Rural Water Sewer Systems

Financing for Rural Water Sewer Systems

Many rural communities across America do not have access to clean drinking water and safe waste disposal systems. The EPA Clean Watersheds Needs Survey 2004 showed that small communities of fewer than 10,000 population have documented needs of $17 billion for wastewater systems. For these same communities, the need for drinking water facilities is significantly higher, totaling $59 billion.

While small rural communities are home to less than 25 percent of the nation’s population they account for over 85 percent of the nation’s community water systems.  Communities of fewer than 10,000 residents are more than twice as likely to violate drinking water standards for microbes and chemicals as systems serving greater than 10,000 population .

The issue of affordability is paramount in small low-income communities.  Community waste systems naturally succeed water systems — with central water comes indoor plumbing, washing machines, dishwashers, etc., all of which eventually require an efficient wastewater disposal system.  Rural communities are often burdened by the cost of water service alone and are unable to manage the combined user fees for water and waste.  According to EPA data, ratepayers of small rural systems are charged up to four times as much per household as ratepayers of larger systems.  In some extreme situations, some households are being forced out of homeownership because they cannot afford rising user costs.

Rural communities have limited access to much-needed debt and equity capital, and small water and wastewater systems lack the economies of scale needed to reduce costs on their own.  In order for communities to cut back on project costs and have affordable rates, operation and maintenance are typically underestimated in the budgets for new systems.  This often results in limited or no capital improvement accounts for future upgrades and expansions needed for community development including stabilization of local small business, affordable housing development, and other needed industrial development.

The National RCAP Program is working together to address the problems of small rural communities in the area of water and waste.  The six regional affiliates of the Rural Community Assistance Program are working with state and federal funders and regulators to address the managerial, technical and financial issues that result in inadequate systems in rural communities.


USDA’s Rural Utilities Service (RUS) is the primary federal force in rural water and waste development, providing loans and grants to low-income communities in rural areas.  The agency assists low-income rural communities that would not otherwise be able to afford such services.  Approximately one-fifth of the communities served live below the national poverty line.

In providing these important services, the program also protects public health and promotes community stabilization and development.  Businesses and industries are reluctant and often unable to locate in areas without functioning water and sewer systems.  But with the assistance of RUS, communities are able to have the services they need so that their health and economies may benefit.

The Recovery Act provided an additional $1.3 billion in budget authority for the Water and Waste Disposal program to support $2.7 billion in direct loans and $939 million in grants for 2009.  Frankly, these numbers are not in synch with the needs in rural communities, where the need for grant support for systems is at least equal to the ability of small towns to repay loans.

There is still a substantial backlog of demand for rural water waste water financing with the dollar value of applications on hand totaling over $7.5 billion.

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