Benefits of Regionalization

Growing populations and a shrinking economy mean tough times for small water systems. In times like these, the best solution may be to band together.

Regionalization

Regionalization isn’t always the most desired solution, but it can be the best solution for the sake of the customers. Pooling resources can help save both water systems time, money and resources.
In this edition of eBulletin, we’ll examine the concept of regionalization, the pros and cons and a few scenarios where regionalization helped small water systems survive.

Myth busting

Several factors could turn water systems toward the option of regionalization. Depleted aquifers or ground water sources, finances, repair costs, population spurts, even natural disasters can force a small water system to look elsewhere for assistance.
Regionalizing water systems doesn’t always mean the smaller system is “swallowed up” by a bigger one. It could be as simple as the smaller system purchasing water from a neighboring system while continuing to maintain its own system. Services can be divided up, where one system handles water distribution while the other handles maintenance. They can be shared, where both systems provide the same services, but each to certain geographical areas within the region. Or one system simply can take over all of the services.
How the regionalization is carried out depends largely on the parties involved. However, the plan also must ensure that all parties involved meet state and federal requirements. So while regionalization is mainly about the water systems and their customers, regulators also will have a say in whatever plan is hammered out.
There is one hard truth to regionalization: It’s never an easy process. Often, it can take months, and sometimes years, to sort out the details where all parties are happy, including state and federal regulators.

Pros and cons

One of the biggest factors to deciding on regionalization is weighing the pros and cons. Buying water from a nearby town may seem like a simple solution, but how much will it cost to tie into their system? Do they have the system to sustain both their customers and yours?
There’s another factor to consider – how stable is the system from which you’re purchasing services? There’s little point in tying into a system that has had a history of EPA violations or bankruptcies. It’s important to ensure the system from which you purchase your services won’t have future issues that might suddenly leave your customers high and dry.
You also have to consider your population. Is it expected to remain about the same? A sudden growth spurt could tax the supplying system’s water or wastewater services. That could mean costly expansions for all, or a sudden drop in services for the smaller town, because the city’s customers would take priority.
Take for example, one southern town that purchased wastewater services from a nearby city. Things were fine, until the entire region experienced major growth in only a few years’ time. When the city decided to expand its wastewater system to cover the region’s new growth, it requested partial funding from the small town it supplied. The small town refused to pay, so the city refused to service any more sewer taps. In the end, the small town was left to negotiate a new contract with that city to its south and another city to its north in order to cover all the new residents.
So it’s important to have a good estimate of how much you’ll need in the coming years, and it’s a good idea to pad that estimate a bit, just in case the population increases. For example, a town may request the purchase of 500,000 gallons a month, but may have the option of up to 750,000 gallons per month.
There are advantages to consider as well. For example, a regional system may have more assets to get more and better loans and grants. It may be easier to save money for repairs, upgrades and emergencies with the water and wastewater costs and duties divided up.
RCAC, the western affiliate of the Rural Community Assistance Partnership, held a roundtable discussion on regionalization in Albuquerque, New Mexico, in May 2006. Three presentations from the roundtable are available on the web. A link is provided below.
In one presentation, Anne Watkins, special assistant to the New Mexico state engineer, outlines a plan for regionalization to help water and wastewater systems throughout the state. She describes some of the benefits of the plan, such as improving efficiency of management, administration and operation of a regional system and optimizing infrastructure. Her presentation is available at the RCAC link provided below.
Simona Frone explains regionalization, its benefits and its detractions in her paper “Factors and Challenges of Regionalization in the Water and Wastewater Sector.” In it, she outlines some of the basic factors water and wastewater systems should consider when pondering regionalization. She has reached her conclusions by studying systems in Romania that were trying to regionalize to qualify for European Union funding. However, her descriptions and points can serve just about any water or wastewater system looking to regionalize.
She mentions things like cost sharing, which is a pro toward regionalization. On the flip side, communities with lower costs may be reluctant to subsidize the smaller towns that are facing higher costs. Also, the larger system could decide to tack on extra fees for the smaller system’s customers, leaving them to pay more than the larger system’s customers do.
The cooperation between systems, however, has its perks. Often, it’s easier to meet and sustain state and federal standards. Cost sharing can help both systems, and the cooperation among water and wastewater systems could lead to cooperation among other public services.
A link to Simona Frone’s paper is provided below.

Additional Resources

RCAC Community Assistance Corporation Roundtable
http://nmcollaborations.nmt.edu/RCACWaterSystemRegionalization%20Roundtable.htm
“Factors and Challenges of Regionalization in the Water and Wastewater Sector.”
http://www.revecon.ro/articles/2008-2/2008-2-12.pdf

How to…

So how do you regionalize? It’s not an easy task. One good starting point is to study systems in nearby regions to see how they’re faring, what they charge their customers and whether they could sustain themselves and an added population. You’ll need to consider just how much control you want to maintain with your system. Do you just need another water source, or do you need the new system to take over everything, from treatment to repairs to billing?
Staff members with the Rural Community Assistance Partnership can help with this. They can perform rate studies and put out the feelers on whether a nearby system can sustain yours. They’ll know how to put two systems together or several. They even can help hammer out those details.
Regionalization is going to mean working with many people and agencies, from state regulators who’ll need to be sure the new system is sound to engineering consultants who will determine whether the system truly can service everyone or whether expansion will be necessary.
The first step is to figure out what your system needs, whether it’s just water or wastewater services or if total control needs to go elsewhere. Figure out whether this plan should be temporary or if you’ll be able to maintain your own system in a few years.
A feasibility study can determine whether regionalization will solve your system’s problems and which nearby system will be able to help you out. Again, RCAP can assist with this task if needed.
It would be a good idea to find out what the requirements might be for state and federal funding of a regional system. Grants and loans may be available to assist in the transition, but some may require plans that cover the next several years.
The hardest part will be deciding on the details. The final agreement has to satisfy a lot of people – all the systems involved, their cities or regions, state and federal regulators, and most of all, the customers. Be prepared for a long process as details are negotiated over time. The end result may not be ideal for every system involved. But the best benefits drawn from the final agreement should go to the customers.
It’s a tough, lengthy process, but there are people available to help. If you’re considering regionalization, feel free to contact your local RCAP affiliate, or just click the Ask the Expert link on the Safe Drinking Water Trust’s web site.

Read all about it

The Summer 2009 edition of RCAP’s Rural Matters magazine also talks about regionalization and provides a few stories on systems that went through the process.
For example:

• The small town of Guion, Arkansas, was facing a dilemma after being told their water source faced surface contamination. Unable to shoulder the cost of digging another well, the system worked out an agreement with a neighboring town to purchase water.
• In Ohio, a large water system found several flexible ways to offer regionalization to smaller systems in its area. In some cases, it simply sold treated water to the systems at wholesale but let them retain control over distribution and billing. In other cases, it agreed to take over the entire system completely.
• Other systems across the U.S. are using various methods of regionalization to assist their neighbors and services customers both in town and in rural areas.