HD30 - The Impact of the Safe Drinking Water Act Amendments of 1986 on the Commonwealth of Virginia

  • Published: 1990
  • Author: Department of Health
  • Enabling Authority: House Joint Resolution 335 (Regular Session, 1989)

Executive Summary:
The impacts of the 1986 Amendments to the Safe Drinking Water Act will be significant in Virginia. Financial impacts will be felt by state agencies, waterworks owners and consumers. The final cost of the increased oversight required by the 1986 Amendments will be borne by waterworks consumers.

This report identifies specific additional FY 1990-92 biennial programmatic costs to the Health Department's Division of Water Supply Engineering and to the Division of Consolidated Laboratory Services of $6.88 million and $2.17 million, respectively. The State Corporation Commission and the Office of the Attorney General will also face other, relatively minor, programmatic costs.

In addition, waterworks owners will face an annual cost of between $51 million and $143 million for monitoring and treatment to comply with the regulations. Although these costs will be passed on to the water consumer by water utilities through higher water bills, non-utility waterworks (including a number of facilities owned by state agencies) do not obtain their revenue by selling water, and so will have to recover these costs from other sources such as taxes, assessment, General Assembly appropriations, and higher prices for goods and services.

There will be a wide range of increases in household water bills depending on the size of the water system's customer base and the nature of the treatment improvements needed for the waterworks to comply. The increase in the annual household water bills may range from $5 per year (for customers of large systems that are already in full compliance with the regulations) to $1284 per year for a household on a small system impacted by all of the existing and proposed regulations. Further increases are likely as the EPA issues more regulations in the future. The systems that face the larger costs for treatment will be identified only after monitoring begins.

A number of state agencies that own waterworks will face increased capital and operations costs to comply with the 1986 Amendments. These agencies include the Department of Corrections; the Department of Mental Health, Mental Retardation and Substance Abuse Services; the Division of Parks and Recreation; the Department of Transportation; the State Police; and the Community College system. Each agency will be required to review its operations at each waterworks to determine what improvements will be needed, if any, and what costs will be incurred. These agencies will include the costs in future budget requests to the General Assembly. Note that these costs are included in the expected annual costs to waterworks owners.

Two types of systems will be most affected by these Amendments. The first are the small systems. The treatment cost range for small systems reflects the lack of economy of scale that is available to larger systems and the limited economic base (number of customers) available to share these costs. The second type of system most affected will be that system which has multiple contaminants exceeding the standard which will require different treatment techniques for removal. The cost of treatment, in these cases, are additive.

In general, any increased costs experienced by a waterworks will be recouped through changes in water rates or changes in the price for the service or product that system provides. The cost of safe, dependable drinking water will increase. The construction cost increases may be minimized for government-owned waterworks if the Virginia Water Supply Revolving Fund (Fund) receives sufficient funds, through either direct general fund appropriations or special fees or assessments. The statute authorizing the Fund allows payback at interest rates down to zero percent; this flexibility will help minimize costs that the waterworks will incur. House Document 13 (1987) recommended that $10 million be appropriated to the Fund; presently, only an annual $100,000 is authorized.

The funds for the increased programmatic costs to state agencies must be approved by the General Assembly if Virginia is to retain primary enforcement authority (primacy). Virginia has had primacy since 1977. The funds for capital and operational improvements at state-owned waterworks must be approved, in any event, to comply with the 1986 Amendments. This study identifies, but does not recommend, possible funding sources which may be available to fund these additional costs.