Strained Rural Water Utilities Buckle Under Pandemic Pressure

This story originally appeared on Stateline, an initiative of the Pew Charitable Trusts.

The months leading up to the coronavirus pandemic already spelled trouble for the Rome Water System and the tiny community it serves in the Mississippi Delta.

A tornado tossed around several homes, closed roads and left the community without power for two weeks. Lightning strikes on two separate occasions damaged pumps used to transport water and wastewater for about 75 connections serving about 220 people. 

The system usually takes in about $3,400 a month. But since the pandemic hit, the system has been bringing in just over half as much. It can't catch up until people start paying their bills, said the system’s treasurer, Irie Knighten.

“We ain’t doing so hot,” Knighten said.  

Rural water and wastewater systems have largely been left out of federal and state pandemic relief, and yet they play critical roles in local economies. Homes rely on them, of course, but so do small businesses such as eateries and large companies such as manufacturers and processing plants.

As the virus stretches further into smaller communities, these systems are fighting for their survival under long-standing economic and structural weights.

Of 150,000 public water systems, 97% are in communities of 10,000 residents or fewer, according to the Rural Community Assistance Partnership, a national network of nonprofits whose work includes assistance to and training for water and wastewater systems.

"If the economics of the community are hit by an outside source like COVID, it impacts the water and wastewater systems and their ability to make sure those communities continue to grow and thrive," said Nathan Ohle, CEO of the Rural Community Assistance Partnership.

To be sure, small and large systems share common challenges. They often have aging infrastructure and older operators who are at more risk should they contract the coronavirus. When the pandemic hit, many systems’ customer service offices closed, and businesses had to radically change their operations overnight. Wastewater operators put themselves at risk when COVID-19 can be detected in sewage. Some universities are surveilling their sewage to predict outbreaks.

But smaller systems have fewer resources. They are more likely to be serving populations with fewer and fewer people. With skeleton crews, they may not have anyone to look after the system if a water operator has to quarantine or falls ill.

With many states maintaining a moratorium on water shutoffs, water systems have fewer ways to deal with unpaid bills. Some advocates worry the moratoria are permitting customers to dig themselves into a deeper hole since they’ll be on the hook to pay their growing bill eventually. Meanwhile systems are providing service for free without any assurance that a local government would step in to help.

Municipal and nonmunicipal systems are generally funded by user rates, not tax dollars. Small systems may not have the reserves to call on when customers facing hardship are unable to pay their bills.  

Many utilities such as Rome are asking customers to pay what they can, and aren’t insisting on bills being paid in full, even if the state's moratorium on shutoffs expired.

"If they don't have the money, cutting them off ain't gonna do no good anyway," Knighten said.

The widely reported postal service delays have meant late payments for some rural utilities, according to Mike McGill, president of the communications firm WaterPIO. "Their bills are going to a main hub in the mail system, and they're sitting there," McGill said. "They're sitting there for weeks."

When the system in Tyrrell County, North Carolina's smallest, lost its biggest customer, a prison, it teetered on the edge of bankruptcy before the state stepped in. Other rural municipalities in the state are reporting delinquency rates of 30-50%, according to Scott Mooneyham, director of political communications and coordination for the North Carolina League of Municipalities.

"The bottom line is that these rural communities were already struggling with 30, 40, 50 years of global trends that were working against them," Mooneyham said. "COVID comes along and their biggest financial challenges, operating these utility systems — it massively affected that going forward. If this continues without additional help down the road, some of these communities will be basically unable to operate."

Financial problems related to their aging water and sewage systems prompted North Carolina's Local Government Commission to take over the town of Eureka and the Cliffside Sanitary District last year.

The commission, which is staffed by the Department of the State Treasurer, is developing a plan to address dozens of distressed small-town water and sewer systems, according to local news media.

"I don't think it's unreasonable to expect that we could see a lot more Eurekas out there with their utility systems essentially bankrupt and bankrupting the town themselves if there's not some effort made to help these communities," Mooneyham said.

Impact Varies

If current conditions were to continue for a year, small water systems could face $3.6 billion-$5.5 billion in revenue losses, according to a May survey by the Rural Community Assistance Partnership. The figure represents water system respondents in 33 states.

In April, the National Rural Water Association estimated small water and wastewater systems would lose $998 million in revenue by mid-July. The losses do not include emergency operational expenses such as additional shifts, isolating staff and purchasing personal protective equipment.

The association surveyed 4,915 water and wastewater utilities in all states and U.S. territories. Those systems serve more than 29 million people and nearly 1.4 million businesses. 

The pandemic's effects on utilities are "extremely variable and uneven," said Matt Holmes, CEO of the National Rural Water Association. They depend on factors such as location, the virus's effects, the utility and local policies. Some systems have had revenue shortfalls from customer nonpayment.

"Others are selling a bunch of water because of the way the pandemic has affected their customer base," Holmes said.

Data is hard to come by, even for those in need. Self-Help Enterprises, a nonprofit in California's Central Valley, donated $4,700 to the Allensworth Community Service District because the system was forthcoming about its needs. The money covered a dozen accounts that were past due more than 60 days.

Other systems haven't been as forthcoming, said Jessi Snyder, assistant program director for community development. Snyder points to poor book-keeping and a lack of motivation when there are few supports available.

"Everybody knows there's nothing available, so they keep getting by," Snyder said.

‘Help Them’

Federal dollars typically cover upgrades, infrastructure projects and new water pumps. They don't cover operating grants or working capital costs.

Some rural water and wastewater systems benefitted from federal coronavirus relief to small businesses through the Paycheck Protection Program, often called PPP. But it initially had been unclear that wastewater cooperatives, typically 501(c)12s, were eligible for PPP alongside other types of nonprofits, Holmes said.

Although governmental units or municipalities were ineligible for PPP, they could have received money that flowed to states through the federal CARES Act.

The $2 trillion bill included direct appropriations to states and municipalities with populations greater than 500,000. Rural advocates would like more flexibility in any forthcoming federal relief, and direct funding to municipalities with smaller populations.

"I'm sure some states are doing a good job pushing that out to their rural communities, but that's a 50-state challenge right now — to see how that process is going to go," Holmes said.

About $1.25 billion in CARES Act money went to New Hampshire, which sent money to local governments. "Districts and precincts were mistakenly excluded from being eligible for that funding," said Jason Randall, superintendent of the Plymouth Village Water and Sewer District. "Municipality can mean many different things, not just a town or city government, but the subgovernment or entities that surround it."

Between March and June, the district lost 31% of its consumption revenue, or $235,000. Layoffs, reduced hours, reserves and a budget freeze have helped it continue operating.

Of the 552 municipalities in North Carolina, $4 billion from the CARES Act flowed to the state plus three counties and the city of Charlotte.

Some rural areas were not well-equipped to withstand the pandemic's economic effects because of the long-standing trends in job, population and industry losses, said Mooneyham, with the North Carolina League of Municipalities.

"It's disappointing in my position to hear politicians say, 'You're just asking for more money to fix an existing problem,'" Mooneyham said. "Well, yeah, there was an existing problem that was created through no fault of these communities themselves, which you've kind of ignored — and now you're blaming them.

These are your constituents," he added. "Help them."

A bill introduced in the U.S. House would help by providing $1 billion in operational and revenue loss relief for small water systems through the U.S. Department of Agriculture's Rural Utilities Service.

Another bill would establish a permanent bridge loan to directly support the operational costs of water and other utilities that have experienced revenue losses because of the pandemic or future covered emergencies. The bills remain before House committees.

These types of programs also would help communities in east Texas and southern Louisiana recover from Hurricane Laura, said Ines Polonius, CEO of Communities Unlimited, an economic development agency and Community Development Financial Institution that serves seven Southern states. 

"What we saw after [Hurricane] Harvey, in some cases 50% of the community was gone and stayed gone," Polonius said. She pointed to Nome, in east Texas. "It was struggling before Hurricane Harvey, and now it's a shell of itself."

Getting By

As the pandemic continues, utilities are doing what they can to carry on.

The Rural Community Assistance Corporation serves rural communities in 13 Western states. In recent months, it’s deployed technical assistance to tribal communities in Arizona and California.

The reservations had closed their borders, and needed help fixing a water break or retrieving chlorine to continue treating their water, said Ari Neumann, director of community environmental services. 

"An emergency pre-COVID was usually major equipment failure, whereas now [an emergency] is often something that would normally be no big deal," Neumann said.

"They've got vehicles that are out of commission and they don't have the revenues to replace them because their revenues are being cut," Riley said. 

The town of Allensworth, in California's Central Valley, was meant at its founding in 1908 to be a utopian Black community. It was founded by Lt. Col. Allen Allensworth, who was born into slavery in Kentucky, fought for the Union during the Civil War and rose to become the highest-ranking Black member of the military. But the town has had dangerous levels of arsenic in its water on and off for decades. Today it's a poor area whose demographics have shifted from mostly Black to mostly Latino.

"The district has been in worse situations and I think we will get through this," said Valerie Contreras, general manager of the Allensworth Community Services District.

In Mississippi, Rome is working on repairs to its wastewater pump. But the repairman Knighten typically would recommend contracted COVID-19. So the town is turning its wastewater pump on and off at different times of the day because it doesn't have the money to continue the repair, Knighten said.

Parchman Penitentiary is Rome's nearest large employer. The town’s median household income is about $28,000 a year, according to Communities Unlimited. 

Rome Water System has faced financial troubles over the past 15 years, Knighten said. He is essentially a volunteer.

"It's a burden, but hey, eventually we're gonna work this thing out some type of way," Knighten said. "I know it sounds, 'Why are we doing this?'

“I mean, somebody has to do it. So, we doing the best we can."