentage of Pipe that is:  Less than 40 years old 76.3 81.5 81.1 77.6 76.2 65.2 61.4  Between 40 and 80 years old 23.6 18.3 17.5 18.4 19.7 26.9 29.2  More than 80 years old 0.1 0.1 1.4 4.0 4.2 7.9 9.4 Observations 18 72 173 135 122 88 160 Private Systems Percentage of Pipe that is:  Less than 40 years old 92.4 92.8 98.7 96.2 95.8 86.6 56.5  Between 40 and 80 years old 7.6 7.2 1.3 3.3 3.1 12.0 34.1  More than 80 years old 0.0 0.0 0.0 0.6 1.1 1.4 9.4 Observations 137 94 31 19 21 12 14 All Systems Percentage of Pipe that is:  Less than 40 years old 90.6 88.3 85.7 84.3 81.4 70.2 60.9  Between 40 and 80 years old 9.4 11.7 13.3 12.9 15.3 23.4 29.7  More than 80 years old 0.1 0.1 1.0 2.8 3.4 6.4 9.4 Observations 155 166 204 154 143 100 174 

Source: Reprinted from Environmental Protection Agency, Community Water System Survey 2000, vol. 2, Detailed Tables an

(Washington, D.C.: EPA, December 2002), 68, available at www.epa.gov/safewater/consumer/pdf/cwss_2000_volume_ii

Note: The table reports the percentage of pipe on average in each age category in the nation. It is not the percentage of pi
 Drinking Water and Wastewater in Appalachia 40

Wastewater 

Appalachia’s methods of disposing of wastewater are as diverse as the region’s cultural 

and economic environment. In many areas, households still discharge untreated waste 

directly into streams (“straight-piping”). For example, in 1990 in Madison County, 

North Carolina, 7 percent of the households surveyed used some type of straight-pipe 

system.24 At the other end of the spectrum, Greenville, South Carolina (and 

surrounding areas connected to the Mauldin Road treatment plant of the Western 

Carolina Regional Sewer Authority), provides advanced tertiary treatment to the waste 

that it collects from residents before discharging the waste into Hollow Creek. 

Treatment of drinking water is largely a physical and chemical process. In contrast, 

treatment of wastewater involves using biological systems. Wastewater treatment 

“chains” include settling and clarifying processes (primary treatment) and reduction of 

the biological and pathogen contents (secondary treatment) by exposing the wastewater 

to microorganisms and oxygen. Small communities often rely on “package plants,” 

which involve primary and secondary treatment within a compact physical space. For 

facilities ending treatment at the secondary level, the treated effluent is disinfected and 

absorbed into the surface or discharged into a body of water. All discharging facilities 

are regulated at the federal and state level. Secondary treatment has a limited impact on 

problem nutrients such as phosphorus and nitrogen, so many communities now must 

employ advanced or tertiary treatment to reduce nutrient levels before discharge. 

Wastewater is delivered from households to centralized treatment facilities through 

sewer systems, which include “collector lines” through neighborhoods and major 

“interceptor lines” that serve as the backbone of the system. Aging sewer systems 

throughout the country and in Appalachia often have “inflow” and “infiltration” 

problems that involve rain water entering the sewer system through cracks and 

improperly designed manholes. Inflow and infiltration problems can lead to sewer 

overflows and overwhelmed treatment facilities, if not corrected. In some parts of the 

country, sewer systems were intentionally designed to collect rain water in addition to 

wastewater. These combined-sewer-overflow (CSO) systems now are granted permits 

by the EPA, and under the permits they must be modified or separated at huge expense 

to the system owners. 

Small household systems that use septic tanks have self-contained treatment facilities 

on their property. Wastewater is typically collected in a tank that allows solids to 

separate out, provides some biological treatment, and allows relatively clear wastewater 

to be absorbed into the ground through a drainage facility. Like centralized systems, 

 

24 Estimates from Census Bureau, Census 1990, Summary File 3, Tables H23, H24. 
Drinking Water and Wastewater in Appalachia 41

these systems may develop problems, ranging from septic tanks that get clogged 

because they are not emptied of solids, to drainage fields that lose their absorptive 

capacity and discharge clear but pathogenic effluent, which bubbles onto the surface. In 

many parts of Appalachia, space or soil constraints limited what households could 

install, and some individual systems are nothing more than a straight pipe that runs 

directly to a stream. 

How one characterizes wastewater disposal depends on one’s perspective. People in 

households without indoor plumbing may view the world as divided into “flushing” 

and “not flushing.” Environmentalists may believe that the degree (or lack) of treatment 

is the most important variable. Regulators may explain the wastewater universe by 

whether or not a system discharges to surface water. The variation in wastewater 

systems and the lack of national data on them make quantifying the differences 

between Appalachia and the United States as a whole significantly more difficult than it 

is for water systems. 

The last time that individual households were asked to indicate whether or not they 

were connected to a public sewer system was during the 1990 Census. About 75 percent 

of U.S. households reported being served by public sewers, versus 52 percent of 

Appalachian households. At the county level, sewerage coverage in Appalachia ranged 

from 2 percent in Bland County, Virginia, to 89 percent in Ohio County, West Virginia. 

In 1990, coverage was lowest in the Blue Ridge area of Appalachia and in eastern 

Kentucky (see Figure 2-7). 

The lack of public sewers in Appalachia is not a problem in itself, in fact the use of 

well designed and maintained onsite systems such as septic tanks are considered by 

many to be a more appropriate and cost effective means of wastewater treatment for 

many rural communities.25 Unfortunately, surveys of existing septic systems continue 

to suggest that many onsite systems are improperly designed and more prone to failure 

than centralized sewers.26 

 

25 Craig Lindell, Decentralized Wastewater Management, Public Management 87:6, 33-35 (July 2005). 

26 National Environmental Services Center, A Summary of the Status of Onsite Wastewater Treatment Systems 

in the United States During1998: National, Regions I through X, (Morgantown, WV: National Small Flows 

Clearinghouse, 2001).
42                            Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 43

Documenting the prevalence of public sewers or conversely the prevalence of onsite 

systems remains a major challenge. Regulatory (and documenting) responsibility for 

onsite systems normally rests with county health departments with little accurate data 

aggregation done at the state, let alone national level. The US EPA maintains coverage 

data for centralized systems that suggests current centralized wastewater coverage (50 

percent) have not changed that much since the 1990 Census (52 percent). However, 

when the EPA data is used to analyze coverage for specific counties, the limits of the 

more recent EPA data becomes apparent with many Appalachian counties appearing to 

have more people covered by centralized systems than are reported to live in the 

county.27 

EPA reports data on publicly owned wastewater treatment facilities by the current 

flow rate at the facility (see Table 2-4). Eleven percent of the nation’s wastewater 

treatment facilities are in Appalachia. Only 29 percent of the Appalachian population 

whose wastewater is centrally collected have facilities that treat more than 10 million 

gallons per day, compared with 52 percent for the United States as a whole. In other 

words, the larger treatment facilities outside Appalachia connect more people per 

facility than those in Appalachia do. Appalachia accounts for 34 percent of the national 

facilities that treat less than 10 million gallons of sewage per day. The smallest 

treatment facilities (constituting 79 percent of all facilities) collect sewage from only 26 

percent of the connected Appalachian population. 

Table 2-4. Publicly Owned Wastewater Treatment Facilities, by Flow Rate, 2000 

Flow Rate (in MGD) 0.001–0.1 0.1–1.0 1.0–10 10–100 > 100 Total 

Number of treatment facilities in 

Appalachia 

 550 871 354 27 1 1,803 

Percentage of treatment facilities in 

Appalachia 

 31 48 20 1 0.1 100 

Percentage of population receiving 

collection from treatment facilities 

in Appalachia 

 4 22 45 22 7 100 

Number of treatment facilities in 

U.S. 

 6,583 6,462 2,665 487 46 16,255 

Percentage of treatment facilities in 

U.S. 

 40 40 16 3 0.3 100 

Percentage of population receiving 

collection from treatment facilities 

 2 12 32 37 17 100 

 

27 Environmental Protection Agency, Clean Watersheds Needs Survey 2000 Standard Report – Facilities in 

Operation, available at http://cfpub.epa.gov/cwns/populationp.cfm. Data on population presently 

served by publicly owned wastewater treatment facilities currently in operation compiled and analyzed 

by UNCEFC. County population estimates were obtained from Census 2000 Summary File 1 Table P1. 
 Drinking Water and Wastewater in Appalachia 44

Flow Rate (in MGD) 0.001–0.1 0.1–1.0 1.0–10 10–100 > 100 Total 

in U.S. 

Percentage of U.S. treatment 

facilities in Appalachia 

 8 13 13 6 2 11 

Source: Data from Environmental Protection Agency, Clean Watersheds Needs Survey 2000 (Washington, 

D.C.: EPA, 2003), compiled by UNCEFC.

Note: MGD = millions of gallons per day. 

More than 4,000 facilities (both in operation and planned) are in the CWNS database 

for Appalachia (see Figure 2-8). Each state is responsible for identifying the facilities 

that are entered into this database, and the choice of facilities to include varies from one 

state to another. Despite this limitation, the map helps illustrate the areas of Appalachia 

that are served or will be served by community wastewater systems. 

Despite the expansion of wastewater systems in some areas of Appalachia, septic 

tank systems still are abundant. In 1990, households in the region were as likely to have 

a septic tank as they were to be connected to a public sewer system. Four million 

households in the region used septic tank systems in that year. (For the number of 

septic tanks per square mile for counties in Appalachia, see Figure 2-9.) 

In 1990, about 70 percent of the counties in Appalachia had more than 50 percent of 

their households served by onsite systems such as septic tanks or unlined systems 

commonly referred to as “cesspools” (see Figure 2-10). These systems served more than 

75 percent of households in counties along the Blue Ridge and in the Valley and Ridge 

areas, from northern Georgia to southwestern Virginia (see Figure 2-11). 
Drinking Water and Wastewater in Appalachia                                       45
46              Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 47

20

227

79 92

0

50

100

150

200

250

25% or less 26 ‐ 50% 51 ‐ 75% more than 75%

Percent of Households in the County Using Septic Tanks and Cesspools

Number of Counties and Independent

Cities in Appalachia *

Figure 2-10. Percentage of Appalachian Households Using 

Septic Tanks and Cesspools, 1990 

Source: Data from Census Bureau, Census 1990, Summary File 3, Tables H23 and H24. 

* Eight Virginia Independent Cities are analyzed separately, totaling to 418 counties and independent 

cities in Appalachia. 

Ambient Water Quality 

“You are what you drink.” The connection between health, drinking water, and the 

quality of raw water used for drinking is quite clear. In most cases the quality of bodies 

of water receiving discharge is the primary factor that dictates wastewater treatment 

requirements. Some of the highest-quality and most outstanding resource waters in the 

eastern United States are in Appalachia. This is not surprising, given the abundant 

precipitation, the remaining forest cover, and the headwaters location of most 

Appalachian streams. 

 High-quality, high-quantity water is reflected in the diversity of water-dependent 

species, both amphibians and fish. “The southern Appalachians are a world center of 

diversity for salamanders and have 68 species of a unique group of lungless 

salamanders that evolved in this region of well-oxygenated streams and high rainfall,” 
48                 Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 49

write Peter White and colleagues.28 Appalachia is a major contributor to the 

southeastern United States’ status as the richest region for diversity of freshwater fish of 

any temperate area of comparable size in the world.29 

However, as White and his colleagues point out, this diversity is largely attributable 

to the numerous, narrowly restricted endemic species in a lot of the headwater streams. 

Many of these species depend on very good water quality and are accordingly 

threatened by changes in the environment that might not be as significant in ecologies 

involving larger, downstream bodies of water. Thus White and his colleagues find a 

much higher percentage of species endangered or threatened in Appalachia than in 

other parts of the Southeast (see Table 2-5). 

Table 2-5. Endangered or Threatened Species, by Region 

Faunal Region 

Percent of Species 

Endangered or Threatened 

Southern Appalachians 18.3

Interior Plateau 11.4

Atlantic Slope 7.1

Lower Appalachicola River basin 6.3

Lower Mississippi River 6.0

Lower Mobile River basin 4.9

Peninsular Florida 4.1

Source: From Peter White et al., Environments of the Southeast (Delray Beach, Fla.: St. Lucie Press, n.d.), 

available at biology.usgs.gov/s+t/SNT/noframe/se130.htm. 

Some writers, including noted critic of the Appalachian mining industry Harry M. 

Caudill, have viewed Appalachia’s abundance and high quality of water as great 

assets.30 Appalachia is home to the headwaters of almost all the important rivers of the 

eastern United States (see Figure 2-12). Thus whatever happens to Appalachian waters 

has major consequences for the nation as a whole. 

 

28 Peter White et al., Environments of the Southeast (Delray Beach, Fla.: St. Lucie Press, n.d.), available at 

biology.usgs.gov/s+t/SNT/noframe/se130.htm. 

29 Ibid.

30 See Harry M. Caudill, The Watches of the Night (Boston: Little, Brown, 1976), 253–54, on water as the 

future of the region. 
50              Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 51

Appalachia also is home to some serious problems with ambient water quality. 

Recent reports submitted by the Appalachian states to EPA, as required by Section 

305(b) of the Clean Water Act of 1972, contain lists [required by Section 303(d)] of water 

segments in each state that are too polluted to attain their designated use (swimming, 

fish consumption, drinking, aquatic life, and other purposes). The Section 303(d) list is 

updated in even years. The Section 305(b) reports have serious limitations, but given 

that the United States has no real national accounting of the extent and the costs of 

water pollution, they are a reasonable second-best assessment. If a state deems a water 

body to be impaired and includes it in the Section 303(d) list, that water body certainly 

has some significant water-quality problems. West Virginia serves as a good example of 

problems with water quality. All the river basins in West Virginia are in Appalachia, 

and they drain the Appalachian Plateaus province, except for rivers on the east and 

northern borders of the state. West Virginia’s 2004 Section 303(d) list identifies 878 

impaired streams, covering approximately 6,170 stream miles. The most common 

impairments of water quality still are those related to mine drainage, bacterial 

contamination, and acid rain. Mine-drainage streams often are impaired by acidity (low 

pH) and/or elevated concentrations of metals, including iron, aluminum, and 

manganese. Many of these streams also fail tests of biological integrity (ability to 

support aquatic life). 

Mercury deserves special mention. Aerial deposition of mercury is a national 

problem but one with special significance for Appalachia. Mercury contamination in 

fish tissue at levels above health standards is found in every state, and a recent EPA 

study found detectable levels in every single fish sample taken during a broad national 

sampling effort.31 All the Appalachian states have issued fish consumption advisories 

for mercury, especially for pregnant women and for children. 

One of the major sources of this pollution is combustion of coal—hence the special 

significance for Appalachia, especially its coal-producing areas. The Appalachian states 

collectively accounted for 44 percent of the United States’ reported atmospheric 

emissions of mercury and mercury compounds in 2002. Of the top 100 electric utilities 

emitting airborne mercury, 28 were in Appalachia. The total reported emissions of 

mercury from these 28 sources in 2002 equaled 15,643.6 pounds.32

 

31 See EPA’s study website, at www.epa.gov/waterscience/fishstudy, for updated information. The 

first two years of data are analyzed by the U.S. Public Interest Research Group in Reel Danger: Power Plant 

Mercury Pollution and the Fish We Eat (August 2004), available at cta.policy.net/reports/reel_danger/ 

reel_danger_report.pdf. 

32 Data from Environmental Protection Agency, Toxic Release Inventory 2002, available at 

www.epa.gov/tri/tridata/tri02, compiled by UNCEFC. 
 Drinking Water and Wastewater in Appalachia 52

Environmental Characteristics Influencing Service 

Water quality in Appalachia—and therefore the cost of providing water and 

wastewater services—is intrinsically linked to the region’s physical environment. 

Without an understanding of the physical environment’s attributes, fully assessing the 

current and future challenges for water and wastewater service is impossible. The 

physiographic province map (Figure 1-2) includes shaded relief showing topography in 

Appalachia. The region includes all the mountain areas of the eastern United States that 

are south of New England. Also, it extends into piedmont terrain on the east and into 

interior plains on the west and the south. Topology, geology, soils, precipitation, and 

groundwater are intimately related. Ultimately they are important to consideration of a 

region’s comparative advantages, disadvantages, and costs in delivery of water and 

wastewater services. Appendix F discusses these environmental factors in detail by 

physiographic province. The remainder of this chapter provides an overview of the 

interplay of these characteristics in Appalachia and offers some specific illustrations in 

the various provinces.33 

Most of the environmental factors in Appalachia lead to higher costs, especially in the 

Highlands. Subsurface conditions often are hard rock, making installation and repair of 

pipes relatively expensive. Groundwater typically occurs in fractures of bedrock, rather 

than in large, deep aquifers that are predictable in yield and depth. Frequently, soils are 

thin and unsuitable for onsite waste systems. Slopes are pervasive and often steep, 

sometimes requiring more and larger pumps and leading to a dispersed population, as 

settlements concentrate linearly along river bottoms. 

Appalachian water quality suffers disproportionately from acid rain, especially of 

sulfates. The acid water can be buffered for drinking. However, it takes a toll on the 

region’s aquatic life. 

Other airborne pollutants, such as mercury (discussed earlier), are potentially more 

serious in the region than they are nationally. Further, there are areas of elevated, 

naturally occurring radionuclides in the groundwater. The mercury, the radionuclides, 

historically rapacious extractive industries, and widespread inadequacies in wastewater 

handling all contribute to significant water-quality problems in the region. 

 

33 Most of the information in this chapter on geology and its consequences for the water resources of 

Appalachia is extracted from Henry Trapp Jr. and Marilee A. Horn, Atlas of the United States: Delaware, 

Maryland, New Jersey, North Carolina, Pennsylvania, Virginia, West Virginia (Washington, D.C.: U.S. 

Geological Survey, 1997), chap. 730-L (available at capp.water.usgs.gov/gwa/gwa.html), along with 

related information from other authors of the U.S. Geological Survey’s atlases for the relevant 

physiographic regions, including chapter 730-K for the Appalachian Plateaus and chapter 730-G for the 

southern portions of the Appalachian Plateaus as well as the Atlantic and Interior Plains. 
Drinking Water and Wastewater in Appalachia 53

On the positive side of the ledger, the region receives ample precipitation, and as the 

headwaters area for the entire eastern United States, it faces fewer problems with 

upstream contamination than communities in the lower Piedmont, Coastal Plain, and 

Mississippi River corridor face. The corollary of this fact, though, is that the quality of 

Appalachian waste treatment is linked directly to the costs and the risks of surface 

water treatment downstream, in the rest of the eastern United States. 

Another positive environmental factor is that the soils support an abundance—

indeed, a huge diversity—of plant life, notably trees, both hardwoods and softwoods. 

Where the forest cover has been restored since its historic clearing from 1870 to 1930, or 

where it has expanded as a result of the reduction in grazing on ridges, the canopy and 

the riparian vegetation help stabilize soils and minimize suspended sediment in rivers 

and streams. 

The Appalachian Plateaus province provides a good illustration of the interplay of 

environmental features and drinking water and wastewater service. The province is 

characterized by high, sharp ridges, low mountains, and narrow valleys. In the more 

southerly part of the province, geological processes have produced long, steep ridges 

running parallel from southwest to northeast. Elevation of the Highlands ranges from 

1,000 to 4,500 feet, with a few peaks higher. Local relief generally ranges from 1,000 to 

2,500 feet. The bedrock is overlain by residuum, colluvium, and alluvial material. 

Sandstone and some of the tougher carbonates hold up most of the upland portions; 

weaker carbonates and shale underlie most valleys. 

Most of the precipitation that falls on the Plateaus moves quickly down the slopes, 

rather than sinking into the typically thin soils. Thus there is not as ample a bedrock 

aquifer as there is in the Valley and Ridge province. 

The chemical quality of water in the freshwater parts of the bedrock aquifers is 

variable but usually satisfactory for municipal supplies and other purposes. Most of the 

water in the upper parts of the aquifers is not greatly mineralized and is suitable, or can 

be made suitable, for most uses. However, fresh groundwater generally circulates only 

to shallow depths. In much of the area, saline water or brine is not far below the land 

surface. Around Pittsburgh for example, wells drilled deeper than 100 feet below the 

level of the nearest major stream often yield saline water. 

In southwestern Pennsylvania the rocks nearest the surface are mostly coal-bearing 

formations that consist of sandstone, shale, conglomerate, clay, coal, and minor 

limestone. The sandstones are the most productive aquifers, although coal beds and 

limestones also yield water. The limestones, however, are thin compared with those of 

the Valley and Ridge province. 
 Drinking Water and Wastewater in Appalachia 54

In the Appalachian Plateaus, active, underground mining of coal disturbs the natural 

system of groundwater flow. Mines use artificial drains to dispose of unwanted water. 

Mines can create new fractures and thus increase the permeability of the soil. When the 

drains are effective, they can lower the regional water table, and the directions of 

groundwater flow can change in some cases until flow moves across former 

groundwater divides into adjoining basins. Groundwater tends to flow toward mines, 

which usually have pumps removing water from them. Adverse effects of mine 

drainage on well yields are greatest where the mines are not much deeper than the 

bottoms of the wells and where vertical fractures connect the aquifers and the mines. 

Abandoned mines can collapse. This causes fracturing of the rocks that overlie the mine 

and also may leave a depression on the land surface.34

Land Use and Land Cover 

The fecund forest of Appalachia has been noted since the days of the earliest European 

visitors. For example, botanist John Banister wrote in 1680, 

This is a Country excellently well water’d & so fertile that it does or might be made yield anything 

that might conduce to the pleasure or necessity of life..35

As recently as 1902, James Wilson, a trained observer, noted that 

remote from the railroads the forest on these mountains is generally unbroken from the tops of 

ridge and peak down to the brook in the valley below, and to-day it is in much the same condition 

as for centuries past.36

 

34 Trapp and Horn, Atlas of the United States, chap. 730-L. 

35 John Banister, Letter to Dr. Robert Morison, reprinted in The Height of Our Mountains: Nature Writing 

from Virginia’s Blue Ridge Mountains and Shenandoah Valley, eds. Michael Branch and Daniel Philippon 

(Baltimore: Johns Hopkins Press, 1998). 

36 James Wilson, Report on the Forests and Forest Conditions of the Southern Appalachian Region 

(Washington, D.C.: Government Printing Office, 1902), reprinted in The Height of Our Mountains: Nature 

Writing from Virginia’s Blue Ridge Mountains and Shenandoah Valley, eds. Michael Branch and Daniel 

Philippon (Baltimore: Johns Hopkins Press, 1998),. Wilson was secretary of agriculture under Presidents 

McKinley, Roosevelt, and Taft. He personally visited the region and indicted the forestry practices then 

under way, in text and photographs. 
Drinking Water and Wastewater in Appalachia 55

With the coming of the railroads from 1870 to 1930, though, the forests of the region 

were nearly all cut. This clear-cutting had profound negative effects on water quality 

and quantity—namely, huge losses of already rare topsoil, and devastating floods.37 

Woody cover across the region may be increasing. However, some experts believe 

that forest cover peaked in the 1960s and now is declining because of changes in the 

frequency of fires and the aging and demise of old-field pine that colonized many 

abandoned farms across the region in the mid and late nineteenth century.38 Timber is 

an integral component of the region’s water-quality system. 

Summary 

As with everything else about Appalachia, simple generalizations about water quality 

are impossibly misleading. There are areas of high-quality water and water uses in the 

eastern United States, and there are areas so contaminated by decades of uncontrolled 

discharges that the prospect for cleanup at any foreseeable time is grim. 

What is perhaps most important to an understanding of water and wastewater 

funding in the region is that most expressed needs for capital spending account 

minimally, if at all, for the costs of watershed restoration. If Appalachia is ever to attain 

Harry Caudill’s vision of a region that would use its water to draw urbanites and their 

money from all over the eastern United States, much more funding will have to be 

found to improve ambient water quality. 

 

37 See Ronald D. Eller, Miners, Millhands, and Mountaineers: Industrialization of the Appalachian South, 

1880–1930 (Knoxville: University of Tennessee Press, 1982); Ronald L. Lewis, Transforming the Appalachian 

Countryside (Chapel Hill: University of North Carolina Press, 1998); Ronald L. Lewis, “Railroads, 

Deforestation, and the Transformation of Agriculture in the West Virginia Back Counties, 1880–1920,” in 

Appalachia in the Making: The Mountain South in the Nineteenth Century, eds. Mary Beth Pudup, Dwight B. 

Billings, and Altina L. Waller (Chapel Hill: University of North Carolina Press, 1995), 297–320; John 

Alexander Williams, Appalachia: A History (Chapel Hill: University of North Carolina Press, 2002). 

38 Peter White et al., Environments of the Southeast (Delray Beach, Fla.: St. Lucie Press, n.d.), available at 

biology.usgs.gov/s+t/SNT/noframe/se130.htm. 
 Drinking Water and Wastewater in Appalachia 56

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57

3 

Assessments of Needs for Water and 

Wastewater Infrastructure in Appalachia 

The dialogue concerning water and wastewater services is usually dominated by 

discussion of needs for physical capital infrastructure. This is not surprising, given that 

a new or expanded water or wastewater treatment plant, a new sewerage collection 

system, or an expanded water distribution system often is the most expensive public 

project carried out in or by a community. In addition to having large price tags, these 

projects bring pride, improved health, and economic development. When funds for the 

projects are not available, public leaders often make finding funds their number one 

priority. Water and wastewater needs related to decentralized systems, regulatory 

oversight, training, stormwater handling, source-water protection, watershed 

restoration, and system operation and maintenance rarely get the same attention either 

locally or nationally. As a result of the interest in capital, there are many more surveys 

of capital needs and sources of information on them, than there are of other types of 

needs. 

Over the last ten years, a number of national, state, and advocacy organizations have 

completed water and wastewater infrastructure studies that cover parts of Appalachia 

(for a summary, see Tables 3-1 and 3-2). These studies have varied in scope, purpose, 

and method of implementation. Understanding the variations is crucial in determining 

how to extract and estimate Appalachian needs from the studies. 
58 Drinking Water an

Table 3-1. Differences among National Infrastructure Needs Surveys and Report

Author Title Geographic 

Coverage

Scope (Systems Surveyed or Methodology)

Smallest Geographical Subunit

Report Year

Report Frequency

Time Horizon

EPA Drinking Water Infrastructure Needs 

Survey: 2nd Report to Congress 

Nation 100% of large CWSs, 

American Indian and Alaska Native Village water systems, and extrapolation from of medium CWSs, 599 small CWSs, 100 non–CWSs 

State 2001 Every 4 

years 

20 years 

EPA Clean Watersheds 

Needs Survey 2000 

Nation Surveyed facility list 

includes most centralized discharging facilities and many collection systems 

Utility 2003 Every 4 

years 

Identifieneeds as of 1/1/200varies in horizon 

AWWA Dawn of the 

Replacement Era: Reinvesting in Drinking Water Infrastructure 

Nation Extrapolation from 20 

utilities 

Nation 2001 Special 30 years 
Drinking Water and Wastewater in Appalachia 

Author Title Geographic 

Coverage

Scope (Systems Surveyed or Methodology)

Smallest Geographical Subunit

Report Year

Report Frequency

Time Horizon

CBO Future Investment in 

Drinking Water and Wastewater Infrastructure 

Nation Top-down macro 

estimate 

Nation 2002 Special 20 years 

(2000– 2019) 

EPA The Clean Water and 

Drinking Water Infrastructure Gap Analysis 

Nation DWNS & CWNS plus 

modeled estimates 

Nation 2002 Special 20 years 

(2000– 2019) 

Water Infrastructure Network 

Clean and Safe Water for the 21st Century: A Renewed National Commitment to Water and Wastewater Infrastructure 

Nation Top-down macro 

estimate 

Nation 2000 Special 20 years 
60 Drinking Water 

Table 3-2. Differences among State Infrastructure Needs Surveys and Reports 

Author Title

Geographic 

Coverage

Scope (Systems 

Surveyed or 

Methodology)

Smallest 

Geographical 

Subunit

Report 

Year

Report 

Frequency Time Horizon

West Virginia Infrastructure and Jobs Development Council 

PWS and PWWS Inventory & Needs Assessment Report 2002 

West Virginia 

All 557 CWSs and all 292 community sewage systems 

Utility 2002 Every 3 

years 

Identifieneeds 

North Carolina Rural Center 

Clean Water: Our Livelihood, Our Life 

North Carolina 

405 water and 254 sewer systems in 75 predominantly rural counties 

Utility 1998 Special Identifie

needs 

Ohio Public Works Commission 

Capital Improvement Reports 

Ohio All water or sewer 

systems that apply for funds from OPWC (some Capital Improvement Reports are outdated) 

Utility Lastupdated 

Capital Improvement Reports between 1999 and July 22, 2004 

Continuous 5 years 
Drinking Water and Wastewater in Appalachia 

Author Title

Geographic 

Coverage

Scope (Systems 

Surveyed or 

Methodology)

Smallest 

Geographical 

Subunit

Report 

Year

Report 

Frequency Time Horizon

Kentucky Governor’s Water Resource Development Commission 

Water Resource Development: A Strategic Plan(1999) 

Kentucky All extensions of 

service planned by 2020 (not current infrastructure needs) 

Utility 1999 Special 20 years 

(2000– 2020) 

Kentucky Governor’s Water Resource Development Commission 

Water Resource Development: A Strategic Plan for Wastewater Treatment (2000) 

Kentucky All extensions of 

service planned by 2020 (not current infrastructure needs) 

Utility 2000 Special 20 years 

(2000– 2020) 

Tennessee Advisory Commission on Intergovernmental Relations 

Building Tennessee’s Tomorrow: Anticipating the State’s Infrastructure Needs 

Tennessee All projects during 

2002–2007 costing at least $50,000 

County 2004 Annually 5 years 

(2002– 2007) 
Drinking Water and Wastewater in Appalachia 62 

Scope and Implementing Organizations 

Some surveys estimate national needs, whereas others estimate state or substate needs. 

EPA coordinates the national CWNS and the national DWNS every four years. The 

results of the CWNS conducted in 2000 were published in 2003.39 Included are all 

wastewater capital needs that were present at the time of the survey, regardless of time 

period. The CWNS reports a total national need of $181.2 billion (in 2000 dollars), 

including $161.9 billion for wastewater collection and treatment facilities. The results of 

the DWNS conducted in 1999 were published in 2001. Included are national capital 

needs for 1999-2019.40 The DWNS reports a total national need of $150.9 billion (in 1999 

dollars), including $136.3 billion for the nation’s community water systems and $3.1 

billion for not-for-profit noncommunity water systems. 

EPA also has published an analysis that uses needs studies as well as supplementary 

data and modeling to estimate drinking water and wastewater needs and the 

infrastructure gap for the entire country. The Gap Analysis suggests that the nation’s 

twenty-year needs for investment in wastewater facilities are $331 billion–$450 billion 

(in 2001 dollars). The figure for investment in drinking water facilities is presented as 

$218 billion (in 2001 dollars).41 

The Water Infrastructure Network (WIN) and the American Water Works 

Association (AWWA) carried out national-level studies as well.42 Finally, the 

 

39 Environmental Protection Agency, Clean Watersheds Needs Survey 2000 (Washington, D.C.: EPA, 

2003). 

40 Environmental Protection Agency, Drinking Water Infrastructure Needs Survey: Second Report to 

Congress (Washington, D.C.: EPA, 2001). The 2003 DWNS has been completed. However, the data will not 

be available for analysis until late 2005. 

41 Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap Analysis 

(Washington, D.C.: EPA, 2002). 

42 Water Infrastructure Network, Clean and Safe Water for the 21st Century: A Renewed National 

Commitment to Water and Wastewater Infrastructure (Washington, D.C.: the Network, 2000), available at 

www.amsa-cleanwater.org/advocacy/winreport/winreport2000.pdf; American Water Works 

Association, Dawn of the Replacement Era: Reinvesting in Drinking Water Infrastructure (Denver: the 

Association, 2001). 
Drinking Water and Wastewater in Appalachia 63 

Congressional Budget Office (CBO) carried out an analysis of needs and past studies to 

generate additional numbers.43 

All these studies provide national estimates. Some of them, such as the EPA needs 

surveys, have sufficient data and were carried out in a manner that permits presenting 

needs information at the state level. Others, such as the WIN and AWWA studies, are 

top-down modeling efforts that cannot readily be used to determine subnational needs. 

The EPA needs surveys are carried out primarily by state needs coordinators, and 

each state is responsible for collecting data. The CWNS is done on a system- or facilitywide basis, so state-collected data can be used directly to estimate state needs. The 

DWNS involves some sampling at the state and national levels, so generating state 

estimates requires modeling done at the national level. 

Several states in Appalachia carry out state-level infrastructure needs assessments 

separate from the EPA studies.44 Some, such as Kentucky and West Virginia, collect 

data statewide at the project or system level so that they can generate needs estimates at 

substate levels. Others—for example, North Carolina—rely on sampling and then 

modeling to arrive at a state estimate. The resulting information cannot be easily 

disaggregated at the substate level. 

Finally, some assessments, such as that reported in the Virginia Coalfields Regional 

Water Study, have focused on the need in a particular area of Appalachia.45 The 

organizations responsible for state and regional needs surveys include economic 

 

43 Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure 

(Washington, D.C.: CBO, 2002), available at www.cbo.gov/showdoc.cfm?index=3983&sequence=0. 

44 Kentucky Governor’s Water Resource Development Commission, Water Resource Development: A 

Strategic Plan and Water Resource Development: A Strategic Plan for Wastewater Treatment (Frankfurt: the 

Commission, 1999, 2000); North Carolina Rural Economic Development Center, Clean Water: Our 

Livelihood, Our Life (Raleigh: the Center, 1998); data from Ohio Public Works Commission, Capital 

Improvement Reports, provided on 22 July 2004, and analyzed by UNCEFC; Tennessee Advisory 

Commission on Intergovernmental Relations, Building Tennessee’s Tomorrow: Anticipating the State’s 

Infrastructure Needs (Nashville: the Commission, 2004); West Virginia Infrastructure and Jobs 

Development Council, Public Water Systems & Public Wastewater Systems Inventory & Needs Assessment 

Report 2002 (Charleston: the Council, 2002). 

45 Thompson & Litton, for LENOWISCO and Cumberland Plateau Planning Districts, Virginia Coalfields 

Regional Water Study (Duffield, Va.: LENOWISCO, 1998), available at 

www.lenowisco.org/lenowisco%20library.htm. 
64 Drinking Water and Wastewater in Appalachia 

development groups (as in Maryland, North Carolina, and Tennessee) and funding 

agencies (as in Kentucky and West Virginia). 

Purpose 

The stated goal or purpose of a needs assessment dictates how it is carried out, what 

types of needs are included, and how the data are presented. Surveys such as those 

done by WIN, AWWA, and the North Carolina Rural Economic Development Center 

are primarily used to provide information for policy debate. As a result, these surveys 

tend to be more top-down than other types of surveys. The numbers they generate are 

not very useful in understanding needs in smaller, or different, areas than were covered 

by the original estimate. 

In other cases, survey results are used to allocate capital funds. For example, the 

DWNS is used to determine capitalization grant allocations for states’ DWSRF 

programs. 

Some surveys are used to register needs so that projects can be considered for 

funding. Examples are those conducted in Kentucky, Ohio, and West Virginia (see 

Table 3-2). 

Frequency and Planning Period 

Needs surveys may be done on a one-time basis, periodically, or on an ongoing basis 

(see Tables 3-1 and 3-2). Studies such as the EPA Gap Analysis and the WIN report, and 

state surveys in Kentucky, North Carolina, and Virginia have been commissioned over 

the years to respond to special policy and information needs. The EPA needs surveys 

and state surveys in Tennessee and West Virginia are done at regular intervals. Needs 

databases maintained by funding organizations such as the Kentucky Infrastructure 

Authority, the Ohio Public Works Commission, and the West Virginia Infrastructure 

and Jobs Development Council are updated continually to reflect newly identified 

projects. 

Surveys of capital needs solicit information for stated planning periods, typically 5–20 

years. Surveys that are used to evaluate projects for funding focus on shorter-range 

planning periods. The databases maintained by the Kentucky Infrastructure Authority 

and the Ohio Public Works Commission primarily include needs (facilities) scheduled 

(or desired) to be constructed within five years. Both organizations also collect data for 

longer horizons, but the data are assumed to be incomplete and less accurate. The 

DWNS asks systems to identify all their needs for twenty years. The CWNS requires 

that facility needs be documented and includes all needs documented at the time of the 
Drinking Water and Wastewater in Appalachia 65 

survey, whether they are for five years or longer. Thus the planning period for the 

CWNS varies from facility to facility. 

Methodology 

Understanding the different methodologies provides insight into how data from each of 

the surveys can and should be used to generate accurate estimates for Appalachia. No 

two needs surveys are alike. Some begin with the collection of project estimates at the 

system level, then aggregate them to the state or national level. This bottom-up 

approach is used by the CWNS and, to a lesser extent (because of sampling), by the 

DWNS. 

The CBO classifies reports as top-down or bottom-up. However, many surveys are 

really hybrids of the two techniques.46 For example, the AWWA survey uses a detailed 

engineering analysis of twenty systems to model needs across the country. 

Information at the local level, if used at all, is collected differently for different 

surveys. The EPA provides general guidelines to states in collecting needs information, 

but the actual process varies. Some states hire contractors to collect information or 

conduct analyses. Other states rely almost exclusively on survey responses, with little 

follow-up. Still others visit each surveyed system. 

The North Carolina Department of Environment and Natural Resources takes a very 

active role in the DWNS. EPA sends the department the survey, and the department 

hand-delivers it to systems. The department follows up with site visits to assist systems, 

especially small ones, in filling out the survey. It also conducts local meetings if there 

are several utilities in an area. After it collects the surveys, the department does an 

extensive review of the costs before sending the surveys on to EPA. 

On the other hand, the Maryland Department of Environment uses a private 

contractor to conduct the state’s CWNS. The department collects some data but sends 

them on to the contractor to interpret and review. 

Needs surveys done by state organizations, such as the Kentucky Infrastructure 

Authority and the West Virginia Infrastructure and Jobs Development Council, use a 

variety of methods to gather information. The Kentucky Infrastructure Authority’s 

Water Resource Information System is a database that collects infrastructure data 

through a Water Project Profile system. Individual development districts in Kentucky 

identify water and wastewater needs in their district and enter them as project profiles. 

 

46 CBO, Future Investment. 
66 Drinking Water and Wastewater in Appalachia 

The Water Resource Information System database is used as an electronic clearinghouse 

to connect needs and funding. 

The West Virginia Infrastructure and Jobs Development Council collects needs data 

through its voting members, who meet monthly to assess needs. The council includes 

representatives from the Bureau for Public Health, the Department of Environmental 

Protection, the Water Development Authority, the Housing Fund, and the Economic 

Development Authority. West Virginia’s eleven regional planning and development 

councils assist communities in entering projects into a database that tracks pending and 

funded projects, as well as unserved needs. 

Accuracy 

The current systems for assessing and assigning dollar values to infrastructure capital 

needs are far from perfect. Indeed, there is strong evidence that the estimates, 

particularly for rural systems without planning staff, are less than actual capital needs. 

Lack of incentives to provide accurate information and lack of planning resources at the 

state and local levels are some of the factors that affect the accuracy of the estimates and 

contribute to a general sentiment on the part of state officials that the surveys are 

inaccurate. 

Of all the national surveys and studies, the CWNS faces the most challenges in 

accurately portraying needs. For example, the 2000 CWNS shows a documented need in 

Accident, Maryland, of $206,000. Actual project investments have been significantly 

higher. Between 2001 and 2004, Accident invested $110,000 to correct sanitary sewer 

problems, and in 2004 it received and spent an additional $2.9 million in grants and 

loans to repair and reconstruct its water and wastewater systems. For another example, 

Northfork, in McDowell County, West Virginia, needs a new treatment plant. 

According to the CWNS, however, Northfork has no needs. 

Reasons for missing data can be linked to the manner in which the CWNS is 

implemented and the perceived incentives or disincentives that systems have for 

providing information. Another major factor relates to the capacity of a particular 

system to provide information. Ironically the systems with some of the greatest needs, 

such as Northfork, also have the fewest human and financial resources to identify, plan 

for, or report needs. 

At the time this report was written, Jasper, New York, was about to spend $2.86 

million on a new sewer system. Not only do the town’s needs not appear in the CWNS, 

but the name Jasper does not appear in the comprehensive list of New York systems 

used to identify needs. Jasper is not included because until Jasper spends its money, it 
Drinking Water and Wastewater in Appalachia 67 

does not have a system or a facility. The CWNS is a bottom-up survey beginning at the 

level of existing systems. 

The lack of incentive to respond to surveys affects the DWNS as well, even though 

the information is used for funding allocations. Systems that have not used the State 

Revolving Fund (SRF) programs, or systems that are not allowed access to the SRFs 

(such as private, for-profit systems in North Carolina and West Virginia), have little 

direct incentive to help their state acquire more federal SRF funds.47 

The UNCEFC research team’s interviews with state needs coordinators in the 

Appalachian states highlight the variation in how EPA and state surveys are 

implemented and how the quality of the data is perceived. Perceptions about the CWNS 

ranged from “not worth the paper it is printed on” to being “very accurate” for the 

state. The state whose coordinator perceived the CWNS as “very accurate” approaches 

the CWNS with the belief that Congress might start using it to allocate the federal Clean 

Water State Revolving Fund (CWSRF) monies among the states on the basis of each 

state’s portion of the national needs, as it does with the DWNS. 

The other group of state officials who have the closest ties to these surveys are those 

who manage funding programs, some of whom use the data as part of their funding 

process. One surprising result of the UNCEFC survey was the discovery that many 

funding program managers are unaware of the EPA needs surveys (30 percent of 

respondents were unaware of the DWNS, and 40 percent of the CWNS) despite the use 

of the EPA data to make state allocations. When asked to comment on the accuracy of 

EPA and state surveys, funding program managers had the most doubts about EPA 

survey accuracy and were generally more accepting of the state surveys’ estimates. 

Sixty percent of the respondents said that the state surveys accurately estimate their 

state’s needs, while 70 percent and 60 percent said that the DWNS and the CWNS, 

respectively, underestimate their state’s needs). (For the results of the UNCEFC survey 

of funding program managers, see appendix D.) 

In 1997, EPA carried out follow-up visits in 200 communities included in the 1995 

DWNS and found significant underreporting. As a result, for its Gap Analysis, EPA used 

multipliers that significantly inflated needs survey data to estimate actual needs (see 

Table 3-3). 

 

47 The Safe Drinking Water Act permits private for-profit-systems to access SRF funds. However, many 

states—North Carolina, among them—have enacted state rules that limit access to not-for-profit or public 

government systems. 
68 Drinking Water and Wastewater in Appalachia 

Table 3-3. Adjustment Factors Used by EPA in One Approach to 

Estimating National Drinking Water Needs from 1997 DWNS 

Characterization of Community Water System Pipe Needs Non-Pipe Needs 

Large Systems (serving more than 40,000 people) 1.61 1.49 

Medium Systems (serving 3,300 – 40,000 people) 1.61 1.49 

Small Systems (serving fewer than 3,300 people) 1.00 1.00 

Source: Reprinted from Environmental Protection Agency, The Clean Water and Drinking Water 

Infrastructure Gap Analysis (Washington, D.C.: EPA, 2002), 31. 

At the state level, the situation in North Carolina illustrates the sensitivity of needs 

surveys to the resources that state governments can devote to them. The 1999 DWNS 

occurred at the same time that North Carolina Public Water Supply officials were 

managing the largest public infrastructure funding initiative in the history of the state. 

They had few extra resources to perform follow-up visits. According to the North 

Carolina DWNS coordinator, in 2003 the staff was able to devote considerably more 

effort to follow-up visits. The provisional results of the 2003 needs survey far exceed the 

1999 numbers. That is especially surprising, considering that the state pumped at least 

$388 million into water systems from 2000 to 2003. The likely conclusion is that the need 

was there in 1999 but not captured. 

Data from needs surveys suggest that when states do not have sufficient resources or 

incentives to carry out the surveys, overall numbers are low, and harder-to-reach areas 

such as those found throughout Appalachia are particularly underreported. For this 

reason, in conducting the DWNS, EPA carries out structured visits with a sample of 

small systems (those with fewer than 3,300 customers) rather than relying on stateprovided data. Unlike the DWNS, the CWNS relies on state-collected information for 

small systems. 

The needs results for Tennessee from the 2000 CWNS illustrate the potential 

magnitude of underreporting in some states. Tennessee officials, like many consulted 

for this project, expressed concern that the CWNS is not currently used for a purpose 

that benefits the state and that as a result they find it difficult to make the survey a 

priority. In estimates of the clean water needs of Appalachia, Tennessee is clearly a 

major outlier, with a much lower estimate of needs per capita than the average for 

Appalachia as a whole (see Figure 3-1). The level of reporting in the Appalachian 

counties of Tennessee is low, thereby underestimating Appalachia’s overall needs. The 

data for Tennessee also suggest that when a state is unable to do much follow-up work, 

rural areas with limited staff are likely to report even less in needs, as suggested by the 

sharp disparity between the Appalachian counties’ and the non-Appalachian counties’ 

estimates of needs per capita. 
Drinking Water and Wastewater in Appalachia 69 

$21

$629

$172

$663

Tennessee

A ll 13 States

Appalachain Counties

Non-Appalachian Counties

Figure 3-1. Documented Clean Water Needs per Capita, Tennessee Counties versus 

All Counties in Appalachian States, 2000 

Source: Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Total 

headquarters-accepted needs are used in this analysis. Population estimates from Census Bureau, Census 

2000, Summary File 1, Table P1. 

Undocumented and Unidentified Needs 

The preceding section comments on the underreporting of needs that should have been 

included according to the definition of the surveys. In many parts of Appalachia, a far 

greater issue than underreporting of needs is the purposeful exclusion of needs from 

consideration because of the focus of the surveys and the criteria that they use to define 

needs. For example, capital needs for upgrading or repairing individual septic tanks are 

not systematically included in the CWNS. As described in chapter 2, the average 

Appalachian family is much less likely to be served by a centralized wastewater system 

than the average U.S. family is. 

 Needs data often are presented and used for policy purposes without reference to 

the types of infrastructure needs included in the numbers. Both of the EPA needs 

surveys are oriented toward centralized systems, although some participating states 

include system extensions (extensions of water distribution lines and sewer collection 

lines) aimed at providing service to new customers with existing health or 

environmental problems. Neither survey includes cost estimates for improving existing 

decentralized systems for communities and households. Providing centralized water 

and wastewater services in many parts of Appalachia is not technically or financially 

feasible. However, the existing decentralized systems still require significant capital 

investments, ranging from installation of new systems where straight piping occurs, to 

complete replacement of failed systems. The Kentucky wastewater needs study 
70 Drinking Water and Wastewater in Appalachia 

estimates that $3.5 billion–$7 billion will be needed to bring current onsite systems into 

compliance. 

Two other types of needs that put pressures on local communities but are rarely 

included in needs surveys are infrastructure to accommodate growth and economic 

development. The need for the former is a problem in some southern parts of 

Appalachia that have more than doubled their population in the past 20–30 years. 

Although needs assessments that are used primarily for infrastructure funding, such as 

the DWNS and the assessment of the Ohio Public Works Commission, understandably 

focus on capital infrastructure, policy-oriented studies like the EPA Gap Analysis and 

the CBO study show that operation and maintenance needs also are significant. 

Since many projects identified as needs in Appalachia are for new infrastructure, 

many communities soon will face completely new capital-related operation and 

maintenance needs. The West Virginia Infrastructure and Jobs Development Council’s 

needs inventory in 2002 includes seventy-eight wastewater facilities for utilities or local 

governments that do not currently provide centralized wastewater treatment service. 

Among them are the six new facilities proposed for McDowell County (see Table 3-4). 

The 2000 CWNS needs estimates do not include the $22.3 million in capital needs for the 

new Davy, Dry Fork Public Service District, and McDowell County Commission 

wastewater facilities. Further, in each of these cases, once the facilities are constructed, 

the communities will become responsible for all the costs associated with operating the 

facility, as well as the costs of providing the necessary ancillary services linked to 

billing, customer service, and utility management. Hence the Appalachian needs 

estimates obtained from the federal needs surveys, already not including the capital 

needs required for many of the new facilities in the region, also underestimate the total 

financial needs of the communities by not including the operating and maintenance 

costs of systems that will come online. 

Table 3-4. New Wastewater Treatment Plants and Collection Systems Proposed for 

McDowell County, W.Va. 

System Name Assessment of System Needs Needs 

Anawalt Construct gravity sewer lines, force mains, 3 pump 

stations, etc. 

 $ 4,800,000 

Davy Construct treatment and collection system 2,943,000 

Dry Fork Public Service 

District 

Construct treatment and collection system (Cucumber, 

Bishop, Avondale, Squire, and Bradshaw) 

 13,839,000 

Elkhorn Public Service 

District 

Wastewater collection system 9,146,200 
Drinking Water and Wastewater in Appalachia 71 

System Name Assessment of System Needs Needs 

Ieager Construct treatment and collection system 3,167,000 

McDowell County 

Commission 

Construct treatment and collection system (in Mohawk 

and Panther) 

 5,474,000 

Source: West Virginia Infrastructure and Jobs Development Council, Public Water Systems & Public 

Wastewater Systems: Inventory & Needs Assessment Report (Charleston, WV: the Council, 2002). 
72 Drinking Water and Wastewater in Appalachia 

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73 

4 

Capital Needs for Water and Wastewater Infrastructure in Appalachia 

Despite the number of needs assessments that have covered parts of Appalachia, no one 

existing survey is perfectly suited for generating needs estimates for Appalachia as a 

whole. Different studies provide complementary and occasionally conflicting 

information about the needs facing Appalachian communities. Furthermore, the 

UNCEFC research team’s examination of selected local communities across the region 

suggests that even the most comprehensive needs efforts often fail to portray the reality 

of the on-the-ground challenges facing communities. 

Those limitations aside, having even rough estimates can provide Appalachian policy 

makers with a basic understanding of how the region compares with the rest of the 

country and, more important, how the needs relate to current resources for public 

capital funding (explored in detail in chapter 5). This chapter offers estimates of the 

portion of needs from state and national studies that can be reasonably attributed to 

Appalachia. 

The Clean Watersheds Needs Survey 

The CWNS is the only needs survey that covers all of Appalachia and includes data that 

can be accurately presented at the county level without additional modeling. The 

documented needs for each Appalachian county based on the 2000 CWNS data appear 

in appendix A. The CWNS covers nine categories of needs (see Table 4-1). Categories I–

V focus on the needs for infrastructure to collect and treat wastewater that are most 

commonly included in state inventories. Categories VI–IX cover needs that are linked to 

activities affecting surface-water quality but that are not normally considered water and 

wastewater needs. 

Table 4-1. CWNS Needs Categories 

Category Description 

I Secondary wastewater treatment 

II Advanced wastewater treatment 

III-A Infiltration/inflow correction 

III-B Sewer replacement/rehabilitation 

IV-A New collector sewers and appurtenances 

IV-B New interceptor sewers and appurtenances 

V Combined-sewer-overflow correction 

VI Stormwater management programs 
74 Drinking Water and Wastewater in Appalachia 

Category Description 

VII Non-point-source pollution control 

VIII Confined animal-point-source pollution control 

IX Mining-point-source pollution control 

Source: Environmental Protection Agency, Clean Watersheds Needs Survey 2000 (Washington, D.C.: EPA, 

2003). 

The moment that a community decides to collect wastewater from individual homes, 

it becomes responsible for a chain of interrelated facilities and processes, all of which 

have associated capital costs. In most cases, “collector” lines carry wastewater from 

homes along side streets to larger “interceptor” lines. As these lines age, they develop 

cracks and holes that allow water to flow in freely or to filter in. Even the newest 

systems have some problems with “inflow” and “infiltration,” but many older systems 

have so many infiltration problems that they become completely overloaded during wet 

weather. When that happens, a mixture of untreated wastewater and inflow water 

overflows from manholes or overloads small treatment plants, resulting in insufficient 

treatment before being discharged. Wastewater treatment plants employ different 

treatment technologies. However, almost all plants rely on the same physical and 

biological processes to carry out primary and secondary treatment. Treatment 

standards for wastewater effluent are highly dependent on where the wastewater is 

discharged. Communities that discharge wastewater into impaired or nutrient-sensitive 

waters often are required to implement advanced treatment to improve effluent quality 

and to reduce further the concentration of nutrients like phosphorus and nitrogen. 

The data that EPA collects and reports for categories I–V are based exclusively on 

actual documented needs, whereas the data that it collects and reports for categories VI-

–IX include needs that were calculated through modeling. Both treatment facilities and 

collection systems planned and in operation (hereafter referred to as “facilities”) were 

listed in the 2000 CWNS.48 Thirty-eight percent (1,571) of Appalachia’s 4,110 included 

facilities reported having project needs (see Table 4-2). The needs ranged from a few 

thousand dollars for improvements in collection systems in dozens of small 

communities, to more than $1.4 billion for the Jefferson County (Ala.) Valley Creek 

Wastewater Treatment Plant. (Of the ten project needs with the highest price tags, 

Jefferson County, which includes the city of Birmingham, has four, totaling $2.1 billion. 

That is 15 percent of the total category I–V needs of Appalachia.) 

 

48 Many of the facilities did not complete the survey, but all provided their names. 
Drinking Water and Wastewater in Appalachia 75 

Table 4-2. Documented Needs for Wastewater and Collection Systems in Appalachia 

(in Thousands of Dollars), by Type 

Appalachian 

Counties 

in . . . 

Category 

I 

Category 

II 

Category 

III-A 

Category 

III-B 

Category 

IV-A 

Category 

IV-B 

Category 

V 

Categories 

I–V Total 

Ala. $ 1,312 $ 922,542 $112,497 $1,127,855 $ 342,902 $ 43,866 — $ 2,550,974 

Ga. 52,973 94,286 18,515 20,908 849 828 — 188,359 

Ky. 158,849 51,907 14,409 68,982 323,364 141,654 $ 7,677 766,842 

Md. 11,063 70,724 12,586 14,034 16,767 10,025 151,940 287,139 

Miss. 14,976 17,484 12,697 5,242 35,651 8,975 — 95,025 

N.C. 48,171 29,575 42,259 73,369 244,201 183,528 — 621,103 

N.Y. 110,260 40,885 14,175 5,098 47,080 22,718 306,867 547,083 

Ohio 91,556 22,901 61,544 3,713 132,043 95,414 192,170 599,341 

Pa. 623,979 146,150 62,752 57,100 747,554 123,682 3,482,948 5,244,165 

S.C. 394,372 56,557 30 2,382 11,124 50,243 — 514,708 

Tenn. 12,588 5,275 3,131 939 26,911 3,380 — 52,224 

Va. 59,179 3,373 11,062 6,726 223,186 97,632 — 401,158

W.Va. 297,949 12,086 133,612 48,014 691,236 478,246 869,116 2,530,259

Appalachia 

Total 

 $1,877,227 $1,473,745 $499,269 $1,434,362 $2,842,868 $1,260,191 $5,010,718 $14,398,380

Percentage of 

Appalachia’s 

Documented 

Needs 

 13% 10% 3% 10% 20% 9% 35% 100%

U.S. Total $36,833,000 $20,419,000 $8,165,000 $16,762,000 $14,265,000 $14,844,000 $50,588,000 $161,876,000

Percentage of 

U.S.’s 

Documented 

Needs 

 23% 13% 5% 10% 9% 9% 31% 100%

Percentage of 

U.S. Needs in 

Appalachia 

 5.1% 7.2% 6.1% 8.6% 19.9% 8.5% 9.9% 8.9%

Source: Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Headquartersaccepted Categories I–V needs are used in this analysis. U.S. national needs by category obtained from 

Environmental Protection Agency, Clean Watersheds Needs Survey 2000 (Washington, D.C.: EPA, 2003). 

The documented needs for categories I–V for all of Appalachia account for $14.4 

billion of the national documented needs of $162 billion, or close to 9 percent. In each of 

the categories, the total Appalachian needs range from 5.1 percent to 9.9 percent of the 

national needs, with the exception of category IV-A (new collector sewers and 
76 Drinking Water and Wastewater in Appalachia 

appurtenances), in which the Appalachian needs account for 19.9 percent of the national 

needs. A substantial portion of the nation’s new sewers are being planned in 

Appalachia, indicating that significant activity is taking place to extend sewer service to 

households that are not currently connected to wastewater treatment plants. Needs for 

new collector sewers and appurtenances account for 20 percent of Appalachia’s 

documented needs. 

Many older sewer systems were designed to collect both wastewater and stormwater. 

During wet weather these combined systems commonly overload their treatment 

facilities, resulting in large amounts of untreated wastewater reaching the environment. 

Appalachia has considerable problems with combined-sewer overflow, as evidenced by 

the $5 billion worth of needs to correct them—35 percent of the total documented needs 

in the region. Nationwide, 31 percent of the documented needs are for these types of 

corrections. In Appalachia, in total numbers, the problem looks significant for the entire 

region. However, only six states have correction needs in their Appalachian counties. 

Pennsylvania accounts for $3.5 billion, or 70 percent of all such needs in Appalachia. 

Fourteen facilities in Appalachia represent $4.5 billion in needs, or 31 percent of the 

total needs of Appalachia (for the facilities’ locations, see Figure 4-1). The inclusion of 

large needs estimates for communities such as Birmingham follows a trend that occurs 

in many needs surveys: large facilities are much more likely than small systems to have 

their needs accounted for in the totals (but many more small systems than large ones 

have their needs included). Not only do needs assessors exert more effort to ensure that 

large systems participate in needs studies, but the large systems typically have more 

attention paid to documenting their needs, resulting in more accurate estimates. Both 

Jefferson County, Alabama, and Accident, Maryland, are under consent decrees to 

improve their wastewater systems. At the time of the needs survey, Jefferson County, 

with its legion of engineering reports, was able to produce large, detailed estimates of 

its needs, whereas Accident was able to identify and document only a small percentage. 

As is true of many small towns, Accident does not have a capital improvement 

program. Problems in places like Accident often remain hidden until the last possible 

moment. Accident is currently making about $3 million worth of repairs to its 

facilities—$2.8 million beyond what was included in the CWNS. 

Across Appalachia, there is great variation in per capita needs per county (see Figure 

4-2). In the 2000 CWNS, they ranged from $6,592 in Mingo County, West Virginia, to 

zero in eighty-two counties. The needs within each county and the variation across 

counties and states should be viewed in the context of the facilities that actually 

reported needs. For example, the absence of needs in most of Tennessee is primarily 

attributed to the abnormally high number of facilities that did not participate in the 

survey or reported zero needs. 
Drinking Water and Wastewater in Appalachia                         77
78              Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 79 

More than half of all the facilities in Appalachia do not have any documented needs 

for wastewater and collection systems (for the locations of these facilities, see Figure 4-

3). These facilities either did not respond to the needs survey, did not have any 

projected needs in categories I–V, or did not provide the required documents for their 

needs to be accepted by EPA in the CWNS. Overall, 62 percent of the facilities did not 

have documented needs. The proportion ranged from 20 percent in Kentucky’s 

Appalachian facilities to 92 percent in Tennessee’s (see Table 4-3). This range underlines 

the different weight placed on, and the different approaches taken by, the various states 

in responding to the CWNS. 

Table 4-3. Facilities with No Documented Needs in Categories I–V 

Appalachian 

Counties in . . . 

Number of 

Participating 

Facilities in 

Appalachia 

Number of Facilities with 

No Documented Needs 

(Categories I–V) 

Percentage of Facilities with 

No Documented Needs 

(Categories I–V) 

Kentucky 187 38 20 

Virginia 156 57 37 

Maryland 67 26 39 

Alabama 171 83 49 

West Virginia 684 379 55 

North Carolina 181 112 62 

New York 202 127 63 

Ohio 371 234 63 

South Carolina 67 44 66 

Pennsylvania 1,559 1,069 69 

Mississippi 211 147 70 

Georgia 90 72 80 

Tennessee 164 151 92 

Appalachia 4,110 2,539 62 

Source: Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Total 

headquarters-accepted Categories I–V needs are used in this analysis. 

Analysis of the documented needs per capita for the Appalachian portion of each 

state is instructive (see Table 4-4). Such an analysis is important for several reasons. As 

pointed out in chapter 3, the extreme variation in per capita needs, when combined 

with the variation in effort put in by the needs assessors, suggests that the variation in 

per capita needs has more to do with how the surveys were done than with actual 

needs. However, without further research this cannot be proven. 
80             Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 81 

Table 4-4. Per Capita Documented Needs in Appalachia 

Appalachian Counties in . . . Per Capita Needs 

Tennessee $ 21.06 

Georgia 85.33 

Mississippi 154.40 

North Carolina 406.96 

Ohio 411.83 

South Carolina 500.37 

New York 509.96 

Virginia 603.08 

Kentucky 671.78 

Alabama 899.11 

Pennsylvania 901.09 

Maryland 1,213.10 

West Virginia 1,399.21 

Appalachia 628.91 

U.S. $ 575.00 

Source: Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Total 

headquarters-accepted Categories I-V needs in each county are used in this analysis. Population estimates 

from Census 2000 Summary File 1 Table P1. 

As noted earlier, the CWNS is a bottom-up survey that relies on accurate information 

for each facility to ensure that it is represented in the total needs figure. The fact that so 

many facilities in Appalachia either have not reported their needs (62 percent) or have 

underreported their needs suggests that the total needs estimate for Appalachia is likely 

to be much less than what communities will actually need to spend in the coming years. 

Given the overall high percentage of nonreporting communities and the high variation 

in reporting across states, the UNCEFC research team thinks that it is impossible to 

estimate or model accurately what the true need is for Appalachia as a whole or for 

communities that were not included in the survey. In the face of all the evidence of 

missing needs and underreporting, the research team concludes that the $14.4 billion 

estimate in needs for the Appalachian communities that participated in the CWNS can 

and should be considered as the lower bound of any realistic range. This finding is 

supported by state needs estimates and by consultations with and surveys of public 

officials throughout the study region. For example, about 50 percent of the funding 

program managers who completed the UNCEFC funding survey and were familiar 

with the needs studies thought that the studies underestimated actual needs. Even EPA, 

which conducts the CWNS, has concluded that the wastewater needs of the country are 
82 Drinking Water and Wastewater in Appalachia 

significantly higher than are documented in the CWNS.49 Other efforts to generate more 

realistic needs numbers using past CWNS surveys, such as those carried out by the 

CBO, suggest that actual needs may be as high as two times the raw CWNS estimates.50 

The Drinking Water Needs Survey 

The sampling and modeling methodologies of the DWNS are designed to generate 

statewide needs totals. After reviewing the modeling approaches and consulting with 

DWNS analysts, the UNCEFC research team developed a modified modeling procedure 

that uses national and regional data and Appalachian system stratification to generate 

needs estimates for community water systems (for a detailed description of the 

modeling procedure, see appendix G). This modeling approach estimates that $11.4 

billion (8.4 percent) of the $136.3 billion needed for community water systems in the 

United States, is needed for such systems in Appalachia (see Table 4-5). The $11.4 billion 

estimate amounts to $496 per capita, slightly higher than the national need of $484 per 

capita. The figures for Appalachia and the United States are similar, partly because the 

national data were used to estimate Appalachia’s needs. If only sampling data from 

Appalachia are used for the small systems (those serving fewer than 1,000 people), 

Appalachia’s needs increase to $11.6 billion, or $505 per capita (see appendix G for more 

details).51

Table 4-5. Extrapolated Community Water System Needs in Appalachia 

Appalachian Counties 

in . . . 

Number of Community 

Water Systems 

Extrapolated 

Community Water 

System Needs 

Extrapolated Needs 

per Capita 

Alabama 331 $ 1,278,689,572 $451 

Georgia 265 992,411,921 450 

Kentucky 174 788,488,678 691 

 

49 Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap Analysis 

(Washington, D.C.: EPA, 2002). 

50 Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure 

(Washington, D.C.: CBO, 2002). 

51 Analysis by UNCEFC of average per-system needs estimates from data used in Drinking Water 

Infrastructure Needs Survey: Second Report to Congress (Washington, D.C.: EPA, 2001) shows that in 

Appalachia, per-system needs of small water systems (serving fewer than 1,000 people) are up to 1.5 

times greater than the national average per-system small water system needs. Also, more than 61 percent 

of all community water systems in Appalachia are small water systems. 
Drinking Water and Wastewater in Appalachia 83 

Appalachian Counties 

in . . . 

Number of Community 

Water Systems 

Extrapolated 

Community Water 

System Needs 

Extrapolated Needs 

per Capita 

Maryland 65 98,968,226 418 

Mississippi 341 521,557,507 847 

North Carolina 482 575,952,763 377 

New York 584 621,167,425 579 

Ohio 324 733,688,883 504 

Pennsylvania 1,437 2,836,744,852 487 

South Carolina 100 422,908,429 411 

Tennessee 274 995,869,970 402 

Virginia 301 409,452,309 616 

West Virginia 556 1,079,500,918 597 

Appalachia 

Total/Average 

 5,234 $ 11,355,401,455 $496 

Source Number of community water systems in Appalachia from Environmental Protection Agency, 

SDWIS, database for 4th quarter, fiscal year 2003, frozen in January 2004; downloaded from 

www.epa.gov/OGWDW/data/pivottables.html and compiled by UNCEFC. National needs estimates 

from Environmental Protection Agency, Drinking Water Infrastructure Needs Survey: Second Report to 

Congress (Washington, D.C.: EPA, 2001). State needs estimates compiled by UNCEFC from SDWIS and 

average per-system needs estimates from data used in Drinking Water Infrastructure Needs Survey: Second 

Report to Congress (Washington, D.C.: EPA, 2001). Population estimates from Census Bureau, Census 

2000, Summary File 1, Table P1. 

In generating its Gap Analysis estimates, EPA studied data from follow-up visits to 

compare actual needs with reported needs. It determined that the numbers reported in 

the needs survey were substantially lower than actual needs. This led EPA to use 

multipliers of about 1.5 for some types of needs for large and medium-sized systems. 

Other National Studies 

Extracting Appalachia’s numbers for county and state needs from other national studies 

is much more difficult than extracting them from the CWNS and the DWNS, given the 

top-down nature of the estimates. In many cases the national numbers presented in 

these studies are based on national-level assumptions that make disaggregating the 

numbers to the county or state level unreliable. 

However, studies like the WIN study, the AWWA study, and the EPA Gap Analysis

can provide valuable insight into Appalachian needs in relation to the needs of other 

areas of the country. One of the twenty systems analyzed in the AWWA study, 

Charleston, West Virginia, is in Appalachia. As is true of many systems in the central 
84 Drinking Water and Wastewater in Appalachia 

part of the region, much of the Charleston system was constructed in the first half of the 

twentieth century (for a case study of Charleston, see appendix E). Systems installed 

during this period are estimated to reach their peak replacement needs earlier than the 

average U.S. system.52 

State-Level Studies 

Some state needs surveys can be broken down at least to the county level, so 

Appalachian county needs can be extracted from the state totals (for the Appalachian 

portion of several state needs surveys, see Table 4-6). For states such as Tennessee, 

whose CWNS numbers are clearly inaccurate, the state-generated numbers suggest that 

Tennessee’s needs are closer in scope to communities in other Appalachian states than 

the CWNS indicates. The table also illustrates the apples-and-oranges nature of needs 

surveys that makes accurate comparisons so difficult. 

Table 4-6. Water and Wastewater Needs in Appalachia as Determined by 

State Surveys 

State State Survey Title Description of Needs Type Total Needs 

Estimates from 

EPA Needs 

Surveys 

Ky. A Strategic Plan (1999) 

A Strategic Plan for 

Wastewater Treatment 

(2000) 

20-year needs to extend 

sewer service 

20-year needs to extend 

water service 

Sewer 

Water 

 $1,052,710,000 

 878,311,000 

 $ 766,842,000 

 995,869,970 

Ohio Capital Improvement 

Reports (1999–2003) 

5-year water and 

wastewater needs 

Sewer 

Water 

 456,779,424 

 415,387,782 

 599,341,000 

 733,688,883 

Tenn. Building Tennessee’s 

Tomorrow: Anticipating 

the State’s Infrastructure 

Needs (2004) 

5-year water and 

wastewater needs 

Water 

and 

sewer 

 1,454,880,037 1,048,093,970 

 

52 American Water Works Association, Dawn of the Replacement Era: Reinvesting in Drinking Water 

Infrastructure (Denver: the Association, 2001). 
Drinking Water and Wastewater in Appalachia 85 

State State Survey Title Description of Needs Type Total Needs 

Estimates from 

EPA Needs 

Surveys 

W.Va. Public Water System and 

Public Wastewater System 

Inventory & Needs 

Assessment Report (2002) 

All 557 community 

water systems and all 

292 community 

sewage system needs 

Sewer 

Water 

 3,104,717,185 

 692,455,713 

 2,530,259,000 

 1,079,500,918 

Source EPA wastewater needs estimates from Clean Watersheds Needs Survey 2000 (Washington, D.C.: 

EPA, 2003). Drinking water needs from EPA, SDWIS, database for 4th quarter, fiscal year 2003, frozen in 

January 2004; downloaded from www.epa.gov/OGWDW/data/pivottables.html and analyzed by 

UNCEFC. Average per-system needs estimates from data in Drinking Water Infrastructure Needs Survey: 

Second Report to Congress (Washington, D.C.: EPA, 2001). 

Kentucky maintains one of the most comprehensive and ongoing systems for 

documenting needs at the state level. The Kentucky Infrastructure Authority maintains 

a GIS database of needs throughout the state. For extending water and wastewater 

service to unconnected households, the per capita needs in the Appalachian counties 

are much greater than the per capita needs in the rest of the state (see Table 4-7). 

Table 4-7. Twenty-Year Water and Sewer Extension Needs in Kentucky 

Needs to Extend Service Per Capita Needs 

Type State App. Counties 

Non-App. 

Counties App. Counties 

Non-App. 

Counties 

Water $1,573,683,000 $878,311,000 $695,372,000 $769 $240 

Sewer 1,973,494,000 1,052,710,000 920,784,000 922 317 

Source Kentucky Governor’s Water Resource Development Commission, Water Resource Development: A 

Strategic Plan and Water Resource Development: A Strategic Plan for Wastewater Treatment (Frankfurt: 

the Commission, 1999, 2000). Population estimates from Census Bureau, Census 2000, Summary File 1, 

Table P1. 

In summary, the needs surveys conducted by some Appalachian states may report 

county needs more accurately than national needs surveys do. Where discrepancies 

exist between them and the national surveys, such as in Tennessee, closer examination 

is necessary. 
86 Drinking Water and Wastewater in Appalachia 

Needs by Physiographic Region 

The level of needs across physiographic regions would be expected to differ because of 

the contrasting topography, in terms of both the varying engineering designs and 

corresponding costs that are specific to certain topographies, and the necessity of 

supplying community water and wastewater services in areas where onsite systems still 

predominate, such as in the Blue Ridge province. Examination of EPA’s community 

water system needs and documented wastewater and collection system needs by 

physiographic region supports this hypothesis (see Table 4-8). 

Table 4-8. Wastewater and Drinking Water Needs and Population Served per System, 

by Physiographic Region

Wastewater Population Served and Needs 

Community Water System Population 

Served and Needs 

Physiographic 

Region 

Population Receiving 

Wastewater Collection 

by Treatment Facility, 

per Facility 

Documented 

Needs 

per Capita 

Population Served 

per Community 

Water System 

Drinking Water 

Needs per 

Population Served 

Atlantic Plain 3,549 $128 2,880 $320 

Piedmont 7,135 244 6,010 198 

Interior Plains 8,508 336 9,409 250 

Blue Ridge 3,574 374 1,937 242 

Valley and Ridge 7,166 494 3,983 302 

Appalachian 

Plateaus 

 6,345 946 3,396 389 

Source Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Total 

headquarters-accepted Categories I–V needs are used in this analysis. Data from EPA, SDWIS, database 

for 4th quarter, fiscal year 2003, frozen in January 2004; downloaded from www.epa.gov/OGWDW/ 

data/pivottables.html. Average per-system drinking water needs estimates from data in Drinking Water 

Infrastructure Needs Survey: Second Report to Congress (Washington, D.C.: EPA, 2001), compiled by 

UNCEFC. Population estimates from Census Bureau, Census 2000, Summary File 1, Table P1. 

This analysis suggests an interesting correlation between needs levels and 

physiographic regions. However, the concerns about data quality outlined throughout 

this report limit the reliability of this analysis, and its results should be applied 

cautiously. 
Drinking Water and Wastewater in Appalachia 87 

Needs by County Economic Status 

Every year, ARC classifies all the Appalachian counties into four economic levels. The 

levels are based on a comparison of the counties with national averages according to 

three economic indicators (see Table 4-9). The analysis in this report uses county 

economic status for 2004. 

Table 4-9. Criteria for Economic Status Classification of Appalachian Counties 

Economic Status Classification 

Criterion Attainment Competitive Transitional Distressed 

Three-year 

Average 

Unemployment 

Rate 

≤ national 

average 

≤ national 

average 

All counties not 

in other classes 

≥ 150% of national 

average 

2000 Per Capita 

Market Income 

≥ national 

average 

80%–100% of 

national average 

All counties not 

in other classes 

≤ 67% of national 

average 

2000 Census 

Poverty Rate 

≤ national 

average 

≤ national 

average 

All counties not 

in other classes 

≥ 150% of national 

average or

≥ 200% and county 

qualifies on one of other 

two criteria 

Source. Appalachian Regional Commission, Source and Methodology for the map County Economic 

Status in Appalachia, FY 2004, available at www.arc.gov/search/method/cty_econ.jsp. 

In 2004 there were ninety-one distressed counties. Distressed counties are of 

particular interest because they have many fewer resources available to promote selfsufficiency for their populations than other Appalachian counties do, based on their 

lower per capita income levels, higher poverty and unemployment rates, and smaller 

population sizes, which amount to reduced labor forces. On average, distressed 

counties have a population size of 21,000, which is 38 percent of the average population 

size in all Appalachian counties (about 56,000). 

On the whole, slightly less than 2 million people (8 percent) live in distressed 

counties, primarily in nonmetropolitan ones (see Figure 4-4). Carter County, Kentucky, 

and Lawrence County, Ohio, are the only two metropolitan counties in Appalachia that 

are distressed. On average, county population size is smaller for distressed counties 

than it is for counties with a higher economic status level (see Table 4-10). 
88 Drinking Water and Wastewater in Appalachia 

0

2

4

6

8

10

12

14

16

Attainment Competitive Transitional Distressed

County Economic Status

Population (in millions)

Nonmetropolitan

counties

Metropolitan

counties

Figure 4-4. Population of Metropolitan and Nonmetropolitan Appalachian Counties, 

by County Economic Status 

Source County economic status from Appalachian Regional Commission, County Economic Status in 

Appalachia, FY 2004 (available at www.arc.gov/index.do?nodeId=2146). Metropolitan status, as defined 

by the Office of Management and Budget in 2000, provided by the Appalachian Regional Commission 

(personal communication with authors, 4 November 2003). Population estimates from Census Bureau, 

Census 2000, Summary File 1, Table P1. 

Table 4-10. Population of Appalachian Counties, by County Economic Status

Economic status Number of 

counties 

Total 

population 

Average county 

population 

Attainment 8 3,014,461 376,808 

Competitive 22 2,046,604 93,027 

Transitional 289 15,925,690 55,106 

Distressed 91 1,907,262 20,959 

All 410 22,894,017 55,839 

Source Appalachian Regional Commission, 2004. Population estimates from Census Bureau, Census 

2000, Summary File 1, Table P1. 

Of the 4,110 treatment facilities and collection systems included in the 2000 CWNS, 

567 (13.8 percent) are located in distressed counties. The wastewater infrastructure 
Drinking Water and Wastewater in Appalachia 89 

needs per Appalachian facility documenting needs average more than $9 million, 

ranging from more than $4 million per facility in distressed counties to about $30 

million per facility in attainment counties (see Table 4-11). 

Table 4-11. Wastewater Infrastructure Needs in Appalachia per Facility and 

per Capita, by County Economic Status 

County Classification 

Average 

Needs per Facility 

Average 

Needs per Capita 

Attainment $29,843,766 $634 

Competitive 14,629,563 572 

Transitional 8,725,997 644 

Distressed 4,208,135 554 

All $ 9,165,105 $629 

Source Environmental Protection Agency, Needs Report data for Clean Watersheds Needs Survey 2000, 

available at www.epa.gov/owm/mtb/cwns, downloaded and compiled by UNCEFC. Total 

headquarters-accepted Categories I–V needs are used in this analysis. Population estimates from Census 

Bureau, Census 2000, Summary File 1, Table P1. County economic status from Appalachian Regional 

Commission, 2004. 

Per capita, however, there is no large difference between the needs of facilities in 

distressed counties and the needs of facilities in nondistressed counties, despite the fact 

that a much lower percentage of distressed county residents are actually served by (and 

pay sewer bills to) centralized facilities. In summary, distressed areas have per capita 

needs similar to those of nondistressed counties but fewer well-off rate payers, and 

fewer rate payers in general, to meet the burden. 

Of the 5,234 Appalachian community water systems listed in the SDWIS database, 

638 are located in distressed counties. On average, distressed counties have seven 

community water systems, which is half or less than half the number of systems in 

nondistressed counties (see Table 4-12). Furthermore, the populations served by these 

systems are smaller in size than those in nondistressed counties (see Table 4-13). 

Distressed counties’ community water systems serve a population of nearly 8,000, on 

average. 
90 Drinking Water and Wastewater in Appalachia 

Table 4-12. Community Water Systems in Appalachia, by County Economic Status 

County Classification No. of CWSs 

Population 

Served per CWS 

Average No. of 

CWSs 

per County 

Attainment 132 119,368 17 

Competitive 364 52,126 17 

Transitional 4,100 20,574 14 

Distressed 638 7,914 7 

All 5,234 24,901 13 

Source: Data from Environmental Protection Agency, SDWIS, database for 4th quarter, fiscal year 2003, 

frozen in January 2004; downloaded from www.epa.gov/OGWDW/data/pivottables.html and compiled 

by UNCEFC. County economic status from Appalachian Regional Commission, 2004 

Note: CWS = community water system. 

Table 4-13. Drinking Water Infrastructure Needs in Appalachia per Community 

Water System and per Person Served, by County Economic Status 

County Classification Needs per CWS Needs per Person Served 

Attainment $24,567,729 $191 

Competitive 19,082,612 326 

Transitional 7,052,729 353 

Distressed 3,864,707 497 

All $ 7,989,679 $316 

Source: 1999 Drinking Water Needs Survey data, obtained by e-mail from Cadmus Group, 23 March 

2004, compiled by UNCEFC. 

Likewise, nonmetropolitan counties have fewer systems per county (11) and smaller 

community water systems (serving less than 12,000 people per system, on average) than 

metropolitan counties.53 

On average, community water systems in Appalachia have $8 million in 

infrastructure needs. The needs grow according to the economic status of the county, 

 

53 Data from Environmental Protection Agency, SDWIS, database for 4th quarter, fiscal year 2003, 

frozen January 2004; downloaded from www.epa.gov/OGWDW/data/pivottables.html and compiled 

by UNCEFC. 
Drinking Water and Wastewater in Appalachia 91 

from $4 million per system in distressed counties to about $25 million per system in 

attainment counties. 

Again, though, on a per capita level, the trend is reversed. The average community 

water system’s per capita needs increase as the economic status of the county decreases. 

Thus, on average, community water systems in distressed counties have greater needs 

per person served ($497) than systems in nondistressed counties ($191–$353). These 

findings imply that in Appalachia the burden of needs for drinking water infrastructure 

is greatest on those being served by community water systems in distressed counties or 

nonmetropolitan counties, where resources are fewer and incomes are lower but per 

capita needs are greater. 

Regulatory Needs as Water and Wastewater Funding Needs 

Including regulatory needs in an assessment of the adequacy of funding for water and 

wastewater infrastructure may be unprecedented. However, without an adequate 

regulatory system, the quality of water and wastewater services will not be assured. 

Anecdotal accounts and occasional published news reports suggest that regulators in 

the Appalachian states have unusually large needs—in other words, that their budgets, 

human resources, and levels of political support fall behind those in other regions of the 

country. For example, in 1998, citing EPA officials and a study from the magazine 

Chemical and Engineering News, Ken Ward of the Charleston Gazette reported that West 

Virginia’s water-quality regulators were seriously underfunded.54

Confirming or refuting this suggestion of disproportionately low regulatory funding 

for water quality in Appalachia is difficult, if not impossible. The UNCEFC research 

team has attempted to assess it using three sources: data supplied directly to UNCEFC 

by the Environmental Council of the States (ECOS); a report, State Environmental 

Expenditures and Innovations, compiled by the National Association of State Budget 

Officers (NASBO) in May 2000; and an interim report by the Association of State and 

Interstate Water Pollution Control Administrators (ASIWPCA) in April 2002.55 The data 

 

54 Ken Ward, “Regulators Lacking Funds: EPA Upset,” Charleston Gazette, 25 January 1998. 

55 ECOS data from spreadsheet provided to Richard Whisnant, on file at UNCEFC; National 

Association of State Budget Officers, State Environmental Expenditures and Innovations (Washington, D.C.: 

the Association, May 2002), available at www.nasbo.org/publications/infobriefs/enviro_expend2000. 

pdf; Association of State and Interstate Water Pollution Control Administrators, State Water Quality 

Management Resource Analysis: Interim Report on Results (Washington, D.C.: the Association, April 1, 2002). 
92 Drinking Water and Wastewater in Appalachia 

collection and presentation methods in these reports make disaggregating costs for 

Appalachia difficult. 

The ECOS data provide the most insight into potential regulatory funding gaps. They 

suggest that there may be a significant difference between environmental budgets 

inside the region and environmental budgets outside it. Comparing per capita spending 

for all environmental programs in fiscal year 2003, the UNCEFC research team found 

that Appalachian states spent $53.17, while non-Appalachian states spent $79.97. This 

comparison includes West Virginia among the Appalachian states. In the ECOS data, 

West Virginia is an outlier for spending. If it is excluded from the comparison, the gap 

between Appalachia and the rest of the country widens further: $40.03 for the 

Appalachian states other than West Virginia, still $79.97 for the rest of the nation. (For a 

discussion of the methodology used for this analysis and for the complete results, see 

appendix H.) 

Application of Needs Estimates to the Policy Challenges Facing 

Appalachian Communities 

Taken together, the EPA needs surveys indicate that communities in Appalachia have 

approximately $26 billion in water and wastewater infrastructure needs. However, 

there is ample evidence that communities will actually have to pay far more than this to 

ensure services that meet basic public health and environmental standards. Given the 

manner in which the surveys were carried out, it is impossible to estimate exactly how 

much more communities will have to pay, yet detailed needs extrapolations by others 

suggest that the number could easily be in the range of $35 billion–$40 billion. Once 

again, this number does not include the additional funds, certainly in the billions, 

needed to address the thousands of substandard and failing individual wells and onsite 

(septic systems to straight pipes) sanitation systems, nor does it include the funds that 

will be necessary to operate and maintain new facilities or facilities that have been 

neglected in the past. 

In general, because so many state and federal funding policy decisions are justified 

under the rubric of responding to unmet capital needs, having a general estimate of 

capital needs is essential to an informed policy dialogue. The UNCEFC research team 

thinks that a range of $26 billion–$40 billion provides a realistic metric for 

understanding the challenges facing the region as a whole, especially for purposes of 

comparison with the public funding amounts presented in the next chapter. However, 

as large as these numbers are, they do not portray the full set of challenges facing 

individual states, counties, and communities. Any macro analysis of needs must be 

balanced by an examination of the challenges facing individual communities, such as 

those that have been profiled for this study (see appendix E). 
93 

5 

Sources of Funding for Water and Wastewater Infrastructure 

When communities write a check for a large infrastructure project, they normally find 

the funds in one of three places: their current revenues and reserve funds, the private 

capital market, or public funding programs. Some communities create innovative 

partnerships with other systems or private entities, but this source of funding is 

relatively uncommon, compared with the other three sources. 

Current Revenues and Reserve Funds 

The use of current revenues and reserve funds to pay for capital improvements often is 

referred to as pay-as-you-go financing. Systems with large annual revenues and wellplanned, staggered investments can occasionally cover large initial capital expenditures 

using revenues generated in the year in which the investment is made, but this is rare 

for all but the largest systems. For most systems, pay-as-you-go financing depends on 

proactive capital planning, which involves putting funds aside for future expenditures, 

sometimes for years. This type of planning is particularly difficult for small systems 

with limited revenues and elected boards that are reluctant to charge rates beyond what 

the systems require to meet current operating needs. The use of pay-as-you-go 

financing as a financial management strategy is discussed further in the next chapter. 

Analysis of the documented needs for wastewater systems in West Virginia, versus 

current revenues, is instructive (see Figure 5-1). All the points above the diagonal line in 

Figure 5-1 represent communities where the documented needs are more than four 

times the annual revenues. If these systems could put 10 percent of their current 

revenues aside for future capital costs, it would take each of them at least forty years to 

accumulate enough savings to address today’s needs, not to mention future needs. Even 

if systems did want to use pay-as-you-go financing, for many, the needs are so much 

higher than the revenues that it is difficult to imagine how they would generate extra 

revenues. 
94 Drinking Water and Wastewater in Appalachia 

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

0 500,000 1,000,000 1,500,000

Operating Revenue

Needs

Figure 5-1. Documented Needs for Wastewater Systems in West Virginia, 

versus Current Revenues 

Source: Data from West Virginia Public Service Commission, provided to UNCEFC by Dave Jarret, 

19 May 2004 ; West Virginia Infrastructure and Jobs Development Council, 2002 Inventory and Needs 

Assessment Report (Charleston: the Council, 2003), available at www.wvinfrastructure.com/ 

reports/index.html. 

Many state and federal programs that fund infrastructure require local matching (also 

called cost-sharing). For example, State and Tribal Assistance Grants require 45 percent 

cost-sharing (unless a different requirement is specified). The Capital Improvements 

Revolving Loan Program in Mississippi requires 50 percent cost-sharing. The North 

Carolina Clean Water Management Trust Fund provides communities with grants but 

requires cost-sharing of at least 20 percent. 

Some communities have savings or cash on hand to cover these additional matching 

or cost-sharing requirements, but in many situations, communities turn to another 

funding program to obtain the additional funds. In the end, communities often can 

carry out multimillion-dollar projects with minimal local contributions up front. For 

example, Weaverville, North Carolina, combined $100,000 of its own funds with 

millions of dollars from other funding sources to pay the costs of a new water system 

(for a case study of Weaverville, see appendix E). 
Drinking Water and Wastewater in Appalachia 95 

The Private Capital Market 

According to EPA, the private capital market is the single largest source of 

infrastructure capital funds.56 However, use of this market varies significantly as a 

function of a community’s creditworthiness, which in turn depends on a range of local 

factors. Relatively few communities in Appalachia, especially in economically 

distressed counties, have credit ratings for water and wastewater purposes from major 

rating agencies (for those with credit ratings from Moody’s Investors Service, one of the 

nation’s three major rating agencies, see Figure 5-2). 

Some areas of Appalachia have regional rating agencies, such as the North Carolina 

Municipal Council. More than 40 percent of the cities and the counties in the 

Appalachian region of North Carolina either do not have a rating from the council or 

have a rating that indicates limited creditworthiness (less than 75). A review of 

outstanding private debt in certain areas in Appalachia indicates that in many of them, 

direct borrowing from the private capital market still is relatively rare Nevertheless, for 

larger and more economically advanced communities, such as Weaverville, North 

Carolina, the private debt market has been an important source of capital (see the 

sidebar below; also, for more detail about Weaverville, see the case study in appendix 

E). 

Because of the difficulty many local communities have to accessing private capital, 

many states have realized that one of the most efficient methods of supporting 

infrastructure investment is to use a state’s credit worthiness or bonding authority to 

develop pooled loan programs. This method of providing private capital to local 

communities has taken different forms in different states. For example, Virginia, Ohio, 

and West Virginia have developed traditional pooled loan programs in which state 

agencies serve as intermediaries to borrow money from the private capital market and 

lend it back to local governments through special state assistance programs. In some 

cases, states use the EPA SRF programs as their vehicle for providing local governments 

with access to private capital. Alabama has issued revenue bonds in order to contribute 

millions more than its required 20% state match to its EPA supported revolving loan 

programs. 57

 

56 Environmental Protection Agency, 2000 Community Water System Survey (Washington, D.C.: EPA, 

2002). 

57 Alabama Department of Environmental Management 

http://www.adem.state.al.us/WaterDivision/SRF/SRFMainInfo.htm, Web site accessed July 22, 2005. 
96              Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 97 

Public Funding Programs 

Communities with significant investment needs that do not have cash on hand or access 

to private capital invariably turn to the federal government or their state government 

for capital funds for water and wastewater infrastructure. Government programs 

disbursing such funds collectively account for a significant amount of capital 

investment in Appalachia. UNCEFC created a Master Funding Database as part of the 

present study (see appendix I). Data from that source indicate that between January 1, 

2000, and December 31, 2003, government programs disbursed about $4.6 billion for 

water and wastewater infrastructure in Appalachia (see Figure 5-3). Funding programs 

include grants, subsidized loans, and pooled loans (bond bank programs). 

Figure 5-3. Disbursements in Appalachia by Federal and State Programs, 2000–2003 

Source: UNCEFC Master Funding Database, 2004. 

Sidebar 5-1 

Sources of Capital: Weaverville, North Carolina 

Year: 1996 

Purpose: expansion of drinking water source and protection of watershed 

Funding Sources: 

$3.9 million general obligation bond 

$1.5 million grant from the Farmers Home Administration of the U.S. Department of 

Agriculture 

$200,000 grant from ARC 

$100,000 in local township funds 

1,025

1,137 1,139

1,300

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2000 2001 2002 2003

(in Millions)
98 Drinking Water and Wastewater in Appalachia 

Types of Funding Programs 

Funding programs in Appalachia are directly administered by federal and state 

government agencies, independent authorities, and nonprofit programs. Some, such as 

ARC’s programs, EPA’s CWSRF and DWSRF, and the Community Development Block 

Grants program of the U.S. Department of Housing and Urban Development (HUD–

CDBG), are primarily federal programs that are administered by state agencies. Federal 

funding programs do not rely exclusively on federal funds, for example the EPA SRF 

programs require states to contribute a 20 percent capital match. In other words, 

disbursements from federal assistance programs do not equate to federal funding 

levels. In other cases, state agencies and organizations manage pools of stateappropriated funds that are state-specific. (For the identities of major funding programs 

in Appalachia, see Figure 5-4.) 

Figure 5-4. Disbursements in Appalachia by Major Water and Wastewater Programs, 

2000-2003 

Source: UNCEFC Master Funding Database, 2004.

The CWSRF is the single largest infrastructure program in the region, accounting for 

30.8 percent of the water and wastewater investments by public programs from 2000 

through 2003. Over this period, across the thirteen Appalachian states, the CWSRF 

provided an average of $354.4 million each year.58

 

58 This report refers to the CWSRF as a federal funding program. However, CWSRF funds are 

disbursed by state-managed government programs. These programs also distribute state cost-sharing 

funds and proceeds from past loans. 

$108 $85

$313

$1,418

$467

$197

$964 $1,049

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

ARC EDA HUD‐CDBG CW SRF DW SRF STAG USDA‐RUS State‐

Specific

(in Millions)
Drinking Water and Wastewater in Appalachia 99 

The Water and Waste Disposal Loans and Grants Program of the U.S. Department of 

Agriculture, Rural Utilities Service (USDA–RUS), is the second-largest federal funding 

program in Appalachia, accounting for $964 million in water and sewer investments 

between 2000 and 2003. The funding criteria and procedures for USDA grants and loans 

are the same throughout the country, and the programs are administered by USDA 

offices located in each Appalachian state. (For a summary of the CWSRF, the USDA 

Water and Waste Disposal Loans and Grants Program, and other federal programs, see 

appendix J.) 

Taken together, the special programs established by individual states accounted for 

22.8 percent of the public program investments. The size of the programs varies 

significantly across states. The largest single state program is the West Virginia 

Infrastructure and Jobs Development Loan Program, with $215.4 million in funding 

from 2000 through 2003. (For the four-year funding totals for each major category of 

state funding program, see Table 5-1.) 

Stand alone state specific programs have been important in some states and 

nonexistent in others. The data presented in Table 5-1 and throughout this chapter 

under the heading of “State Specific” refers to disbursements from state specific 

programs and does not include funds that states contribute to federal programs such as 

the EPA’s SRF programs. SRF state matching funds are accounted for within the 

disbursements made through federal programs in this study. Alabama, while without 

any major stand alone state specific programs, is the only Appalachian State to have 

made significantly higher state capitalization matches (an average of 45 percent over 

1988-2003) to its CWSRF program.59 

Table 5-1. Major Water and Wastewater Funding Programs in Appalachia and 

Percentage of Total Funding in Appalachia, 2000 –2003 

Program Name

Total 

Funding 

Percentage of 

Total 

Appalachian 

Program 

Funding 

Federal Programs 

SRF—Clean Water Program $1,417,601,834 30.81 

USDA–RUS Water and Wastewater Disposal Loans and Grants 964,322,220 20.96 

SRF—Drinking Water Program 466,727,534 10.14 

HUD—Community Development Block Grants 312,813,531 6.80 

 

59 Clean Water SRF Program Information for the State of XXX 2004, online at 

http://www.epa.gov/region5/water/cwsrf/pdf/*.*
100 Drinking Water and Wastewater in Appalachia 

Program Name

Total 

Funding 

Percentage of 

Total 

Appalachian 

Program 

Funding 

State and Tribal Assistance Grants 197,213,837 4.29 

ARC—Area Development, Economic Development, and Grant 

Programs 

 107,840,761 2.34 

EDA—Public Works Program (about 5% of EDA funds were not 

used in this analysis) 

 84,974,870 1.85 

State-Specific Programs 

West Virginia Infrastructure and Jobs Development Loan 

Program 

 

215,387,425 4.68 

Pennsylvania State Revolving Fund (Clean Water and Drinking 

Water—State Source of funds, not Federal source of Funds) 

 

177,997,697 3.87 

West Virginia Water Development Authority 75,267,433 1.64 

Georgia Fund Loan Program 72,940,037 1.59 

West Virginia Infrastructure and Jobs Development Grant 

Program 55,669,810 1.21 

Tennessee Municipal Bond Fund 53,596,660 1.16 

Ohio Water Development Authority 48,822,280 1.06 

Ohio Public Works Commission—State Capital Improvements 

Program 41,404,787 0.90 

New York Clean Water/Clean Air Bond Act—Safe Drinking 

Water Portion 37,654,156 0.82 

Kentucky Coal and Tobacco Development Fund Program 33,110,783 0.72 

North Carolina Revolving Loan and Grant Program—High Unit 

Cost Grants, Clean Water 31,723,316 0.69 

Kentucky Wastewater Construction 28,008,669 0.61 

Kentucky 2020 Water Services Account Program 24,476,650 0.53 

Kentucky Single County Coal Program 20,482,894 0.45 

North Carolina Revolving Loan & Grant Program—High Unit 

Cost Fund, Drinking Water 20,359,310 0.44 

Virginia Pooled Financing Program 19,505,000 0.42 

Kentucky Coal Severance Tax Receipts—Kentucky Infrastructure 

Authority portion only 12,686,958 0.28 

North Carolina Supplemental Grants Program 11,728,130 0.25 

Kentucky Flexible Term Finance Program 11,643,700 0.25 

North Carolina Unsewered Communities Grants Program 9,942,907 0.22 

North Carolina Clean Water Management Trust Fund 9,010,490 0.20 

South Carolina Water and Wastewater Infrastructure Fund 7,790,473 0.17 
Drinking Water and Wastewater in Appalachia 101 

Program Name

Total 

Funding 

Percentage of 

Total 

Appalachian 

Program 

Funding 

Maryland Supplemental Assistance Program 6,132,000 0.13 

Kentucky Infrastructure Revolving Loan—Fund B 5,247,364 0.11 

Maryland Drinking Water Supply Assistance Program 4,749,925 0.10 

South Carolina Budget and Control Board Grant Program 3,620,184 0.08 

New York Financial Assistance to Business—Water Program 3,162,628 0.07 

Mississippi Capital Improvements Revolving Loan Program 2,019,534 0.04 

Georgia Equity Fund Program 1,761,800 0.04 

U.S. Army Corps of Engineers (includes only selected records) 1,510,000 0.03 

North Carolina Capacity Building Grants Program 1,371,939 0.03 

Georgia Regional Assistance Program (2003 data not included) 500,000 0.01 

Source: UNCEFC Master Funding Database, 2004. 

Sixty-eight percent of the public funding assistance to Appalachian communities 

from 2000 through 2003 came as loans. In total, $3.1 billion was loaned to communities. 

The largest single source of loans in the region was the CWSRF. The largest single 

source of grants was the Water and Waste Disposal Loans and Grants Program. 

The terms of the loans varied significantly across programs. CWSRF loan terms are 

established by individual state programs. Typical terms from 2000 through 2003 were 

interest rates between 0 and 4.5 percent and loan periods of 15–20 years.60 The Water 

and Waste Disposal Loans and Grants Program packages loans with grants. Most loans 

in the loan portion of the financing are made at 4 percent to 5 percent over 30–40 years. 

State loan programs use various assistance strategies. One strategy is to offer loans at 

market rates but for periods (thirty years) longer than communities would qualify for in 

the private sector. The Ohio Water Development Authority is among the programs that 

employ this strategy. Another strategy is to offer discounted loan terms (for example, 

0.0 percent). The Ohio Water Development Authority and Pennsylvania’s State Funded 

State Revolving Fund (Clean Water and Drinking Water) are among the followers of 

this strategy. 

 

60 Some states extend DWSRF loans to disadvantaged communities for thirty years. West Virginia has 

received special permission to extend CWSRF loans for thirty years. 
102 Drinking Water and Wastewater in Appalachia 

Distribution of Funds 

Public funding programs in Appalachia support different objectives and have different 

eligibility requirements, making geographic comparison difficult without taking into 

consideration the characteristics of systems in each area. On a per capita basis, 

Appalachian counties received $0–$649 annually from state-originated programs from 

2000 through 2003, with a median of $36 and a mean of $58 (see Figure 5-5). As 

expected, the counties in the states with large state programs received significantly 

more funding than those in states without similar programs. 

From 2000 through 2003, Appalachian communities received about 16.5 percent of the 

funds distributed by USDA’s Water and Waste Disposal Loans and Grants Program 

and about 8.2 percent of the funds distributed nationally by the CWSRF.61 

Analysis of the distribution of state-specific program investments in the Appalachian 

and non-Appalachian areas of the states offering the programs reveals that most of the 

programs are investing more per capita in the former areas than in the latter (see Table 

5-2). This distribution is not surprising, given the distressed economic status of many 

Appalachian communities and the design of most funding programs to support lowincome communities. 

Table 5-2. Total Funding per Capita by State-Specific Programs 

 Region (per Capita) 

Program Appalachian 

NonAppalachian State 

West Virginia Infrastructure and Jobs Development Loan 

Program 

 $119.11 NA $119.11 

West Virginia Water Development Authority 41.62 NA 41.62 

New York Clean Water/Clean Air Bond Act —Safe Drinking 

Water Portion 

 35.10 $28.85 29.21 

Ohio Water Development Authority 33.55 29.35 29.89 

Georgia Fund Loan Program 33.04 20.36 23.78 

West Virginia Infrastructure and Jobs Development Grant 

Program 

 30.78 NA 30.78 

 

61 Data on USDA distributions from U.S. Department of Agriculture, Rural Utilities Service, Annual 

Reports for Fiscal Years 2001, 2002, 2003 (Washington, D.C.: USDA, 2002, 2003, 2004), and UNCEFC Master 

Funding Database (see appendix I). Data on EPA distributions from Environmental Protection Agency, 

Annual Report for 2003 (Washington D.C.: EPA, 2004), and UNCEFC Master Funding Database (see 

appendix I). In some cases these calculations were made by comparing calendar fiscal years with state or 

federal noncalendar fiscal years. 
Drinking Water and Wastewater in Appalachia 103 

 Region (per Capita) 

Program Appalachian 

NonAppalachian State 

Pennsylvania State Revolving Fund (Clean Water and 

Drinking Water—State Source) 

 30.58 0.00 14.49 

Virginia Pooled Financing Program 29.32 45.44 43.92 

Kentucky Coal and Tobacco Development Fund Program 29.01 5.67 12.26 

Ohio Public Works Commission—State Capital 

Improvements Program 

 28.45 16.21 17.78 

Maryland Supplemental Assistance Program 25.91 2.31 3.37 

Kentucky Wastewater Construction 24.54 0.00 6.93 

Tennessee Municipal Bond Fund 21.62 13.07 16.79 

Kentucky 2020 Water Services Account Program 21.44 7.65 11.55 

North Carolina Revolving Loan and Grant Program—High 

Unit Cost Grants, Clean Water 

 20.79 16.83 17.58 

Maryland Drinking Water Supply Assistance Program 20.07 0.76 1.63 

Kentucky Single County Coal Program 17.94 2.37 6.77 

North Carolina Revolving Loan & Grant Program—High 

Unit Cost Fund, Drinking Water 

 13.34 12.65 12.78 

Kentucky Coal Severance Tax Receipts—Kentucky 

Infrastructure Authority portion only 

 11.11 1.50 4.22 

Kentucky Flexible Term Finance Program 10.20 7.76 8.45 

North Carolina Supplemental Grants Program 7.68 7.24 7.32 

South Carolina Water and Wastewater Infrastructure Fund 7.57 23.96 19.76 

North Carolina Unsewered Communities Grants Program 6.51 9.84 9.21 

North Carolina Clean Water Management Trust Fund 5.90 4.00 4.36 

Kentucky Infrastructure Revolving Loan—Fund B 4.60 3.14 3.55 

South Carolina Budget and Control Board Grant Program 3.52 5.25 4.81 

Mississippi Capital Improvements Revolving Loan Program 3.28 3.78 3.67 

New York Financial Assistance to Business—Water Program 2.95 0.34 0.49 

North Carolina Capacity Building Grants Program 0.90 0.92 0.92 

Georgia Equity Fund Program 0.80 2.20 1.82 

Georgia Regional Assistance Program (2003 data not 

included) 

 0.23 0.30 0.28 

Source: UNCEFC Master Funding Database, 2004. 
104             Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 105 

Sources of Funds 

The terms “public funding program” and “government funding program” imply that 

the government provides the funds for community infrastructure. In reality, individuals 

(taxpayers, investors, etc.) are the source of funds for all public infrastructure 

investments. Governments just collect and distribute funds. 

The public funding programs in Appalachia use different mechanisms to generate the 

capital funds they distribute. Some of these mechanisms are quite complicated, as in the 

case of the SRF programs, which involve combining state and federal appropriations 

with loan proceeds to create a pool of capital. 

States have tapped into different revenue sources to support their public funding 

programs. The source of funds for programs may influence where the funds go, as in 

the Kentucky Coal and Tobacco Development Fund. Kentucky divides its counties by 

the principal commodity they export, coal or tobacco. The state used $5 million from 

coal severance taxes to secure $50 million in bonds that funded 103 water and 

wastewater projects specified by legislators in coal counties. Likewise, the state used $5 

million from tobacco settlement money to finance more than $50 million in bonds to 

pay for 164 specified projects in tobacco counties. 

Relationship between Funding and County Needs 

Any discussion of public funding invariably leads to this question: Did the funds go to 

those who needed it most? To attempt to answer the question, the UNCEFC research 

team carried out a series of analyses comparing the amount that counties received from 

different funding programs with various indicators of needs. Funding programs 

employ a wide variety of criteria to prioritize funding. The UNCEFC analysis was 

designed not to evaluate whether an individual program adhered to its criteria but to 

determine if there were general relationships between where funding went and what 

the public might commonly consider to be indicators of financial or environmental need 

(see Table 5-3)—for example, low median household incomes and a history of 

wastewater system violations. This section presents an overview of the analysis.62

 

62 For a description of the methodology and a discussion of analysis results, see Matthew T. 

Richardson, “Examination of the Relationships between Public Funding for Water and Sewer 

Infrastructure and Indicators of Need in the Appalachian Region from 2000 through 2003” (master’s 

thesis, University of North Carolina at Chapel Hill, 2005). 
106 Drinking Water and Wastewater in Appalachia 

Table 5-3. Sample Indicators of Need and Expected Relationships with Funding 

 Indicator of Need 

Abbreviation Hypothesized Relationship 

1 Median household income MHI Negative—counties with lower income 

receive more funding 

2 Total clean watershed needs per 

capita (from 2000 EPA CWNS) 

CWNS Positive—counties with more 

documented needs receive more funding 

3 Septic system density 

(from 1990 Census) 

Septic Positive—counties with high septic 

system density receive more funding 

4 Permitted combined-sewer-overflow 

systems 

CSO Positive—counties with more CSO 

permits receive more funding 

5 Number of POTW NPDES violations 

per POTW NPDES permit issued 

NPDES Positive—counties with more NPDES 

violations receive more funding 

6 SDWA violations per community 

water system (monitoring and 

reporting violations excluded) 

SDWA Positive—counties with more SDWA 

violations receive more funding 

7 Waterborne disease outbreaks WBD Positive—counties with more disease 

outbreaks receive more funding 

Note: POTW = publicly owned treatment works (a facility). SDWA = Safe Drinking Water Act. 

The analysis revealed that needs identified by the CWNS were statistically 

“significant” and positively related to the distribution of water and wastewater 

infrastructure funding in Appalachia. (A “significant” relationship is one that could not 

have occurred by chance, given a 0.01 percent probability.) The relationship between 

funding distributions and NPDES compliance violations were significant and positive. 

Likewise, the relationships between funding distributions and waterborne diseases 

were significant and positive. The relationship between septic system density and 

funding, although significant, was negative. In other words, on average, counties with 

higher densities of septic systems received less public funding than counties with lower 

densities of septic systems. This finding is likely attributable to a fundamental 

characteristic of infrastructure funding: funding from large programs tends to flow to 

communities with existing large public systems. In essence, septic system density also is 

an indicator of whether or not a county is likely to have centralized water and 

wastewater systems. (For a summary of the results, see Table 5-4.) 
Drinking Water and Wastewater in Appalachia 107 

Table 5-4. Regression Analysis: Relationship between County Funding Totals 

(All Funding Programs) and Indicators of Need

Independent

Variable Significance Direction Result

CWNS High Positive An increase of one dollar per capita identified in CWNS is

associated with an increase of 0.06 dollars per capita in

funding.

NPDES High Positive An increase of one NPDES violation from a POTW is

associated with an increase of 54 dollars per capita in

funding

Septic High Negative An increase of one septic system per square mile is

associated with a decrease of 2.7 dollars per capita in

funding

WBD High Positive An increase of one WBD case is associated with an increase

of 1.3 dollars per capita in funding

Source: Matthew T. Richardson, “Examination of the Relationships between Public Funding for Water 

and Sewer Infrastructure and Indicators of Need in the Appalachian Region from 2000 through 2003” 

(master’s thesis, University of North Carolina at Chapel Hill, 2005) 

The number of public funding programs and the amount of the public funding to 

upgrade existing wastewater systems in Appalachia or build new, decentralized ones 

are extremely limited. Consultations with public officials at the state and local levels 

suggest that some of these approaches promote sustainability and improved access to 

funds more than others do. States that have developed coordinated funding 

organizations have been able to improve communication and minimize the 

administrative hurdles. Other states, such as Ohio and West Virginia, have made 

difficult decisions regarding the eligibility of communities for funds and the types of 

funds to make available to communities. These states offer a large proportion of their 

funds as loans and pay careful attention to the fiscal capacity of communities before 

granting them. The measures have promoted consolidation and have kept some 

communities from investing funds in systems that may not be sustainable.

Funding Stability over Time 

Historical funding levels are not always good predictors of future funding, for the 

funds available to many programs, particularly those funded by state appropriations, 

can be highly variable over time. Over the study period, funding generally increased, 

but in some states, such as North Carolina, it decreased (see Figure 5-6). Many of the 

state programs in North Carolina that were most active from 2000 through 2003 have 

ceased distributing funds to communities because of depletion of a pool of bond funds 

approved in 1998. 
108 Drinking Water and Wastewater in Appalachia 

Figure 5-6. Disbursements of Federal and State Programs in the 

Appalachian Region of North Carolina, 2000–2003 

Source: UNCEFC Master Funding Database, 2004. 

The amounts of federal funds that individual states have to administer also can 

change significantly over time. The USDA’s Water and Waste Disposal Loans and 

Grants Program allocates funds to states on the basis of formulas that take rural 

population and incomes into consideration. In several Appalachian states, including 

New York and Pennsylvania, major demographic shifts between 1990 and 2000 have 

affected the number of Appalachian communities that are eligible for the funds. 

Congressional appropriations for the CWSRF program dropped significantly for the 

first time in several years in federal fiscal year 2004–05. Nationwide the appropriation 

dropped from $1.35 billion to $1.1 billion. (For the impact of this decrease on the 

capitalization funds that Appalachian states receive, see Table 5-5.) Additional 

decreases have been proposed in the fiscal year 2005–06 budget. 

$38.2

$42.8

$36.6

$29.9

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2000 2001 2002 2003

(in Millions)
Drinking Water and Wastewater in Appalachia 109 

Table 5-5. Decreases in Appropriations of Capitalization Funds for Appalachian 

States 

State 

CWSRF Appropriation FY 2003–04

(in millions) 

CWSRF Appropriation FY 2004–05 

(in millions) 

Alabama $15.0 $12.1 

Georgia 22.6 18.4 

Kentucky 17.0 13.8 

Maryland 32.4 26.3 

Mississippi 12.1 9.8 

North Carolina 24.2 19.6 

New York 147.8 119.9 

Ohio 75.4 61.2 

Pennsylvania 53.0 43.0 

South Carolina 13.7 11.1 

Tennessee 19.4 15.8 

Virginia 27.4 22.2 

West Virginia 20.9 16.9 

All App. States $480.8 $390.0 

U.S. $1.35 billion $1.09 billion 

Source FY 2003–04 data from Environmental Protection Agency, FY 2004 Clean Water State Revolving 

Fund Title VI Allotments (February 17, 2004), available at www.epa.gov/owm/cwfinance/cwsrf/ 

cwsrfallots.pdf. FY 2004–05 data from National Resource Defense Council, Bush Budget Impacts on EPA 

Funding for Water Quality Programs (Feb. 10, 2005) (last visited April 14, 2005), available at www.nrdc. 

org/media/docs/050211.pdf. National Resource Defense Council values for 2004–05 are based on 

formula calculations from the 2003–04 budgets. 

In addition to seeing variation in the size of the funding pie, states may experience 

change in the relative size of their slice. CWSRF capitalization funds continue to be 

distributed to Appalachian states on the basis of percentages established about fifteen 

years ago. The allocation of funds has been a source of debate among states. Over the 

last few years, there have been several attempts to modify the allocation percentages in 

a way that could significantly affect several Appalachian states, including New York 

and Tennessee.63 To date, these proposals for revised allocations have not been enacted. 

However, in the UNCEFC survey, several state needs coordinators indicated that they 

have begun investing more in carrying out their state’s CWNS to ensure that if the 

change does occur, they will not be penalized by avoidable underreporting. 

 

63 “Perspectives on the CWSRF Allocation Formula” (paper presented at Council of Infrastructure 

Financing Authorities, Federal Policy Conference, May 2004). 
110 Drinking Water and Wastewater in Appalachia 

In sum, whatever the true needs for water and wastewater services in Appalachia are, 

whether at the lower or the upper end of this study’s $26 billion–$40 billion estimate, 

the $4.6 billion in total nonlocal public financing provided from 2000 through 2003 is 

only meeting part of the need. Unlike communities in more populous, higher-growth 

areas of the country, many communities in Appalachia have little or no access to private 

capital markets to make up the difference. These same communities cannot generate 

revenue to pay for capital improvements on a pay-as-you-go basis. State programs to 

help pay for water and wastewater capital problems have been an increasingly 

important share of the public funding effort, but the state commitments tend to wax 

and wane over fairly short cycles. 
111 

6 

Financial Management and Funding Strategies 

The magnitude of the capital needs of Appalachian communities describes only part of 

the challenge facing them in regard to water and wastewater services. Even large gaps 

can be bridged with sufficient resources, and very small gaps can be insurmountable if 

a community lacks the capacity or the tools. Many recent policy reports offer 

suggestions and policy inventories for addressing infrastructure gaps at the national, 

state, and local level. Despite the region’s recent gains, Appalachian communities 

remain some of the most fiscally stressed in the country. 

Many of the strategies that seem feasible in other parts of the United States cannot 

readily be applied in Appalachia. Furthermore, given the diversity of the Appalachian 

communities and the water and wastewater challenges they face, no single strategy or 

measure will work throughout the region. So what financial management and funding 

strategies are likely to have the biggest impact on service in the region? This chapter 

assesses different strategies, policies, and tools that have been prescribed in national 

studies or implemented by states and communities in the region. To assess the 

applicability of these tools, the UNCEFC research team analyzed the fiscal, managerial, 

environmental, and technical capacity of Appalachian communities in comparison with 

the capacity required by these strategies. 

Major Funding Challenges and Gaps 

Like the country as a whole, Appalachia faces several types of interrelated water and 

wastewater financing challenges, including capital requirement gaps; annual cash-flow 

shortages; marginal utility/system fiscal capacity; diminishing household ability to pay; 

and diverse management-oriented needs. Despite the numerous capital funding 

programs in the region, a backlog of project funding requests exists in many areas. In 

other parts of the country, the private capital market provides a large pool of capital 

funds to supplement limited public capital funds. Although some communities in 

Appalachia have access to private capital, it is out of reach for the majority of 

communities in distressed areas. 

At the system level, many small utilities have insufficient revenues to cover future 

cash-flow requirements, once debt repayments and increased operating costs linked to 

new facilities are taken into account. These utilities are characterized by small and often 

shrinking customer bases. In some cases, even if grants for capital were available, the 

utilities would be unable to meet the operating costs associated with their facilities. 
112 Drinking Water and Wastewater in Appalachia 

Concern about affordability and ability to pay exists in almost every system in the 

country. Even the nation’s wealthiest areas have small pockets of poverty. However, in 

comparison with the nation as a whole, households in many Appalachian counties are 

paying a much higher proportion of their income for water and wastewater services, so 

high in several areas for large numbers of households that asking them to pay more for 

improved service is infeasible. This household affordability gap has become the critical 

challenge for many utilities. 

Management shortfalls in the region range from small systems that are unable to 

support trained and educated staff, to large systems that have yet to shift from a 

reaction-oriented paradigm characterized by high maintenance costs and continual 

capital stock crises, to a more proactive approach that includes asset management 

systems, proactive investments, and continual staff training. 

Regionalization and Local Partnerships 

Increasing the number of regional water and wastewater systems (or decreasing the 

number of small providers) is one of the few measures that almost all national advocacy 

organizations and state and federal government agencies endorse as a strategy for 

improving service and reducing cost. This strategy is described in detail in EPA’s Gap

Analysis and commonly appears among the suggestions made by regional EPA offices.64

More than 90 percent of the state and federal funding program managers who 

responded to the UNCEFC survey thought that consolidation could have at least a 

moderate impact on the funding of water and wastewater services in Appalachia. 

The average size of community water systems and the number of such systems vary 

significantly from state to state (including adjoining states) in Appalachia (for the 

number per county in selected Appalachian states, see Figure 6-1). This suggests that 

technology and topography are not the only determinants of the ease with which this 

strategy can be applied. Kentucky, which has made reducing the number of small 

systems a priority, tends to have fewer systems per county than most other 

Appalachian states. New York, North Carolina, and Pennsylvania have an abundance 

of small systems. 

 

64 Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap Analysis 

(Washington, D.C.: EPA, 2002); Environmental Protection Agency, Mid-Atlantic States, Water Infrastructure 

Financial Assistance (last visited April 17, 2005), available at www.epa.gov/reg3wapd/water_ 

infrastructure. 
Drinking Water and Wastewater in Appalachia                              113
114 Drinking Water and Wastewater in Appalachia 

In addition to recent state efforts to promote consolidation, some states, such as 

Kentucky and West Virginia, have a history of regional entities and have institutional 

and regulatory frameworks favorable to regional systems. In other states a go-it-alone 

culture and a historic model of a single provider prevalent in their system of 

government make larger, multiple-jurisdiction systems much less common. For 

example, in North Carolina, municipalities make up a much higher percentage of 

government-owned systems than they do in West Virginia (see Table 6-1). 

Table 6-1. Government-Owned Utilities in North Carolina and West Virginia 

Government Unit North Carolina West Virginia 

Municipal systems 402 175 

County systems, regional authorities, 

and other district models 

 105 161 

Source: Data from the North Carolina Local Government Commission and the West Virginia Public 

Utilities Commission, collected through e-mail communication (June 2004 and July 2004 respectively) and 

compiled by UNCEFC. 

In many cases, communities that are part of large regional drinking-water systems 

maintain independent wastewater systems. One of the obvious reasons for this 

distinction is that moving drinking water long distances up and down mountains is 

normally easier and cheaper than moving sewage is. For example, in West Virginia, 

municipalities are the primary provider of wastewater services, despite the growing 

number of regional water providers. 

Finding the right incentives to overcome the political and cultural attraction of singlejurisdiction systems is a key to making multiple-jurisdiction systems work. Many public 

funding agencies now incorporate regionalization into their evaluation criteria. About 

75 percent of the respondents to the UNCEFC funding survey indicated that they had 

programs that included incentives for regionalization. 

Local governments often put pride or political factors before cost in making decisions 

about infrastructure, a practice not commonly shared by for-profit companies. The 

private sector’s drive for profits has proven to be very effective in reducing the number 

of small systems and facilities in certain parts of Appalachia. West Virginia–American 

Water has built a successful company by paying careful attention to cost, and it has 

been instrumental in water system consolidations throughout West Virginia (for a case 

study of this utility, see appendix E). The water company’s efforts to build larger, more 

cost-efficient regional systems has led to a statewide network of eight large water 

treatment plants that serve or will serve more than fifty communities and districts. 

According to the company’s president, one of the company’s fundamental business 
Drinking Water and Wastewater in Appalachia 115 

tenets is to minimize the number of treatment plants it has in operation, even if doing so 

requires extensive investments in water distribution lines.65 

Another factor that encourages West Virginia–American Water and other private 

companies to invest capital to expand their systems relates to how rates are approved. 

West Virginia–American Water’s rates are regulated by the West Virginia Public 

Utilities Commission, and the company is allowed to include a rate of return on its 

capital investment. If West Virginia–American Water invests in capital to acquire more 

systems, it can be assured of getting a return on that investment. Government utilities 

that have their rates approved by their governing board are under political pressure to 

keep rates low and are less assured of getting a return on capital investments in the 

system. This makes capital-intensive system expansions riskier. One of the likely 

reasons why West Virginia’s public service districts have been able to play the role of 

regional provider is that, although they are government owned, their rates are 

approved by the West Virginia Public Utilities Commission rather than by elected 

boards. This arrangement removes some local political pressures from the decisionmaking process. 

Municipal systems in many states also are reluctant to extend their systems beyond 

their boundaries, especially for low-income or expensive-to-serve customers, because 

they think that they have no legal or financial obligation to serve “non-voters.” States 

like North Carolina that have a history of municipal provider models continue to have 

many areas outside city boundaries without access to centralized water systems. 

Regional models and options often are considered when a single jurisdiction faces 

significant system and investment needs. For example, when Weaverville, North 

Carolina, was planning a new water treatment plant, it considered regional models and 

partnerships. However, in the end, each of the three cooperating communities decided 

to proceed independently. (For a case study of Weaverville, see appendix E.) 

In some cases, maintaining partnerships can be as difficult as creating them. The 

future of a regional model that has served a large area of western North Carolina for 

several years is currently in question. The situation in Asheville illustrates the 

importance of having regional models in which the multiple participating governments 

see themselves as equals. The Regional Water Authority, made up of Asheville, 

Buncombe County, and Henderson County, is an institutional body responsible for 

water allocation and financial decisions for a water system and treatment plant that is 

 

65 Chris Jarret, West Virginia–American Water, interview with authors, Charleston, June 2004. 

President. 
116 Drinking Water and Wastewater in Appalachia 

owned and operated by Asheville. Asheville recently announced its decision to 

withdraw from the authority.66 

A single large regional provider is not the only regionalization model in Appalachia. 

Thanks to incentives provided by funding agencies, small systems in some areas have 

been able to partner as equals and share ownership in new facilities. 

Consolidation and regionalization of water and wastewater systems everywhere 

faces the problem of “us versus them”—that is, the perception that outside influence 

over matters as vital as water and wastewater services will come at a cost to a 

community. The loss of autonomy in connecting to another system is quite widely 

viewed as a cost in itself, often the most substantial perceived cost. This nearly 

universal human feeling about loss of control over vital services is compounded in 

many parts of Appalachia by the long, strong cultural opposition to outside influence, 

even when the outsiders are people of the same cultural, ethnic, and economic 

background who live just over the ridge. For funders and policy makers to bemoan this 

fact of the human and Appalachian condition is futile. Instead, they must minimize the 

other costs and barriers to consolidation and regionalization and develop good 

information about the economies to be gained from consolidation by each system 

considering it. Further, they must make these economies clear and understandable, in 

terms that are meaningful to the layperson, such as improvements in property values 

and reductions in rates as a result of combined operations. After all, as happened in 

War, West Virginia, the motivation of an individual community to maintain its 

autonomy can itself be a source of resources and support for a system by mobilizing 

leaders to search for external funding sources (for more detail, see the case study of 

McDowell County, West Virginia, and Letcher County, Kentucky, in appendix E). 

Nevertheless, the collective good of consolidation will not occur automatically. 

Full-Cost Pricing 

“Full-cost pricing” is the practice of setting water and wastewater rates at a level that 

generates sufficient revenues to cover all the capital and operating costs of providing 

service. From the private sector’s financial perspective, the term almost seems absurd. 

What company would intentionally price its product or service at a level at which it 

could not cover its costs? Full-cost pricing and less-than-full-cost pricing remain 

important issues for water and wastewater companies for several important reasons. 

First, many water and wastewater entities are not institutionally independent. Rather, 

they are part of larger government units, such as counties and municipalities. In many 

states, government entities are legally able to transfer funds between water and 

 

66 Jonathan Bernard, “More Surprises—Peterson, Dunn Vote against Water Authority Budget,” Mountain 

Xpress (Asheville, N.C.), 9 June 2004. 
Drinking Water and Wastewater in Appalachia 117 

wastewater units and other government accounts. The revenues from these transfers, 

often originating from general tax revenues of the host government, allow many water 

and wastewater companies to continue operations with artificially low prices. Records 

from the North Carolina State Treasurer indicate that this practice is common in North 

Carolina (see Table 6-2). 

Table 6-2. Average Financial Results of Municipal Water and Sewer Systems for 

the Fiscal Year Ended June 30, 2003 

As Percentage of Operating Revenues 

Population Groupings 

Number 

of Units*

Average 

Operating 

Revenues Operating 

Margin 

Operating 

Transfers In 

(Out) Net Income 

Statewide—All Units 400 $ 2,852,113 9.2 (1.1) 24.9 

Units with Electric Systems: 

All 67 4,987,826 13.6 (1.7) 18.5 

10,000 and above 25 11,409,210 15.8 (0.6) 18.6 

2,500–9,999 19 2,065,670 5.2 (8.9) 13.6 

2,499 and below 23 422,015 (14.8) (2.6) 34.8 

Units without Electric Systems: 

All 333 2,422,405 7.3 (0.7) 28.3 

50,000 and above 9 46,957,840 7.2 (0.6) 25.2 

10,000–49,999 19 7,967,978 13.6 (1.4) 26.4 

2,500–9,999 83 1,789,826 6.6 (2.2) 23.9 

1,000–2,499 88 652,770 1.6 2.5 54.4 

500–999 64 269,662 (10.7) 0.6 33.2 

499 and below 70 134,159 (12.1) (1.8) 42.3 

Source: North Carolina Department of State Treasurer, Memorandum #1017, Statistical Information on 

Water and Sewer Operations (Raleigh, NC: N.C. State Treasurer, 28 April 2004), available at www. 

treasurer.state.nc.us/NR/rdonlyres/4ED70521-087E-47F4-B61E-E0CFAC8BB47A/0/Memo1017.pdf. 

* Number of units with water and wastewater systems that submitted audit reports by April 20, 2004. 

Another reason for the widespread disconnection between prices and costs is that 

annual budgets and short-term cash-flow requirements, rather than financial 

statements, are the primary drivers of financial decisions made by government-owned 

water systems. Budget and cash-flow needs frequently mask the need for capital 

investment, allowing local governments to charge rates that cover basic operating costs 

but do not contribute sufficiently to capital stock investments and upkeep. Needed 

repairs often are deferred until the whole system breaks, requiring a capital infusion. In 

North Carolina the 134 smallest systems in Appalachian municipalities that do not run 

electric utilities had more than a negative 10 percent operating margin in 2003. 
118 Drinking Water and Wastewater in Appalachia 

Nationally the EPA found that smaller systems are much more likely than larger 

systems to operate at a loss.67

Full-cost pricing is one of EPA’s four pillars of sustainable infrastructure.68 It also is 

strongly supported by professional organizations like AWWA.69 High-profile national 

policy studies include assumptions about price increases to demonstrate the ability of 

local communities to meet their infrastructure needs.70 When asked in the UNCEFC 

survey about the potential of full-cost pricing to help communities meet their 

infrastructure needs, funding program managers were split. Thirty percent of the 

managers responding to the survey thought that it would have a major impact, 29 

percent a moderate impact, and 36 percent a small or no impact. 

During interviews and discussions, local, state, and federal officials all reported that 

in many areas of the country, income constraints were a significant barrier to systems 

charging full-cost prices. In 1999 in Appalachia, 67 percent of the households paid a 

water and sewer bill directly, 10 percent had their bills included in the rent, and 23 

percent reported not having to pay for water and sewer services (probably because the 

households were not connected to centralized systems) (for an explanation of the 

methodology used to generate these data, see appendix K). Of the 67 percent that paid 

directly for water and sewer services, the average household expenditure for those 

services was $403, equivalent to an average proportion of income spent on these 

services of 1.65 percent. 

For Appalachian households that pay directly for water and sewer services, their 

average expenditures in absolute terms ($403) are lower than the national average 

($476). However, this statistic may be misleading since the expenditures that were 

reported by the households include bundled water and wastewater services, and a 

smaller proportion of Appalachian households are connected to centralized wastewater 

services than the rest of the country on average. In other words, if water and 

wastewater average expenditure information was collected and shown separately, it is 

likely that Appalachian households would pay the same if not more for comparable 

 

67 Environmental Protection Agency, 2000 Community Water System Survey (Washington, D.C.: EPA, 

2002), app. 2. 

68 Environmental Protection Agency, Sustainable Water Infrastructure for the 21st Century (last visited 17 

April 2005), available at www.epa.gov/water/infrastructure/. 

69 See AWWA E-Mainstream, 28 September 2004. 

70 EPA, Gap Analysis; Water Infrastructure Network, Clean and Safe Water for the 21st Century: A Renewed 

National Commitment to Water and Wastewater Infrastructure (Washington, D.C.: the Network, 2000). 
Drinking Water and Wastewater in Appalachia 119 

services. Os a percentage of income, Appalachian families spend a greater percentage of 

their income on water and wastewater services (1.65 percent) than the rest of the 

country on average (1.51 percent).71

The difference in expenditures in some areas is striking. West Virginia households 

spend, on average, the greatest percentage of their income (2.22%) on water and 

wastewater services than households of any other state in the United States72. In fact, 

West Virginia is the only state where the average percentage of income spent on water 

and wastewater services exceeds 2% (see Figure 6-2). 

At the county level, the average household expenditure on water and wastewater 

services in Appalachia varied from $232 in Gordon, Murray, and Whitfield counties in 

Georgia to $622 in Lackawanna County in Pennsylvania. The average proportion of 

household income spent on water and wastewater services also varied widely, from 

0.75 percent in Forsyth County in North Carolina to 2.75 percent in Dickenson, Lee, 

Russell, and Wise counties in Virginia. 

Households in West Virginia, eastern Kentucky, and parts of Alabama and 

Pennsylvania already pay relatively high percentages of their income for water and 

wastewater services. Raising the price in these areas would be more difficult than doing 

so in areas in Georgia, South Carolina, and southern New York. Most of the distressed 

counties in Appalachia are among the areas where households pay the highest amounts 

and the greatest percentages of their incomes for water and wastewater services. 

Twenty-nine percent of households in Fayette, Greenbrier, Nicholas, Pocahontas, and 

Webster counties in West Virginia pay more than 2.5 percent of their income for water 

and wastewater services, whereas only 4 percent of households in Gwinnett County in 

Georgia do. In 1999 in Appalachia, 15 percent of all the households that paid directly for 

water and wastewater services paid more than 2.5 percent of their income for those 

services, and 5 percent paid more than 5 percent of their income. 

A comparison of what utilities inside and outside the Appalachian region of Ohio 

charge their customers shows that on a statewide basis, Appalachian customers are 

charged more for water both in absolute terms and as a percentage of median 

household income. Based on a statewide monthly average consumption rate of 7,756 

gallons per customer, about 50 percent of utilities in the Appalachian region of Ohio 

charge customers at least $30 per month. Approximately 30 percent of the utilities in the 

 

71 U.S. Census Bureau, Public Use Microdata Sample 5-Percent Files, available on 

ftp://ftp2.census.gov/census_2000/datasets/PUMS/FivePercent. Data downloaded and compiled by 

UNCEFC, using HWEIGHT, WATER and HINC. 

72 Scott Rubin (2003), The Cost of Water and Wastewater Service in the United States. Available at 

www.publicutilityhome.com/speeches/Cost%20of%20Water.pdf. Table 8. 
120             Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 121 

non-Appalachian region charge more than $30 currently. The customer cost of water 

exceeds 2 percent of the median household income for approximately 18 percent of the 

utilities in Appalachia and less than 1 percent of the utilities in the non-Appalachian 

region.73 The same trend was observed in other states. In his response to the UNCEFC 

survey, an official working for Virginia’s Community Development Block Grants 

program said he thought that the Appalachian communities in Virginia had the highest 

rates in the state, to the point that they had “maxed out” their potential to incur debt. 

While funding and regulatory programs often employ universal metrics to determine 

whether water is affordable or not, at the local level, full-cost pricing becomes an issue 

of willingness to pay that is difficult to estimate without understanding local 

conditions. Communities in parts of Appalachia that currently pay a lot for their 

services or have bad service, have demonstrated a willingness-to-pay-more that appears 

to be much higher than in other areas. For example, given the choice of high rates and 

service, or low rates and no service, many residents of McDowell County, West 

Virginia, one of the poorest counties in the United States, have chosen high rates. 

Customers now pay as much as $9 per 1,000 gallons, a rate that many leaders in far 

wealthier areas of the country would consider infeasible. 

The relationship between public funding programs and local initiatives for full-cost 

pricing is complicated. One could argue that by providing utilities with grant 

assistance, public funding programs send the message that less-than-full-cost pricing is 

acceptable. Many funding program managers interviewed and surveyed for this report 

acknowledged this relationship. They indicated that they use their grants only as a last 

resort for communities able to demonstrate that their residents cannot afford to pay the 

full cost of service. Half of the funding survey respondents indicated that they manage 

programs that include funding incentives for communities willing to move toward fullcost pricing. Indeed, 52 percent of the funding programs have conditions that require 

community rates to be at a certain level or to be increased to obtain funds. The 

definition of “affordable rates” used as a trigger by funding agencies varies widely 

across programs and states. 

Accident, in Garrett County, Maryland, illustrates the challenge of full-cost pricing 

facing many small communities in Appalachia. Accident is quite poor, with a median 

household income of $22,500, compared with $52,868 for all of Maryland, and an 

unemployment rate of 6.8 percent.74 In 1999 a family with average consumption (4,000 

 

73 Ohio Environmental Protection Agency, Office of Fiscal Administration, 2002 Sewer and Water Rate 

Survey (Columbus: OEPA, 2004), available at www.epa.state.oh.us/ofa/sw02/02report.pdf July 2004. 

74 Data on income from Census Bureau, Census 2000, Summary File 3, Table P53; data on 

unemployment calculated by UNCEFC from Census Bureau, Census 2000, Summary File 3, Table P43. 
122 Drinking Water and Wastewater in Appalachia 

gallons per month, according to billing records) was charged $196 a year for wastewater 

services and $138 for water services. Together these payments represent about 1.5 

percent of the median household income of Accident—a percentage that is high but still 

lower than the proportion in many other parts of the region. 

Accident recently completed a series of major investments to improve and upgrade 

its wastewater collection and treatment facilities. The improvements were necessary to 

meet the requirements of a consent decree and to correct severe public health and 

environmental problems. The investment upgrades cost about $3 million and were 

funded primarily by grants. However, as part of the funding package, the town had to 

borrow $480,000 from USDA at a rate of 4.5 percent over forty years. The debt service 

for this loan will cost each of Accident’s 197 customers about $130. If the town had 

borrowed the full amount from USDA, the cost per household would have risen to 

more than $800 per customer. If Accident had not received the substantial grants and if 

customers had been asked to pay the full cost of service, their annual payment for water 

and wastewater service would have been about $1,000 per year, or 4.4 percent of their 

median household income—an amount that far exceeds what any county in Appalachia 

currently pays. 

Overall, Appalachia is one of the best “laboratories” in the country for demonstrating 

the potential and the limitations of full-cost pricing. Appalachian communities are an 

example of the willingness of people to make financial sacrifices in order to guarantee 

sustainable, high-quality water and wastewater services. At the same time, many of 

these communities continue to have substantial needs. A time comes when price 

increases reach their limits. 

The region also shows that funding agencies play different roles in promoting fullcost pricing, with some carefully incorporating it into their decisions. The bottom line: 

Appalachia has demonstrated that many communities can contribute to meeting their 

needs but many communities cannot generate adequate revenue to meet future needs 

with price increases. 

Rate-Making Strategies for Low-Income Customers 

Like many other organizations, EPA often suggests that utilities use “lifeline rates” or 

other special strategies to ensure that low-income customers are insulated from the 

impacts of full-cost pricing. Utilities can lower rates for low-income customers directly 

by establishing rate structures that take income levels or other economic indicators into 

consideration. According to West Virginia–American Water staff, American Water’s 

subsidiaries in Pennsylvania have used this approach for years. West Virginia–

American Water has proposed using a similar rate structure for its customers. Again 

according to the utility’s staff, under the proposal, customers whose income is below 
Drinking Water and Wastewater in Appalachia 123 

the federal poverty level would receive a 25 percent discount on their minimumallowance charge. 

This type of strategy is infeasible where state law prohibits governments from 

establishing different rate structures for different income classes. For example, North 

Carolina law does not give municipal water and sewer enterprises the authority to 

develop classes of customers based solely on income or to have two separate rate 

structures based on the household income of customers. In other words, a system 

cannot charge a low-income customer who uses 5,000 gallons per month less than it 

charges a wealthier customer who consumes 5,000 gallons per month. 

Utilities can consider household income, though, in developing rate structures 

applied to all customers. For example, in some areas, customers living in larger houses 

have been shown to have higher base-consumption amounts than customers living in 

smaller houses. The former type of customer may use 8,000 gallons per month, and the 

latter 3,000 gallons. Rate structures can be designed so that the price per gallon for the 

first 3,000 gallons is significantly lower than the price per gallon for 3,000–8,000 gallons. 

This approach often can be supported by cost considerations. Serving large users of 

water, especially those who consume a lot more in the summer than in the winter, can 

usually be shown to be more costly than serving customers who use a more modest, 

consistent amount. 

Targeted Assistance for Low-Income Customers 

In most cases the primary objective of reducing the price that low-income customers 

pay for water and wastewater services is to ensure that they have sufficient funds to 

meet other basic needs. Providing direct funding assistance to low-income water and 

wastewater customers, rather than trying to reduce their rates, can achieve the same 

objective. The National Drinking Water Advisory Council has recommended that EPA 

create a Low Income Water Assistance Program (LIWAP) modeled after the Low 

Income Heating Assistance Program (LIHEAP).75 

This type of targeted assistance also can be established at the state or local level. For 

example, the Orange Water and Sewer Authority in North Carolina runs a Taste of 

Hope program, under which water customers are urged to round up their bills when 

they make payments. The extra funds generated by this rounding are transferred to a 

 

75 National Drinking Water Advisory Council, Recommendations of the National Drinking Water Advisory 

Council to U.S. EPA on Its National Small Systems Affordability Criteria, July 2003, available at 

www.epa.gov/safewater/ndwac/pdfs/report_ndwac_affordabilitywg_final_.08-08-03.pdf. 
124 Drinking Water and Wastewater in Appalachia 

local nonprofit social service agency that provides direct financial assistance to lowincome water customers who are unable to pay their bills. 

CBO has been critical of many public funding programs that distort prices by using 

federal grant funds to pay for projects and thus reducing prices below the true cost of 

water. CBO has recommended that federal funds be more targeted toward 

disadvantaged communities and low-income households.76

Asset Management 

“Asset management” is widely used to refer to a collection of proactive policies, 

procedures, and strategies seeking to ensure that capital assets provide high-quality 

services in a cost-effective manner. Improved asset management has long provided 

substantial benefits to communities in Australia and offers potential to many U.S. 

communities. Some asset management systems are so basic as to be in reach of even the 

smallest community and can and should be promoted in Appalachia. Some larger 

communities in Appalachia, such as Asheville, North Carolina, have developed 

advanced asset management systems that are beginning to provide cost benefits. Such 

systems often require significant up-front planning investments, political commitment, 

and skilled staff to ensure proper implementation. All of these are in short supply in the 

most economically distressed communities in Appalachia. More data and research are 

needed to determine the full potential of asset management systems in small rural 

communities, but in the short term, there are enough obstacles to implementing these 

systems that this strategy alone is unlikely to have a major impact on Appalachian 

water and wastewater funding needs. 

Improvement of Water Efficiency 

Improving water efficiency is the third pillar of EPA’s sustainable infrastructure 

program.77 It includes everything from installing water-efficient fixtures to reducing 

distribution-system leaks. This measure can have varying financial impacts on local 

utilities, depending on the size and the type of system. 

 

76 Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure

(Washington, D.C.: CBO, November 2002), available at www.cbo.gov/showdoc.cfm?index= 

3983&sequence=0. 

77 Environmental Protection Agency, Sustainable Water Infrastructure for the 21st Century (last visited 

April 17, 2005), available at www.epa.gov/water/infrastructure/. 
Drinking Water and Wastewater in Appalachia 125 

The most direct financial benefits accrue to communities that currently have large, 

unaccounted-for water losses and are purchasing treated water from other systems to 

resell, or paying other systems to treat their wastewater. (There are 1,260 community 

water systems that purchase water from others; see Figures 2-4 and 2-5.) As more small 

systems begin relying on larger regional facilities for treatment, the incentives for 

reducing water losses will likely increase. 

Improved water efficiency can have unexpected consequences. In West Virginia, for 

example, efficiency improvements and conservation have had such a major impact 

across the state that the average water consumption per connection has dropped from 

4,500 to 4,000 gallons per month. According to state officials, many communities 

designed and financed facilities using water-demand and cash-flow models with the 

higher estimate and are now experiencing revenue shortfalls. 

Improving efficiency does appear to be one area in which federal, state, and local 

agencies are providing significant assistance to communities. The Rural Water 

Association, the Rural Communities Assistance Project, and state capacity development 

staff offer water audits and other technical assessment programs to help small utilities 

improve their efficiency. 

Planning Grants and Assistance 

Many of the funding program managers whom UNCEFC surveyed thought that the 

lack of planning and the lack of financial assistance for planning made developing 

sustainable, well-conceived water and wastewater systems difficult for communities. 

Although public funding programs have provided billions of dollars in funds for water 

and wastewater systems, only a small percentage of those funds have gone toward 

preliminary planning efforts. When public funding programs do support such efforts, 

normally they do so only after an overall project has been approved and constructed. 

Some state programs have recognized this problem and created special planning or 

administrative funding programs. North Carolina’s Capacity Grants Program provides 

up to $40,000 for system feasibility studies. In many states, funds distributed by ARC 

are among the few that can be used to study and plan a project. 

Local officials in Jasper, New York, think that the planning funds the town received 

through ARC’s local development district were essential in developing community 

support for its project to construct a centralized wastewater system in the town. (For 

more detail, see the case study of Jasper in appendix E.) 
126 Drinking Water and Wastewater in Appalachia 

Improved Access to the Private Capital Market 

As noted in chapter 5, relatively few communities in Appalachia have ratings from 

Moody’s Investors Service for bonds with a designated water or wastewater purpose 

(see Figure 5-2). The figure does not include bond issues that were used for multiple 

projects that may have included water and wastewater components. Nor does it give an 

indication of communities that have worked with local banks to finance infrastructure 

projects through other credit means, such as lease installment purchases or certificates 

of participation. Nevertheless, the figure does demonstrate a commonly held view by 

public officials throughout the region that private capital has played a less important 

role in infrastructure development in Appalachia than in other areas of the country. 

In the UNCEFC survey, only 5 percent of public funding program managers 

responding thought that improving access to commercial credit would have a 

significant impact on water and wastewater services in the region. Sixty-six percent 

thought that improved access would have a small impact or no impact at all, and 29 

percent thought that improved access would have a moderate impact. Of course, to stay 

in business, many of these public funding programs depend on communities with poor 

credit. 

Despite the limitations of this funding strategy in Appalachia, in some Appalachian 

communities, it has been instrumental in improving services. Weaverville, North 

Carolina, with its growing population of affluent retirees and Asheville commuters, 

used a general obligation bond to finance a new water system (for a case study of 

Weaverville, see appendix E). 

Offering of Attractive Loan Terms 

For many communities with marginal fiscal capacity, careful manipulation of funding 

terms may offer the best hope for stretching limited public dollars. In some situations, 

long-term loans can make a capital project feasible for a community. USDA, the Ohio 

Water Development Authority, and West Virginia’s CWSRF are examples of programs 

that offer thirty- and forty-year loans under special conditions to disadvantaged 

communities. These loans should be made only after careful evaluation of a project. 

Generally accepted accounting principles dictate that loan terms not exceed the useful 

life of a facility. 

In the UNCEFC survey, several CWSRF fund managers indicated that the inability of 

states to offer EPA–capitalized SRF program loans beyond terms of twenty years made 

the programs less attractive to communities. Although federal restrictions influence the 

ability of SRF programs to offer extended loans for drinking water and clean water 

projects, some states have successfully crafted longer-term SRF packages for 
Drinking Water and Wastewater in Appalachia 127 

disadvantage and distressed communities. Georgia and South Carolina are among the 

states that have chosen to implement optional disadvantaged community programs. 

Under the DWSRF disadvantaged community programs, states must develop their own 

criteria for identifying disadvantaged communities and then can offer thirty-year loans 

and principal forgiveness to these communities. (All other DWSRF loans must be for no 

longer than twenty years.) 

At least one Appalachian state, West Virginia, has gone a step farther. It has used a 

special provision of the Clean Water Act to develop and gain EPA approval for a thirtyyear extended wastewater loan program that relies on CWSRF funding. 

Establishment of State Funding Sources 

One of the most basic steps that a state can take to help its communities is to create a 

funding program that relies on revenues collected or pooled by the state. Twelve of the 

13 states in Appalachia have at least one major state funding program that has invested 

funds in the region. In total, the twelve states have created thirty-two programs that are 

distinct from federal programs (see chapter 5 for more details). (For per capita funding 

levels for state and federal programs from 2000 through 2003, see Figure 6-3. The data 

include both the Appalachian and the non-Appalachian region of each state.) State 

funding for water and wastewater projects varies considerably in the region, with West 

Virginia state programs disbursing capital funds (loans and grants) totaling $175 per 

capita, compared with other states disbursing less than $10 per capita. 

Pooled-Loan Programs 

The private capital market in the United States has proven to be an essential component 

of infrastructure. However, it still is a tool beyond the reach of many communities in 

Appalachia. Many states have developed innovative methods of pooling loans for 

small, credit-risky communities to reduce their risk. These pooled-loan programs often 

operate under the name “bond bank.” They follow several designs, but the common 

approach is to use a combination of state administrative capacity and creditworthiness 

to obtain private capital at more favorable terms than individual communities could 

obtain. Across the country, bond banks have provided billions of dollars of funding for 

water and wastewater infrastructure by offering a range of programs and services. 

Several states in Appalachia currently operate pooled-loan programs. They follow 

several models. The West Virginia Infrastructure and Jobs Development Council 

operates the largest program, having provided more than $215 million dollars in loans 

to communities from 2000 through 2003. The council was created in 1994 by the 

Infrastructure and Jobs Development Act. The act also authorizes the state to issue $300 
128              Drinking Water and Wastewater in Appalachia
Drinking Water and Wastewater in Appalachia 129 

million in general obligation bonds for infrastructure.78 The act was modified in 1998 to 

allow the council to sell revenue bonds to provide additional funds to communities. The 

general obligation and revenue bond proceeds are made available to local communities 

as grants (about 20 percent of the funds) and as loans at 0, 1, and 2 percent interest for 

twenty years. The state uses coal severance taxes to retire the original general obligation 

bond issue and established community (as opposed to new) loans to retire the revenue 

bonds.79 

The Ohio Water Development Authority invested almost $50 million in water and 

wastewater infrastructure in Appalachia from 2000 through 2003 in the form of thirtyyear market-rate loans, as part of its commitment to Appalachian communities. The 

authority’s borrowers benefit from its superior credit rating and obtain loans for longer 

terms and at lower interest rates than they would on their own, but the program does 

not include any other embedded subsidies. Although these interest rates are higher 

than the SRF interest rates in Ohio (for loans also managed by the authority), many 

communities favor the loans for their reduced administrative requirements and longer 

loan terms.80 

Virginia maintains one of the oldest pooled-loan programs in the region. The Virginia 

Resources Authority issues revenue bonds that have several layers of security, 

including local government loan repayments that provide a 1.4 debt-service coverage 

and a state aid program that indirectly backs the bonds with the moral obligation of the 

state. The last Senior Series bond issue in June 2004 carried Moody’s highest rating, 

Aaa.81 The Virginia pooled-loan program invested more than $20 million dollars in 

Appalachia from 2000 through 2003. 

 

78 West Virginia Infrastructure and Jobs Development Council, 2002 Inventory and Needs Assessment 

Report (Charleston: the Council, 2003), available at www.wvinfrastructure.com/reports/index.html. 

79 Katy Mallory, West Virginia Infrastructure and Jobs Development Council, telephone conversation 

with authors, October 2004. 

80 Steve Grossman, Ohio Water Development Authority, telephone conversation with authors, October 

2004. 

81 Moody’s Investors Service, Moody’s Issue Rating Infrastructure Revenue Bonds, Senior Series 2004A 

(Non–AMT) (June 2004). 
130 Drinking Water and Wastewater in Appalachia 

Streamlining of, Coordination of, and Cooperation among Funding Programs 

Capital funding comes from a wide variety of sources, making planning and 

management of applications, and timing of grants, loans, and matches a significant 

challenge for communities. “Too many hoops to jump through” is how one state SRF 

administrator put it in describing Appalachian communities’ challenges in developing 

projects. Many of the local and state officials interviewed and surveyed for this project 

thought that administrative and timing issues of different public programs were the key 

challenge for local governments in carrying through with a project. At the time this 

report was being drafted, Jasper, New York, was struggling to meet the deadlines of 

one of its four project funders. Although this funder provided a relatively small part of 

the total project cost, the loss of it would have killed the entire project (for a case study 

of Jasper, see appendix E). More often than not, communities require multiple funding 

sources to complete a project successfully. Combining local, state, and federal grants 

and loans, each with their own requirements and deadlines, can be a challenge for even 

the most savvy local government and can be insurmountable for communities that lack 

administrative capacity. 

In the UNCEFC survey, the research team asked funding program managers several 

questions related to collaboration among programs. Managers who were responsible for 

multiple programs tended to feel strongly that there should be more collaboration, 

whereas those who were responsible for only one program were more evenly split. (For 

the percentages of funding program managers who rely on the different coordination 

methods, see Table 6-3.) 

Table 6-3. Funding Coordination Methods Used by 

Funding Program Managers in Appalachia 

Method % Using 

Informal discussions 94 

Shared databases or information 56 

Part of infrastructure coordination organization 53 

Shared application forms 18 

Source: UNCEFC Program Managers Funding Survey (Chapel Hill: UNCEFC, 2004) (see appendix D). 

The states in Appalachia have different types of coordinating organizations. They 

range from a legislative infrastructure council that has not met in more than two years 

(North Carolina), to an ad hoc funders group that meets regularly to evaluate projects 

(Ohio), to a staffed infrastructure development council that maintains elaborate project 

databases and makes recommendations for funding packages for each identified major 

project need in the state (West Virginia). 
Drinking Water and Wastewater in Appalachia 131 

The Role of Private Service Providers 

Opinions about private service providers in the United States and Appalachia are as 

varied and confusing as the terminology and the models associated with them. EPA 

categorizes all water systems in which the assets are not owned by a government 

jurisdiction as private, including systems that are run by nonprofit entities or trailer 

parks whose water business is a secondary part of their operation. Most of the debate 

about privatization, though, centers on the subgroup of private service providers that 

are truly for-profit enterprises, with profit-oriented goals and management strategies 

that cannot be separated from their service goals. 

For-profit water companies, and to a lesser extent for-profit wastewater companies, 

already play an important and growing role in many Appalachian communities. 

Privatization offers some communities a way to attain the economies of scale that 

regionalization brings, as well as access to greater technical and managerial capacity 

than is likely in a go-it-alone approach. Equally important, large multiple-jurisdiction 

for-profit providers offer rate-setting and institutional options not readily available to 

isolated single-jurisdiction systems. 

Numerous state officials interviewed for this study were quick to point out that in 

some areas of Appalachia, for-profit companies have made important public health 

water investments in their service areas, well beyond what local-government-controlled 

utilities have made in their service areas. State officials also are quick to point out that 

these investments have come at a significant cost and that in many cases, customers 

served by for-profit companies are paying significantly more for water service than 

customers served by government utilities are paying. For example, of the 420 public and 

private water utilities monitored by the West Virginia Public Services Commission, 

West Virginia–American Water was ranked 14th in amount charged in 2003.82 

For those in favor of for-profit company involvement, the higher cost is normally 

attributed to the cost associated with better, more modern facilities and is justified as 

necessary to meet public health needs. Private-sector advocates with whom the research 

team spoke stressed that their operational strategies, such as shared management and 

technical expertise, larger facilities, and bulk purchasing of chemicals, all lead to 

important cost efficiencies. Those wary of for-profit involvement attribute the higher 

charges primarily to return on capital (a form of profit), taxes, and higher costs of 

capital acquisition (because the tax-free municipal bond market and many government 

funding programs are out of reach to many for-profit companies). 

 

82 American Water Works Association, Dawn of the Replacement Era: Reinvesting in Drinking Water 

Infrastructure (Denver: the Association, 2001). 
132 Drinking Water and Wastewater in Appalachia 

At the local level, officials in communities like Mercer County, West Virginia, which 

has seen millions of dollars in infrastructure investment from for-profit companies, 

voiced support for their nongovernment service providers. Other local officials to 

whom the research team spoke, who have succeeded in creating large government 

regional water providers, such as the Public Service District in Putnam County, West 

Virginia, felt strongly that more government options still need to be developed that 

have incentives for capital investments without the cost items that for-profit providers 

add. 

In the end, most state officials to whom the UNCEFC research team spoke admitted 

that given the choice between higher costs and more proactive capital investment, they 

would choose higher costs. However, both they and the private-sector managers to 

whom the research team spoke stressed that there are communities in which “the 

numbers don’t work” and that are unlikely to benefit from for-profit investments. 

Further, private systems will not reach the most remote and difficult-to-serve 

communities in Appalachia. Private providers will seek to serve the systems with 

relatively low costs and high revenues. In addition, for-profit providers’ higher cost of 

obtaining capital, their profit needs, and their tax burdens inevitably influence the price 

their customers pay for water. The trade-offs between the benefits of consolidated 

private systems and the extra revenue requirements must be evaluated case by case 

throughout the region. 

A National Trust Fund 

Although many state and federal officials suggested that more federal funding 

assistance was required to meet all the needs in the region, no one specifically 

mentioned or described a new national trust fund similar to the existing one for 

national highway improvement. However, several advocacy organizations, including 

the Association of Metropolitan Sewerage Agencies (AMSA), AWWA, and WIN, have 

called for the establishment of such a fund as a possible method of helping Appalachian 

communities.83 AMSA has been one of the most vocal advocates of the fund and has 

published multiple papers and reports outlining potential structures and funding 

sources for it. 

 

83 Ibid.; Association of Metropolitan Sewerage Agencies, The Cost of Clean (Washington, D.C.: the

Association, 1999), available at www.amsa‐cleanwater.org/pubs/cost/coc.pdf; Water Infrastructure

Network, Clean and Safe Water for the 21st Century: A Renewed National Commitment to Water and Wastewater

Infrastructure (Washington, D.C.: the Network, 2000), available at www.amwawater.org/features/

win/win. html#report.
Drinking Water and Wastewater in Appalachia 133 

Optimization of Grant Programs 

Although opinions were mixed on the impact that most measures would have on 

assisting Appalachian communities, almost all the funding program managers whom 

the UNCEFC research team surveyed thought that grants would have major impacts. 

When asked to estimate the impact that different measures would have in helping 

communities meet their needs, 81 percent of the respondents indicated a large impact 

for grants. Similarly, almost 50 percent of the funding program managers responding 

felt that the inability of specific programs to offer grants was a major obstacle in the 

programs’ helping distressed communities. 

Most high-profile policy reports include conclusions and recommendations regarding 

grant funds. Dozens of separate programs, most of which are state based, offer grants to 

Appalachian communities. The sources of funds for these programs range from currentyear appropriations to state bonds backed by general taxes. 

Determining which communities receive grants can be a major challenge. Although 

most funders seem to agree that grant funds should go to communities “most in need,” 

some argue that grants made to the most fiscally distressed communities may be 

counterproductive in supporting communities that do not have the managerial and 

financial capacity to maintain a viable system and, in the worst case, do not have the 

funds to operate the system the grant supported. Some states have used grants as an 

opportunity to encourage or force communities to address their shortcomings in fiscal 

capacity by partnering with other communities. For such strings to have an impact, a 

comprehensive funding strategy must be in place. Otherwise, as many officials 

reported, communities will play funders off each other and go to the funder that 

requires the least and provides the most. The West Virginia Infrastructure and Jobs 

Development Council’s system of reviewing project requests to multiple programs and 

recommending a comprehensive package has allowed it to distribute grants in a much 

more planned and focused manner. 

Summary 

In conclusion, no single strategy offers a way out of the problem of water and 

wastewater funding shortfalls in Appalachia, but there are many interrelated actions 

that federal and state policy makers and local communities can take to have a positive 

impact on water and wastewater capital funding. For most communities, particularly 

those that are economically distressed, addressing the shortfalls in a sustainable manner 

requires external support combined with local initiatives. Communities without access 

to external funding in many cases are unable to meet their needs. However, outside 

capital alone is not sufficient to guarantee sustainable services. Local communities 

without an understanding of how to tie together different funding programs are 
134 Drinking Water and Wastewater in Appalachia 

unlikely to be able to assemble a funding package with sufficient resources to meet their 

needs. Funding sources like ARC that can provide planning grants and other up-front 

money can help communities stitch together the funding patchwork that has become 

the norm since the passing of the major federal construction grants program of the 

1970s. Strategies such as full-cost pricing and asset management are more likely to help 

meet the capital gap facing larger communities with existing infrastructure investments 

to manage and with large customer bases, than they are likely to help smaller 

communities. However, communities unwilling to charge their customers higher rates 

for water and wastewater services may be unable to maintain new capital infrastructure 

even if they do succeed in attracting outside funding assistance. 

For large-scale policy-making purposes, understanding the immensity of the needs 

facing the region as a whole is important. Ultimately, though, understanding the needs 

of individual communities may provide more guidance. The prototypical Appalachian 

community has a relatively small customer base and a need for what may be its first 

central treatment plant and distribution network. But it has no meaningful access to the 

private capital market in the absence of a state pooled-loan arrangement, and no costeffective way to hook up to a nearby system that lies over a mountain ridge. It is going 

to need outside capital funding help from state or federal grants to address its water 

and wastewater capital needs. The challenge to federal and state funding agencies is not 

only to provide assistance but to do so in a way that is sustainable. Designing funding 

programs and packages that encourage local sustainable management practices should 

be an essential component of any external funding assistance.